Instructions For Form 8873 - Extraterritorial Income Exclusion

Once made, the election applies to the

transactions (other than foreign sale and

Format of tabular schedules. If a tabular

tax year made and remains in effect for

leasing income transactions) are included

schedule is attached to Form 8873, the

all subsequent years unless revoked or

in the same product or product line

schedule must:

terminated. Any revocation or termination

indicated on line 5b. If a different method

Be in spreadsheet or similar format,

applies to tax years beginning after the

is applied to some of the transactions in

List your name and identifying number

tax year during which made. However,

one or more of the separate product lines,

on each numbered page,

the election will automatically terminate if

additional Forms 8873 must be filed.

Be formatted in columns that

the corporation meets neither of the two

Example. If you have no foreign sale

correspond to each line item of Form

requirements above. If an election is

and leasing income and you apply the

8873, and

revoked by the corporation or is

15% of foreign trade income method to

Show totals in each column.

automatically terminated, the corporation

all transactions in three separate product

(and any successor corporation) may not

lines, you would file three aggregate

Part II–Foreign Trade Income

elect to be a domestic corporation again

Forms 8873. However, if you use the

and Foreign Sale and

for 5 tax years beginning with the first tax

1.2% of foreign trading gross receipts

year after the revocation or termination.

method for some of the transactions in

Leasing Income

Effect of election. For purposes of

one of the product lines, you would then

Lines 6 through 14. Enter your foreign

section 367, a foreign corporation that has

file four aggregate Forms 8873.

trading gross receipts identified on lines

elected to be a domestic corporation is

(b) Aggregate on tabular schedule.

6 through 14 using the rules outlined

generally treated as transferring, as of the

You may choose to aggregate your

under Foreign Trading Gross Receipts

first day of the first tax year to which the

transactions on a tabular schedule rather

on page 1.

election applies, all of its assets to a

than on Form 8873. To do so, file one

domestic corporation in an exchange

Line 17. For lines 17a through 17h,

Form 8873 entering only your name and

under section 354.

compute your cost of goods sold allocated

identifying number at the top of the form.

to your foreign trading gross receipts. See

Exception for old earnings and profits

Also check box 1(b) of line 5c. Attach a

the instructions for the tax return for which

of certain corporations. If the exception

tabular schedule to the partially

this form is attached for basic rules for

described in section 5(c)(3) of the FSC

completed Form 8873 reporting all

determining cost of goods sold.

information as if a separate form were

Repeal and Extraterritorial Income

Exclusion Act of 2000 applies, attach a

filed for each aggregate of transactions

Line 19. Enter on line 19, column (a), the

statement indicating the basis for your

described in 1(a) above. Also see Format

deductions, other than those you included

entitlement, if any, to that exception.

of tabular schedules below.

in figuring your cost of goods sold, that

are allocable to the amount reported on

Effect of revocation or termination.

Note: To be eligible for either of the

line 18, column (a).

If a foreign corporation has elected to be

aggregate reporting formats described in

a domestic corporation and the election

1(a) or (b) above, you must maintain a

Enter on line 19, column (b), the

ceases to apply for any subsequent tax

supporting schedule that contains all

deductions, other than those you included

year, the corporation is treated as a

information that would be reported if a

in figuring your cost of goods sold, that

domestic corporation transferring, as of

separate Form 8873 were filed for each

are directly allocable to the amount

the first day of the subsequent tax year to

transaction. The supporting schedule

reported on line 18, column (b).

which the election no longer applies, all

should not be filed with the Form 8873.

Note: Do not include your allocable

of its property to a foreign corporation in

portion of general and administrative

an exchange under section 354.

Instead of aggregate reporting, you may

expenses on line 19, column (b).

Line 4. Before completing lines 4a and

choose to report transactions on a tabular

For both column (a) and column (b),

4b, see Foreign Economic Process

schedule. File one Form 8873 entering

attach to Form 8873 a schedule listing

Requirements on page 1.

only your name and identifying number

these amounts. See the instructions for

at the top of the form. Also check box 1(c)

Line 5a. Enter the six-digit code that best

the tax return for which this form is

of line 5c. Attach a tabular schedule to the

describes the business activity for which

attached for basic rules for determining

partially completed Form 8873 reporting

the form is being filed from the list of

expenses.

all information as if a separate Form 8873

Principal Business Activity Codes

were filed for each transaction. Also, see

Part III–Marginal Costing

included in your tax return instructions.

Format of tabular schedules below.

Line 5b. Enter your product or product

Marginal costing is a method under which

2. Group of transactions. You may

line that meets one of the two standards

only direct production costs of producing

elect to group transactions (other than

below.

a particular product or product line are

foreign sale and leasing income

The product or product line based on

taken into account for purposes of

transactions) by product or product line.

the North American Industry Classification

computing your qualifying foreign trade

The grouping of transactions applies to

System (NAICS) or

income. Complete this section to see if

all transactions completed during the tax

A recognized industry or trade usage.

you will benefit by using marginal costing.

year for that product or product line

Line 5c. Check the applicable box to

If you do not wish to use this method, skip

To make the election, complete one

indicate the basis on which the amounts

Part III and complete Part IV using the

Form 8873 entering only your name and

on Form 8873 are determined using either

instructions below.

identifying number at the top of the form.

the transaction-by-transaction basis or an

Also check box (2) of line 5c. Attach a

election to group transactions. Use one

Part IV–Extraterritorial

tabular schedule to the partially

of the following formats.

Income Exclusion

completed Form 8873 reporting all

1. Transaction-by-transaction. If your

information as if a separate Form 8873

Line 45. Generally, your qualifying

determination is based on each

were filed for each group of transactions.

foreign trade income is based on the

transaction rather than an election to

See Format of tabular schedules below.

greatest of lines 33, 36, 38, 42, or 44.

group transactions, check box 1(a), 1(b),

Once the election is made, it cannot be

Under the alternative computation,

or 1(c), depending on your preferred

changed. If a grouping basis is elected,

however, you may instead choose to

reporting format.

aggregate reporting is not permitted.

enter on line 45 the amount from any of

(a) Aggregate on Form 8873. If you

Note: If your foreign trading gross

those five lines (33, 36, 38, 42, or 44). For

choose to aggregate your transactions on

receipts are $5 million or less for the tax

example, although line 42 may produce

one or more Forms 8873, check box 1(a)

year, you may file a separate Form 8873

the greatest exclusion for you, use of that

of line 5c. Aggregate on one Form 8873

for each group of transactions instead of

line could eliminate or reduce the

those transactions for which the same

filing a tabular schedule.

exclusion for a related person because of

method is applied, provided all the

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Instructions For Form 8873 - Extraterritorial Income Exclusion - 2000 Page 3

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