Instructions For Schedule I (Form 1120-F) - 2007 (Page 4 of 8) in pdf

Line 3d, column (a). Adjustments for

Regulations section 1.884-1(d). Assets

attributable to a U.S. office of a banking,

amounts from partnerships and certain

includable on this line may include, for

financing or similar business under

disregarded entities included on line 2,

example, amounts with respect to

Regulations section 1.864-4(c)(5)(iii) that

column (a). With respect to amounts

securities that are marked to market for

are booked in a foreign bank’s home

from partnerships included on line 2,

tax purposes under section 475 that are

office or other foreign location. Other

column (a), all such amounts must be

not marked to market on the set(s) of

assets reportable on line 5, column (c),

“backed out” on this line 3d, column (a).

books reported on line 2, column (a). If

may generally also include assets that are

Enter on line 3d, column (a), all amounts

the mark-to-market amount includable for

no longer held in connection with a trade

on the Schedule L books for investments

tax purposes is an increase to the basis

or business within the United States that

in partnerships (whether recorded as an

of the assets included on line 2, column

give rise to effectively connected income

investment in the partnership interest or in

(a), include such increase as a negative

under section 864(c)(6) or section

the partnership assets) included on line 2,

number on line 3f, column (a). Similarly, if

864(c)(7). However, not all assets that

column (a).

the mark to market amount decreases the

give rise to ECI, including ECI recognized

basis of the assets included on line 2,

under section 864(c)(7), constitute U.S.

Note. Partnership interests are reported

column (a), include such decrease as a

assets under Regulations section

in Step 1 as follows: The ECI portion of

positive number on line 3f, column (a).

1.884-1(d). See Regulations section

the corporation’s adjusted outside basis in

Other adjustments for book tax

1.884-1(d)(2)(xi), example 5, and

a partnership (from Schedule P (Form

differences with respect to asset values

Regulations section 1.884-1(d)(5).

1120-F), line 19, “Total” column) is

on line 2, column (a), such as

entered on Schedule I (Form 1120-F), line

Line 5, column (d). Total average value

depreciation and amortization for

5, column (b).

of U.S. assets included in Step 1.

taxpayers using the adjusted basis

Combine the amounts on line 5, columns

With respect to amounts from

method for valuing U.S. assets, are also

(a), (b) and (c) and enter the amount on

disregarded entities included on line 2,

reportable on line 3f, column (a). Enter an

line 5, column (d). This amount is the total

column (a), enter on line 3d, column (a)

aggregate net increase as a negative

average value of the corporation’s U.S.

any adjustment needed to reflect the

number. Enter an aggregate net decrease

assets included in Step 1 of the

following: Investments in disregarded

as a positive number.

Regulations section 1.882-5 formula. If

entities should not be included on line 2,

the corporation uses the Separate

Line 4, column (a). Combine lines 3a

column (a) if the set(s) of books are

Currency Pools method to allocate

through 3f and enter the result on line 4,

reportable on Schedule L. Instead, the

interest expense in Step 3 of the

column (a). The result on line 4, column

total assets of such disregarded entity’s

Regulations section 1.882-5 formula, see

(a) constitutes the total net adjustment to

Schedule L books should be combined on

the instructions for line 16a on page 6.

the average book assets from the

line 2, column (a) with all other set(s) of

The amount on line 5, column (d) is also

Schedule L set(s) of books reported on

books reportable on Schedule L. If

reportable on Schedule H (Form 1120-F),

line 2, column (a).

another Schedule L book reflects an

line 23a.

investment in a disregarded entity whose

Line 5. Total Value of U.S. Assets

books are not reportable on Schedule L,

Lines 6 Through 7c. Step 2:

for the Tax Year

then the assets of the disregarded entity

Determination of

Line 5, column (a). Average U.S. assets

are not reported on line 2, column (a).

U.S.-Connected Liabilities -

on set(s) of Schedule L books.

