Instructions For Form 1118 - Foreign Tax Credit-Corporations (Page 5 of 13) in pdf

RIC pass-through amounts. Aggregate

extensions) of the corporation’s return for

stock in that PFIC, report all income

all income passed through from regulated

its tax year in which the foreign tax

deemed received (before gross-up) under

redetermination occurs. For special rules

investment companies (RICs) and report

section 1291.

relating to corporations under the

the total on a single line. Enter “RIC” in

Column 3(a). Report all other dividends

jurisdiction of the Large Business &

column 1 and report the total in column

(before gross-up) not included in column

International Division, see Temporary

13. Note that the totals are being reported

2(a) from sources outside the United

Regulations sections 1.905-4T(b)(3) and

on a single line because it is not

States for the applicable separate

1.905-4T(f)(2)(iii).

necessary to report the RIC pass-through

category. Other dividends include

amounts on a per-country basis.

amounts included in gross income under

Interest and Penalties

section 951(a)(1)(B).

Net operating losses. Report any net

In most cases, interest is computed on

operating loss carryover on a single line.

Note. All dividends from a domestic

the deficiency or overpayment that

Enter “NOL” in column 1 and report the

corporation are of U.S. source, including

resulted from the foreign tax adjustment

total in column 11. Note that the totals are

dividends from a domestic corporation

(sections 6601 and 6611 and the related

being reported on a single line because it

which has 80% or more of its gross

regulations). See Temporary Regulations

is not necessary to report the NOL on a

income from sources outside the United

section 1.905-4T(e) for additional

per-country basis.

States.

information.

Reclassifications of high-taxed

Columns 2(b) and 3(b). Include taxes

income. Aggregate all reclassifications

If the corporation does not comply with

deemed paid by a domestic corporation

the requirements discussed above within

of high-taxed income and report the total

under section 902 or section 960 on

the time for filing specified, the penalty

on a single line. With respect to passive

distributions by a foreign corporation in

provisions of section 6689 (and the

category income, for items of income that

income as dividend gross-up. See

related regulations) will apply.

have been included on Schedule A and

Regulations section 1.960-3(b) for

that must be reclassified under the rules

exceptions.

of Regulations section 1.904-4(c), enter

Column 4. Enter all interest received

“HTKO” in column 1 and enter (as a

Specific Instructions

from foreign sources. See section 861(c)

negative number) in column 13 the net

for the treatment of interest from a

amount of income that is being

Report all amounts in U.S. dollars unless

domestic corporation that meets the

reclassified from passive category

otherwise specified. If it is necessary to

foreign business requirement.

income. With respect to general category

convert from a foreign currency, attach a

Column 6. Include gross income,

income, enter “HTKO” in column 1 and

statement explaining how the conversion

including compensation, commissions,

enter (as a positive number) in column 13

rate was determined.

fees, etc., for technical, managerial,

the net amount of income that is being

engineering, construction, scientific, or

reclassified to general category income.

similar services outside the United States.

Note that the reclassifications are being

Be sure to include gross income from

Separate Category of Income

reported on a single line because it is not

services performed through a foreign

necessary to report them on a per-country

Boxes.

branch.

basis. Also note that tax reclassifications

The corporation must complete a

Column 7. Include all other gross

are needed on Schedule B. See those

separate Form 1118 for each applicable

income from sources outside the United

instructions for more information. Also

category of income. See Categories of

States for the applicable separate

see General Category Income on page 2

Income beginning on page 1.

category, including all other gross income

for general additional information about

of foreign branches and pass-through

high-taxed income.

entities and any exchange gain or loss

Column 1. Enter the two-letter codes

Schedule A

recognized under sections 986(c) or

(from the list at

987(3) on a distribution or remittance of

Report gross income or (loss) from

countrycodes

of all foreign countries and

previously taxed amounts. Attach a

sources outside the United States for the

U.S. possessions within which income is

schedule identifying the gross income by

applicable separate category in columns

sourced and/or to which taxes were paid,

type and by the foreign country or U.S.

2 through 7. Gross income equals gross

accrued, or deemed paid.

possession from which it was sourced.

receipts reduced by cost of goods sold.

For section 863(b) income, enter

Column 9(d). Include all other

Report the applicable deductions to this

“863(b)” instead of a two-letter code.

deductions definitely allocable to income

gross income in columns 9 and 10.

from sources outside the United States

For income passed through from a

Report any net operating loss carryover in

(dividends, interest, etc.) for the

RIC, enter “RIC” instead of a two-letter

column 11. Be sure to include in all

applicable separate category. Include

code.

columns the gross income and

deductions allocable to income of foreign

deductions that pertain to foreign

For a net operating loss, enter “NOL”

branches.

instead of a two-letter code.

Include any reduction of foreign source

Section 863(b) gross income and

For income adjustments for high-taxed

capital gain net income. If foreign source

deductions. Aggregate all section

income, enter “HTKO” instead of a

capital gain net income from all separate

863(b) gross income and deductions and

two-letter code.

categories is more than the capital gain

report the totals on a single line. It may be

net income reported on the corporation’s

When you enter a country code in

necessary to enter amounts in multiple

tax return, enter a pro rata portion of the

Schedule A, column 1, the

columns on that single line, depending

excess as a negative number in each

information entered on the

upon the nature of the section 863(b)

CAUTION

separate category. See Capital Gains on

corresponding line of Schedule B, Part I,

gross income and deductions. For

page 3.

must pertain to that country code.

example, enter “863(b)” in column 1 and

Column 10. Enter only the apportioned

Column 2(a). If the corporation is a U.S.

enter (as a positive number) all section

share from Schedule H, Part II, column

863(b) gross income (in columns 2

shareholder in a CFC, report all income

(d) that relates to gross income reported

through 8) and all section 863(b)

deemed received under section

in columns 2 through 7.

deductions (in columns 9a through 12).

951(a)(1)(A) (before gross-up). See

Also enter the net amount in column 13.

section 904(d)(3) and Look-Through

Note. If the corporation qualified as a

Note that the totals are being reported on

Rules on page 2 for more information. If

financial services entity because it treated

a single line because it is not necessary

the corporation is a U.S. shareholder in a

certain amounts as active financing

to report section 863(b) gross income and

passive foreign investment company

income that are not listed in Regulations

deductions on a per-country basis.

(PFIC) and receives distributions from

sections 1.904-4(e)(2)(i)(A) through (X),

-5-

Instructions For Form 1118 - Foreign Tax Credit-Corporations Page 5

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