Instructions For Schedule I (Form 1120-F) - 2007 (Page 6 of 8) in pdf

interest expense allocations. All direct

Line 10b. Enter on line 10b, the average

item in accordance with its

interest expense allocations to ECI are

worldwide U.S. dollar denominated

characterization and the scaled down

reported on line 22.

liabilities (whether or not interest bearing)

hedging income, expense, gain or loss is

that are not U.S. booked liabilities

reported on Form 1120-F, Section II in the

Line 9, column (c). Total U.S. booked

included on line 8, column (c). See

appropriate category to which the hedging

interest expense. Add the amounts on

Temporary Regulations section

item is characterized. For instance,

line 9, column (a), and line 9, column (b)

1.882-5T(d)(5)(ii).

periodic expense from an interest rate

and enter the result on line 9, column (c).

notional principal contract hedging

Line 12. Excess interest. Multiply the

This result is also required to be reported

transaction that is recorded on the sets of

rate on line 10e by the amount of excess

on Form 1120-F, Section III, line 8. This

books reportable on Schedule L, and that

U.S.-connected liabilities on line 11 and

amount is the corporation’s tentative

is subject to the scaling ratio, is reported

enter the result on line 12. This amount is

branch interest for purposes of the

on Form 1120-F, line 27. Such amount is

the corporation’s excess interest expense

branch-level interest tax under

also subject to reporting on Schedule H

portion of its overall Regulations section

Regulations section 1.884-4(b). See the

(Form 1120-F), Part IV, line 39a as

1.882-5 allocation that is allocable to

instructions for Form 1120-F, Section III,

allocable in part to ECI and in part to

effectively connected income under the

Part II, line 8.

non-ECI in accordance with the scaling

AUSBL method in Regulations section

ratio of this line 14b.

1.882-5(d)(5). The amount on line 12 also

Lines 10 Through 15. Step

constitutes the corporation’s excess

Lines 16 Through 20. Step

interest under section 884(f)(1)(B). See

3: Adjusted U.S. Booked

Regulations section 1.884-4(a)(2).

3: Separate Currency

Liabilities Method

Line 13. Interest expense allocation.

Pools Method

Add the amount reported on line 12 and

If the amount on line 7c exceeds the

the amount of U.S. book interest expense

amount on line 8, column (c), the

Corporations that allocate interest

from line 9, column (c) and enter the

corporation has “excess interest” as

expense under a Separate Currency

result on line 13. This amount is the

defined in section 884(f)(1)(B). Complete

Pools election report the allocations under

corporation’s total amount of interest

lines 10 through 13, and skip lines 14a

a three-step method for each currency in

expense allocable under the three-step

and 14b. If the amount on line 7c is less

which the corporation has U.S. assets (as

formula when U.S.-connected liabilities

than or equal to the amount on line 8,

defined in Regulations section

exceed U.S. booked liabilities under the

column (c), skip lines 10 through 13, and

1.884-1(d)), on Schedule I, lines 16

AUSBL method. It does not include any

complete the determination of the scaling

through 20. The amount of the interest

amounts directly allocable to effectively

ratio on lines 14a and 14b.

expense allocation is the sum of the

connected income under Temporary

separate interest expense allocations in

Lines 10 Through 13.

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

each currency. If the corporation makes a

Computation of AUSBL Method

Lines 14a Through 15.

3% currency election under Regulations

Allocation with Excess Interest

section 1.882-5(e)(1)(i), check the box on

Computation of AUSBL Method

line 16b and include the U.S. dollar value

Allocation Under the

Line 10. 30-day LIBOR election for

of all currencies for which the 3%

Scale-Down Ratio

banks. If the corporation is a foreign

currency election applies in the U.S.

bank that elects to compute excess

If U.S.-connected liabilities on line 7c are

dollar denominated column on line 16a.

interest under the AUSBL method using

equal to or less than U.S.-booked

the 30-day published U.S. dollar LIBOR

Schedule I accommodates reporting of

liabilities on line 8, column (c), the AUSBL

rate for the tax year, check the box on line

the interest expense allocations in four

method allocation is subject to a

10 and skip lines 10a through 10c. Enter

currencies (including the U.S. dollar and

“scale-down” of the U.S. booked interest

the published 30-day U.S. dollar LIBOR

the foreign corporation’s functional

expense reported on line 9, column (c).

rate on line 10d. See Temporary

currency). If the foreign corporation has

Complete lines 14a and 14b in lieu of

Regulations section 1.882-5T(d)(5)(ii)(B)

U.S. assets in more than four currencies

lines 10 through 13. If line 7c exceeds line

for the requirements and separate

that are not subject to a 3% currency

8, column (c), leave lines 14a and 14b

statement required to be attached to a

election, attach separate sheets using the

blank.

timely filed Form 1120-F. The 30-day

same size and format as shown on the

Line 14b. Scaled-down U.S. book

LIBOR election does not apply to

schedule and provide the information

interest. Multiply the amount of U.S.

corporations other than foreign banks. For

requested on lines 16 through 19 on the

booked interest on line 9, column (c), by

this purpose, the corporation is eligible to

attached sheets for all such additional

the scale-down ratio on line 14a, and

make the 30-day U.S. dollar LIBOR

currencies. Report on Schedule I, line 20,

enter the result on line 14b. The allocated

election under the same standard that

column (d), the total results for all

amount is the total amount of the AUSBL

qualifies the corporation as a bank eligible

separate currency allocations shown on

method allocation under Regulations

to make the 95% fixed ratio election in

line 19 for columns (a) through (d), plus

section 1.882-5(d)(4). The amount on line

Temporary Regulations section

any additional line 19 amounts shown on

14b does not include any amount directly

1.882-5T(c)(4). If a protective return is

attached separate sheets (if any).

allocable to ECI under Temporary

filed, see the instructions for making a

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

Line 16a. U.S. Assets — U.S. dollar

protective 30-day LIBOR election on

Hedging amounts. If the corporation

value denominated in currency. Enter

Schedule I filed with the protective return.

has income, expense, gain or loss from a

the U.S. dollar value of the average

Lines 10a Through 10c. Excess

hedging transaction of a U.S. booked

amount of U.S. assets in the appropriate

liability that gives rise to interest expense

column (a) through (d) (or on the attached

Interest – Average Actual U.S.

subject to the scale-down ratio, such

separate sheets for additional currencies).

Dollar Rate

hedging income, expense, gain or loss

Enter in column (a), the U.S. dollar

Line 10a. Actual U.S. dollar interest. If

amount is also subject to reduction under

denominated U.S. assets plus the U.S.

the corporation does not properly make or

the same scaling ratio reported on line

dollar value of any U.S. assets for which a

is not eligible to make a 30-day LIBOR

14a. See Regulations section

3% currency election is applicable for the

election for the tax year, enter the interest

1.882-5(d)(4) and Proposed Regulations

tax year. In column (b), enter the average

expense paid or accrued by the

section 1.882-5(d)(2)(vi). Do not report

U.S. dollar value of U.S. assets

corporation for the tax year on its average

such scale-down reductions of

denominated in the corporation’s home

worldwide U.S. dollar liabilities, excluding

hedging income, expense, gains or

country functional currency. Enter the

U.S.-booked liabilities included on line 8,

losses on line 14b. The ratio reported on

average U.S. assets of all other currency

column (c).

line 14a shall be applied to each type of

pools beginning with column (c).

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Instructions For Schedule I (Form 1120-F) - 2007 Page 6

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