The amount of the investment in the

Regulations Section 1.882-5(c)

Subtract the amount on line 4, column (a)

disregarded entity that is included in the

from line 2, column (a) and enter the

total assets reported on line 2, column (a)

Line 6. Actual ratio or fixed ratio

amount on line 5, column (a). The

must be reversed on line 3d, column (a)

method. Check the applicable box to

resulting amount is the total average

to reflect its disregarded treatment in

specify whether the corporation uses the

value of U.S. assets under Regulations

section 1.882-5.

actual ratio or the fixed ratio method for

section 1.884-1(d) included on the

the tax year to determine its

Line 3e, column (a). Adjustments for

Schedule L set(s) of books, excluding any

U.S.-connected liabilities in Step 2 of the

assets that give rise to direct interest

partnership interests included on line 2.

allocation formula. The amount of

expense allocations under Temporary

U.S.-connected liabilities is the total value

Line 5, column (b). ECI portion of the

Regulations section 1.882-5T(a)(1)(ii).

of U.S. assets for the tax year (line 5,

average value of partnership interests.

Enter on line 3e, column (a), the average

column (d)) multiplied by the actual ratio

Enter on line 5, column (b), the amount

value of the portion of all assets included

or the applicable fixed ratio the

from Schedule P (Form 1120-F), line 19

on line 2 that give rise to direct interest

corporation has timely elected and is

expense allocations under Temporary

(“Total” column). This amount is the sum

eligible to use for the tax year. The actual

of all ECI portions of the corporation’s

Regulations section 1.882-5T(a)(1)(ii) in

ratio or fixed ratio election must be made

outside basis in partnership interests as

accordance with the requirements of

on a timely tax return for the first year the

adjusted under Regulations section

Temporary Regulations section

corporation is subject to Regulations

1.884-1(d)(3). The amount entered from

1.861-10T(b) or (c), and Temporary

section 1.882-5 and is subject to the

Schedule P, line 19 may include the ECI

Regulations section 1.861-10T(d). A

minimum five-year period under

portion of the corporation’s outside basis

foreign corporation that allocates its

Temporary Regulations section

in partnerships whose book value is

interest expense under the direct

1.882-5T(a)(7). An election to change the

allocation rules shall reduce the basis of

included on line 2, column (a) as well as

method after such minimum five-year

the ECI portion of partnership interests

the asset that meets the requirements of

period is also subject to the minimum

whose book value is not recorded on the

Temporary Regulations section

five-year period.

Schedule L books and is not included on

1.861-10T (b) or (c) by the principal

line 2, column (a).

amount of the indebtedness that meets

Actual ratio information. If the

the requirements of Temporary

corporation uses the actual ratio,

Line 5, column (c). Average U.S. assets

Regulations section 1.861-10T (b) or (c).

complete lines 6a through 6c and skip line

not includable in set(s) of books

The amount of directly allocable interest

6d.

reported on Schedule L, line 5 column

under Temporary Regulations section

(a), or from partnerships reported on

Fixed ratio information. If the

1.882-5T(a)(1)(ii) is reported on line 22.

line 5, column (b). Enter on line 5,

corporation uses the fixed ratio, skip lines

Line 3f, column (a). Other adjustments

column (c), the average value of U.S.

6a through 6c and enter the applicable

to average assets included on line 2.

assets (other than the ECI portion of the

fixed ratio on line 6d. For foreign banks

Enter on line 3f, column (a), the average

corporation’s outside basis in partnership

(described in Temporary Regulations

asset balances for any other amounts

interests) from set(s) of books that are not

section 1.882-5T(c)(4)), the fixed ratio is

included on line 2, column (a) that do not

reportable on Schedule L. Such assets

95%. For corporations other than foreign

constitute U.S. assets as defined in

may generally include certain securities

banks, the fixed ratio is 50%.

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Instructions For Schedule I (Form 1120-F) - 2007 Page 4

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