Instructions For Form 8873 - Extraterritorial Income Exclusion printable pdf download

Instructions for Form 8873

Department of the Treasury

Internal Revenue Service

(Rev. September 2017)

(Use with the December 2010 revision of Form 8873.)

Extraterritorial Income Exclusion

be considered enforceable against a

income that is qualifying foreign trade

Section references are to the Internal Revenue

Code unless otherwise noted.

lessor notwithstanding the fact that a

income.

lessor retained approval of the

Qualifying Foreign

What’s New

replacement lessee.

Trade Income

Unrelated person. An unrelated person

These instructions are being revised

Generally, qualifying foreign trade income

is a person that is not a related person as

because of a required change to the

is the amount of gross income that, if

defined in Qualifying Foreign Trade

Paperwork Reduction Act Notice

excluded, would result in a reduction of

Property, later.

regarding the OMB control number under

taxable income by the greatest of:

which the information pertaining to Form

Pre-Repeal ETI Exclusion

15% of foreign trade income,

8873 is being collected.

1.2% of foreign trading gross receipts,

Rules

General Instructions

30% of foreign sale and leasing

Who Qualifies for the Exclusion

income.

Purpose of Form

Eligible Taxpayers

See definitions below.

Use this form to figure the amount of

Individuals, corporations (including S

Foreign Trading

extraterritorial income (defined below)

corporations), partnerships, and other

Gross Receipts

excluded from gross income for the tax

pass-through entities are entitled to the

year. Attach the form to your income tax

exclusion if they have extraterritorial

A taxpayer is treated as having foreign

return.

income.

trading gross receipts (FTGR) derived

from certain activities in connection with

Special rule for DISCs. The

Note. The amount figured on the form is

qualifying foreign trade property (defined

extraterritorial income exclusion does not

net of the disallowed deductions.

later) only if it meets the foreign economic

apply to any taxpayer for any tax year if, at

process requirements (described below).

ETI Repeal

any time during the tax year, the taxpayer

Foreign trading gross receipts are the

is a member of a controlled group of

The American Jobs Creation Act of 2004

taxpayer's gross receipts that are:

corporations (as defined in section 927(d)

repealed the ETI exclusion provisions

(4), as in effect before its repeal) of which

1. From the sale, exchange, or other

generally for transactions after 2004,

a DISC (Domestic International Sales

disposition of qualifying foreign trade

subject to transition rules.

Corporation) is a member.

property;

Transition Rule

2. From the lease or rental of

Eligible Transactions

qualifying foreign trade property for use by

Taxpayers may claim the ETI exclusion for

the lessee outside the United States;

(a) transactions under a binding contract

Generally, the extraterritorial income

that meets the requirements described in

exclusion applies to taxpayers with

3. For services that are related and

Binding Contract Exception below or (b)

respect to transactions after September

subsidiary to (a) any sale, exchange, or

transactions before 2005. Also see

30, 2000. However, the exclusion does

other disposition of qualifying foreign trade

Pre-Repeal ETI Exclusion Rules below.

not apply to any transaction in the ordinary

property by such taxpayer or (b) any lease

course of a trade or business involving a

or rental of qualifying foreign trade

Binding Contract Exception

FSC (Foreign Sales Corporation) that is

property for use by the lessee outside the

The Tax Increase Prevention and

under a binding contract that is in effect on

United States;

Reconciliation Act of 2005 repealed the

September 30, 2000, and at all times

4. For engineering or architectural

ETI binding contract exception for tax

thereafter, and that is between the FSC (or

services for construction projects located

years beginning after May 17, 2006. For

a person related to the FSC) and a person

(or proposed for location) outside the

tax years beginning before May 18, 2006,

other than a related person.

United States; or

the following rules apply: The taxpayer

Line 2 election. The taxpayer may elect

5. For the performance of managerial

may claim an ETI exclusion with respect to

to apply the exclusion rules for the

services for a person other than a related

transactions in the ordinary course of a

transactions described above involving a

person connected with the production of

trade or business under a binding contract

FSC. To make the election, check the box

foreign trading gross receipts described in

if such contract is between the taxpayer

on line 2. See the instructions for line 2 for

item 1, 2, or 3 above. Item 5 does not

and an unrelated person (defined below)

more details.

apply to a taxpayer for any tax year unless

and such contract was in effect on

at least 50% of its foreign trading gross

September 17, 2003, and at all times

Extraterritorial Income

receipts (determined without regard to this

thereafter.

Extraterritorial income is the gross income

sentence) for such tax year are derived

of the taxpayer attributable to foreign

For these purposes, a binding contract

from the activities described in item 1, 2,

trading gross receipts (defined below).

includes a purchase option, renewal

or 3 above.

The taxpayer reports all of its

option, or replacement option that is

extraterritorial income on its tax return. It

included in such contract and that is

Excluded receipts. Foreign trading

then uses Form 8873 to calculate its

enforceable against the seller or lessor.

gross receipts do not include the receipts

exclusion from income for extraterritorial

For this purpose, a replacement option will

of a taxpayer from a transaction if:

Sep 05, 2017

Cat. No. 31661R

Instructions For Form 8873 - Extraterritorial Income Exclusion

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