Instructions For Schedule I (Form 1120-F) - 2007 (Page 2 of 8) in pdf

use the adjusted U.S. booked liability

may instead report its worldwide assets,

Other Forms and Schedules

method or the separate currency pools

liabilities, and equity on Schedule L.

Related to Schedule I

method is an election that generally must

If the foreign corporation has more

Form 1120-F, Schedule L, and

be maintained for a minimum five-year

than one set of books and records

Schedule M-3 (Form 1120-F). The set

period. If a corporation is subject to

relating to assets located in the United

or set(s) of books that give rise to U.S.

Regulations section 1.882-5 for the first

States or assets used in a trade or

booked liabilities under Regulations

time, the election is due with a timely filed

business conducted in the United States,

section 1.882-5(d)(2) and Temporary

return (excluding the additional extended

it must report the combined amounts on

Regulations section 1.882-5T(d)(2) are

period provided by Regulations section

Schedule L and must eliminate asset and

the same sets of books and records that

1.882-4(a)(3)) whether or not the taxpayer

liability amounts recorded between these

are reportable as of the tax year end on

files a protective return under Regulations

books.

Form 1120-F, Schedule L. They are also

section 1.882-4(a)(3)(vi). The protective

Required Reporting on

the same sets of books and records that

election need not be filed with subsequent

are used by foreign banks to report

Schedule I

protective returns filed under Regulations

income and expenses on Schedule M-3

section 1.882-4(a)(3)(vi) for any

Lines 1 through 9. Schedule I requires

(Form 1120-F).

subsequent year to which the minimum

disclosure of data and interest allocation

five-year period applies. However, the

Form 1120-F, Section III, Part II

elections for all parts of the three-step

indication of the election with a protective

(branch-level interest tax). The amount

formula under Regulations section

return is only effective for a year that the

of interest expense from Schedule I, line

1.882-5 and Temporary Regulations

corporation is engaged in trade or

24d is reportable on Form 1120-F,

section 1.882-5T. On page 1, the

business within the United States.

Section III, Part II, line 7b. The amount of

corporation is required to complete Step 1

Accordingly, if a protective election is

the allocation under Regulations section

(lines 1 through 5) to determine its

made for a first year protective return and

1.882-5 reportable on Schedule I, line 23

average U.S. assets, Step 2 (lines 6

in fact the taxpayer is not engaged in

is reportable on Form 1120-F, Section III,

through 7c) to determine its

trade or business until the second year of

Part II, line 7c.

U.S.-connected liabilities, and Step 3

activity within the United States, the

(lines 8 and 9) to determine its U.S.

protective election made in the first year

Schedule M-3 (Form 1120-F), Part III,

booked liabilities and U.S. booked interest

is not effective for the corporation’s

lines 26b and 26c. The amount of

expense under Regulations section

second year of activity because

interest expense allocation reportable on

1.882-5(d)(2) and Temporary Regulations

Regulations section 1.882-5 is not

Schedule I, line 23 is includable on

section 1.882-5T(d)(2). The information

applicable to the corporation until such

Schedule M-3 (Form 1120-F), line 26b,

on line 9, column (c) is also used for

second year. The elections used by a

columns (d) and (e). The amounts subject

purposes of determining the corporation’s

taxpayer for all years in which it files Form

to deferral and disallowance on Schedule

branch interest under section 884(f)(1)(A)

1120-F and reports effectively connected

I, lines 24a through 24c are reportable on

and Regulations section 1.884-4(b), and

income must be shown on Schedule I,

Schedule M-3 (Form 1120-F), line 26c,

in the calculation of the corporation’s

including years subsequent to the year in

columns (b), (c) and (e).

branch-level interest tax on excess

which an election under Temporary

interest under section 884(f)(1)(B) and

Schedule P (Form 1120-F). Enter

Regulations section 1.882-5T(a)(7) is

Regulations section 1.884-4(a). Line 8,

amounts from Schedule P (Form 1120-F),

made.

column (c), and line 9, column (c) are also

lines 19, 17 and 14c on Schedule I, line 5,

included in the interest expense allocation

A corporation that files a protective

column (b); line 8, column (b); and line 9,

computation in Step 3 of the AUSBL

return under Regulations section

column (b), respectively.

method if elected by the corporation.

1.882-4(a)(3)(vi) need not enter amounts

Assets and Liabilities Based on

on Schedule I (other than for the

Lines 1 through 9 must be

published LIBOR election on line 10d) in

Schedule L Set(s) of Books and

completed by all corporations

order to preserve an allocation method. If

Records

required to file Schedule I,

CAUTION

a taxpayer files a protective return under

regardless of whether the corporation

Generally, the assets and liabilities

Regulations section 1.882-4(a)(3)(vi) and

allocates interest expense under the

required to be reported on Schedule L are

does not file Schedule I to identify the

AUSBL or Separate Currency Pools

the total assets and liabilities reflected on

relevant elections under Regulations

method for the applicable year. Schedule

the set or sets of books of the foreign

section 1.882-5 for an applicable year,

I, lines 1 through 9 must also be

corporation that give rise to income

then the Director of Field Operations is

completed under the rules of Regulations

effectively connected with the

authorized to make all applicable

section 1.882-5 and Temporary

corporation’s trade or business within the

allocation method elections on behalf of

Regulations section 1.882-5T even if the

United States and to U.S. booked

the corporation for such applicable year if

corporation reports business profits

liabilities (as defined in Regulations

it is later determined that the taxpayer

attributable to a U.S. permanent

section 1.882-5(d)(2) and Temporary

was engaged in trade or business within

establishment (other than under the ECI

Regulations sections 1.882-5T(d)(2)(ii)(A)

the United States and had ECI during the

rules of sections 864(c), 882(a) and

and (iii)). The total assets and liabilities

year.

882(c)) pursuant to the express

reflected on such books include the third

provisions of an applicable income tax

Note. Under Temporary Regulations

party U.S. assets (as defined in

treaty and accompanying documents

section 1.882-5T(a)(7), no interest

Regulations section 1.884-1(d)) and third

(such as an Exchange of Notes).

expense allocation elections may be

party liabilities (whether with related or

made on an amended return. In addition,

unrelated parties), as well as the

Lines 10 through 20. Allocations,

the relief for late tax elections provided

interbranch assets and liabilities and

direct interest allocations, deferrals

under the rules of Regulations section

assets that give rise to noneffectively

and other disallowances. Step 3 of the

301.9100-1 (and any guidance

connected income in whole or in part.

AUSBL method is provided on lines 10

promulgated thereunder) is not available.

Such books reflect the assets of the

through 15. Step 3 of the Separate

An election identified on line 1 of a

foreign corporation located in the United

Currency Pools method is provided on

change from a fair market value method

States and all other of its assets used in

lines 16 through 21. These Step 3

to a previously elected adjusted basis

its trade or business within the United

methods are mutually exclusive and

method for reporting U.S. assets is not

States (other than its assets giving rise to

cannot both apply to the corporation in

effective without advance consent of the

effectively connected income under

the same year. The methods are subject

Commissioner or his delegate. See

sections 864(c)(6) or (7)), as authorized

to the general five-year minimum period

Temporary Regulations section

under Regulations section

election rules of Temporary Regulations

1.882-5T(b)(2)(ii)(A).

1.6012-2(g)(1)(iii). A foreign corporation

section 1.882-5T(a)(7).

-2-

Instructions For Schedule I (Form 1120-F) - 2007 Page 2

Related Articles

Related forms

Related Categories