Instructions For Form 8873 - Extraterritorial Income Exclusion (Page 4 of 5) in pdf

Part II–Foreign Trade

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

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

supporting statement that contains all

Under the alternative computation,

Income and Foreign Sale

information that would be reported if a

however, you may instead choose to enter

and Leasing Income

separate Form 8873 were filed for each

on line 45 the amount from any of those

transaction. The supporting statement

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

Lines 6 through 14. Enter your foreign

should not be filed with the Form 8873.

example, although line 42 may produce

trading gross receipts identified on lines 6

the greatest exclusion for you, use of that

through 14 using the rules outlined under

line could eliminate or reduce the

transactions. Instead of aggregate

Foreign Trading Gross Receipts, earlier.

exclusion for a related person because of

reporting, you may choose to report

the limitation under section 941(a)(3) on

Line 14, column (b). Enter on this line

transactions on a tabular schedule. File

the use of the 1.2% of foreign trading

only the sum of those portions of the

one Form 8873 entering only your name

gross receipts method. Therefore, to

amounts on lines 6, 9, 12, and 13, column

and identifying number at the top of the

maximize the combined exclusion for you

(a), that are attributable to foreign

form. Also check box (1)(c) of line 5c.

and that related person, you may prefer to

economic processes (see definition

Attach a tabular schedule to the partially

enter on line 45 the greatest of lines 33,

earlier). Because only foreign trading

completed Form 8873 reporting all

36, 38, or 44 (instead of the amount on

gross receipts attributable to foreign

information as if a separate Form 8873

line 42).

economic processes are included in

were filed for each transaction. Also see

line 14, column (b), the amount entered on

Format of tabular schedules below.

Line 50. If you had any operations in or

line 14, column (b), will not necessarily

related to a country associated with

(2) Group of transactions. You may

equal the total of the foreign trading gross

carrying out an international boycott or you

elect to group transactions (other than

receipts amounts entered on lines 6, 9, 12,

participated in or cooperated with an

foreign sale and leasing income

and 13, column (a).

international boycott, your extraterritorial

transactions) by product or product line.

income exclusion may be reduced. See

The grouping of transactions applies to all

Line 17. For lines 17a through 17h,

the separate instructions for Form 5713,

transactions completed during the tax year

compute your cost of goods sold allocated

International Boycott Report, for

for that product or product line.

to your foreign trading gross receipts. See

definitions and other details and to find out

the instructions for the tax return to which

To make the election, complete one

if you are required to file Form 5713. If you

this form is attached for basic rules for

Form 8873 entering only your name and

are required to file Form 5713, also

determining cost of goods sold.

identifying number at the top of the form.

complete Schedule A (Form 5713),

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

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

International Boycott Factor (Section

tabular schedule to the partially completed

deductions, other than those you included

999(c)(1)), and Schedule C (Form 5713),

Form 8873 reporting all information as if a

in figuring your cost of goods sold, that are

Tax Effect of the International Boycott

separate Form 8873 were filed for each

allocable to the amount reported on

Provisions. Enter the amount from

group of transactions. See Format of

line 15.

Schedule C (Form 5713), line 6c, on Form

tabular schedules below.

Enter on line 19, column (b), the

8873, line 50.

deductions, other than those you included

Note. If a grouping basis is elected,

The exception from filing Form

in figuring your cost of goods sold, that are

aggregate reporting is not permitted.

5713 that generally applies to

directly allocable to the amount reported

foreign persons does not apply to

Attach Form 8873 to your tax return.

on line 16.

CAUTION

a foreign person that is claiming the

Once the election is made, grouping

extraterritorial income exclusion.

redeterminations are permitted until one

Note. Do not include your allocable

year after the later of:

portion of general and administrative

Also include on line 50 the total of any

expenses on line 19, column (b).

1. The due date of your timely filed

illegal bribes, kickbacks, or other

return (including extensions), or

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

payments (within the meaning of section

attach to Form 8873 a statement listing

2. In the event of an examination of

162(c)) paid by or on behalf of the

these amounts. See the instructions for

your return by the IRS, notification by the

taxpayer directly or indirectly to

the tax return to which this form is

IRS of such examination (provided you

government officials, employees, or

attached for basic rules for determining

agree to extend the statute of limitations

agents.

expenses.

for assessment by 1 year).

Line 52. Although the amount on line 52

is an exclusion from income and not a

Part III–Marginal Costing

Note. If your foreign trading gross

deduction, include it on the “Other

receipts are $5 million or less for the tax

Marginal costing is a method under which

deductions” or “Other expenses” line of

year, you may file a separate Form 8873

only direct production costs of producing a

your tax return or schedule.

for each group of transactions instead of

particular product or product line are taken

filing a tabular schedule.

If you are filing Schedule C (Form

into account for purposes of computing

1040), enter “Extraterritorial income

your qualifying foreign trade income.

Format of tabular schedules. If a

exclusion from Form 8873” and the

Complete this section to see if you will

tabular schedule is attached to Form

amount on a line in Part V of Schedule C.

benefit by using marginal costing. If you

8873, the schedule must:

If you are filing Schedule E (Form

do not wish to use this method, skip Part

Be in spreadsheet or similar format,

1040), enter “Form 8873” and the amount

III and complete Part IV using the

List your name and identifying number

on the “Other” line under Expenses in Part

instructions below.

on each numbered page,

I of Schedule E.

Be formatted in columns that

Part IV–Extraterritorial

correspond to each line item of Form

For filers of Form 1120, include the

Income Exclusion

8873, and

amount on the “Other deductions” line of

Show totals in each column.

Form 1120 (line 26 of the 2017 Form

Line 45. Generally, your qualifying

1120).

foreign trade income is based on the

Instructions for Form 8873 (Rev. 9-2017)

-4-

Instructions For Form 8873 - Extraterritorial Income Exclusion Page 4

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