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costs exceed $50,000. If the total costs

If the corporation provided taxable

See section 164(d) for apportionment

are $55,000 or more, the deduction is

fringe benefits to its employees,

of taxes on real property between seller

reduced to zero.

such as personal use of a car, do

and purchaser.

CAUTION

If the election is made, any costs that

not deduct as wages the amount allocated

are not deductible must be amortized

for depreciation and other expenses

Line 2c. Interest

ratably over a 180-month period beginning

claimed on lines 1c and 1m.

Do not deduct the following interest.

with the month the IC-DISC begins

Interest on indebtedness incurred or

business operations.

Line 1h. Freight

continued to purchase or carry obligations

Attach any statement required by

if the interest is wholly exempt from

Enter 50% of the freight expenses (except

Regulations section 1.195-1(b) or

income tax. For exceptions, see section

insurance) for shipping export property

1.248-1(c). Report the deductible amount

265(b).

aboard U.S. flagships and U.S.-owned

of these costs and any amortization on

For cash basis taxpayers, prepaid

and U.S.-operated aircraft in those cases

line 2g of Schedule E. For amortization

interest allocable to years following the

where you are not required to use U.S.

that begins during the current tax year,

current tax year (for example, a cash basis

ships or aircraft by law or regulations.

complete and attach Form 4562.

calendar year taxpayer who in the current

For more information, see Pub. 535,

tax year prepaid interest allocable to any

Line 1i. Compensation of Officers

Business Expenses, and the Instructions

period after the current tax year may

for Form 4562. For more details on the

deduct only the amount allocable to the

Enter deductible officers' compensation

election for business start-up costs, see

current tax year).

on line 1i. Attach a statement showing the

section 195. For more details on the

Interest on debt allocable to the

name, social security number, and amount

election for organizational costs, see

production of designated property by a

of compensation paid to all officers. Do

section 248.

corporation for its own use. The

not include compensation deductible

corporation must capitalize this interest.

elsewhere on the return, such as amounts

Limitations on deductions related to

Also capitalize any interest on debt

included in cost of goods sold, elective

property leased to tax-exempt entities.

allocable to an asset used to produce the

contributions to a section 401(k) cash or

If an IC-DISC leases property to a

property. See section 263A(f) and

deferred arrangement, or amounts

governmental or other tax-exempt entity, it

Regulations sections 1.263A-8 through

contributed under a salary reduction SEP

may not claim deductions related to the

1.263A-15 for definitions and more

agreement or a SIMPLE IRA plan. See the

property to the extent that they exceed the

information.

Instructions for Form 1120 for more

IC-DISC's income from the lease

information on officers' compensation,

payments (tax-exempt-use loss). Amounts

Special rules apply to the following.

including any special rules and limitations

disallowed may be carried over to the next

Disqualified interest on certain

that may apply.

tax year and treated as a deduction with

indebtedness under section 163(j). See

respect to the property for that tax year.

Form 8926, Disqualified Corporate

The IC-DISC determines who is an

See section 470 for more details and

Interest Expense Under Section 163(j)

officer under the laws of the state where it

exceptions.

and Related Information, and the related

is incorporated.

Contributions. See the Instructions for

instructions.

Form 1120 and Pub. 542 for limitations

Forgone interest on certain

Line 1m. Other Export Promotion

that apply to contributions.

below-market-rate loans (see section

Expenses

7872).

Original issue discount on certain

Line 1. Export Promotion

Enter any other allowable export

high-yield discount obligations. See

promotion expenses not claimed

Expenses

section 163(e) to figure the disqualified

elsewhere on the return.

Enter export promotion expenses on lines

portion.

1a through 1m. Export promotion

Interest which is allocable to

Note. Do not deduct fines or penalties

expenses are an IC-DISC's ordinary and

unborrowed policy cash values of life

imposed on the IC-DISC.

necessary expenses paid or incurred to

insurance, endowment, or annuity

obtain qualified export receipts. Do not

contracts issued after June 8, 1997. See

Line 2b. Taxes and Licenses

include income taxes. Enter on lines 2a

section 264(f). Attach a statement

Enter taxes paid or accrued during the tax

through 2g any part of an expense not

showing the computation of the deduction.

year, but do not include the following.

incurred to obtain qualified export

receipts.

Line 2d. Charitable Contributions

Taxes not imposed on the corporation.

Taxes, including state or local sales

For more information on charitable

Line 1d. Salaries and Wages

taxes, that are paid or incurred in

contributions, including substantiation and

Enter the total salaries and wages paid for

connection with an acquisition or

recordkeeping requirements, see section

the tax year. Do not include salaries and

disposition of property (these taxes must

170 and the related regulations and Pub.

wages deductible elsewhere on the return,

be treated as part of the cost of the

526, Charitable Contributions. For

such as amounts included in officers'

acquired property or, in the case of a

limitations on deduction and other special

compensation, cost of goods sold,

disposition, as a reduction in the amount

rules that apply to corporations, see the

elective contributions to a section 401(k)

realized on the disposition).

Instructions for Form 1120 and Pub. 542.

cash or deferred arrangement, or amounts

Taxes assessed against local benefits

contributed under a salary reduction SEP

that increase the value of the property

Line 2e. Freight

agreement or a SIMPLE IRA plan.

assessed (such as for paving, etc.).

Enter freight expense not deducted on

Taxes deducted elsewhere on the

line 1h as export promotion expense.

return, such as those reflected in cost of

goods sold.

Instructions for Form 1120-IC-DISC (Rev. 9-2017)

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Instructions For Form 1120-Ic-Disc - Interest Charge Domestic International Sales Corporation Return - 2017 Page 10

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