Instructions For Form 8902 - Alternative Tax On Qualifying Shipping Activities


Department of the Treasury
Instructions for Form 8902
Internal Revenue Service
(Rev. December 2006)
(For use with December 2005 version of Form 8902)
Alternative Tax on Qualifying Shipping Activities
non-self-propelled) U.S. flag vessel of not
The extent of a partner’s ownership,
Section references are to the Internal
less than 6,000 deadweight tons used
charter, or operating agreement interest
Revenue Code unless otherwise noted.
exclusively in the U.S. foreign trade
in any vessel operated by the partnership
during the period the election is in effect.
will be determined on the basis of the
What’s New
partner’s interest in the partnership.
Shipping activity requirement. A
corporation meets this requirement for
A similar rule applies to other
The definition of qualifying vessel has
any tax year only if the following
pass-through entities.
been expanded by lowering the
requirement is met for each of the two
deadweight ton requirement. See
preceding tax years: On average during
Qualifying vessel below for revised
the tax year, at least 25% of the
Specific Instructions
aggregate tonnage of qualifying vessels
used by the corporation was owned by
General Instructions
such corporation or chartered to such
Part I. Section 1354
corporation on bareboat charter terms
Purpose of Form
Election or Termination
(see definition below).
Form 8902 is used by qualifying vessel
Special rule for first year of election.
Item B
operators (defined below) who are
A corporation meets this requirement for
A corporation must make the alternative
making an alternative tax election under
the first tax year for which this election is
tax election on or before the due date
section 1354(a) or who have made such
in effect only if this requirement is met for
an election previously. The form is used
(including extensions of time to file) of the
the preceding tax year.
income tax return for the tax year for
to make such an election or report the
Controlled groups. A corporation
which the election is made.
termination of such an election, to report
that is a member of a controlled group
information relating to such an election,
Election by a member of a controlled
meets this requirement only if such
and to compute the alternative tax.
group. An election under section 1354(a)
requirement is met when determined by
by a member of a controlled group
Who Must File
treating all members of such group as
applies to all qualifying vessel operators
one person.
Form 8902 must be filed by a qualifying
that are members of such group.
vessel operator (defined below) who is
Bareboat charters. A person is treated
making an alternative tax election under
as operating and using a vessel that it
Item C
section 1354(a) or who is reporting the
has chartered out on bareboat charter
Generally, a revocation of an election
termination of such an election. The form
terms only if:
under section 1354(a) made:
must also be used by a qualifying vessel
The vessel is (a) temporarily surplus to
On or before the 15th day of the third
operator who has a valid election in effect
the person’s requirements and the term of
month of the tax year will be effective on
to report information pertaining to that
the charter does not exceed 3 years or (b)
the first day of that tax year.
election and to compute the alternative
bareboat chartered to a member of a
After the 15th day of the third month of
controlled group which includes such
the tax year will be effective the first day
person or to an unrelated person who
of the following tax year.
How To File
sub-bareboats or time charters the vessel
to such a member (including the owner of
However, if the revocation specifies a
File Form 8902 by attaching it to the
the vessel) and
date for revocation that is on or after the
corporation’s Form 1120 or Form 1120-F.
The vessel is used as a qualifying
day on which the revocation is made, the
vessel by the person to whom ultimately
revocation will be effective for tax years
beginning on and after the date of
Qualifying vessel operator. The term
revocation specified.
U.S. foreign trade. The term “U.S.
“qualifying vessel operator” means any
foreign trade” means the transportation of
Item D
corporation that operates one or more
goods or passengers between a place in
qualifying vessels and meets the shipping
the United States and a foreign place or
An election under section 1354(a) will be
activity requirement. See the definitions of
between foreign places.
terminated effective on and after the date
these terms below.
the corporation ceases to be a qualifying
See section 1355 for more definitions
vessel operator.
Operating a vessel. Except as provided
and special rules that apply with respect
in the definition of bareboat charters
to the above definitions.
Election after termination. If a
below, a person is treated as operating
qualifying vessel operator made the
any vessel during any period if:
Partnerships and Other
election under section 1354(a) and
Such vessel is owned by, or chartered
subsequently revoked the election (Item
(including a time charter) to, the person,
Pass-Through Entities
C) or ceased to be a qualifying vessel
or the person provides services for such
operator (Item D), that operator (and any
In applying these rules to a partner in a
vessel pursuant to an operating
successor operator) is not eligible to
agreement, and
make another section 1354(a) election for
Each partner is treated as operating
Such vessel is in use as a qualifying
any tax year before the 5th tax year that
vessels operated by the partnership,
vessel during such period.
begins after the 1st tax year for which the
Each partner is treated as conducting
termination is effective, unless the IRS
Qualifying vessel. A self-propelled (or
the activities conducted by the
consents to the election.
combination self-propelled and
partnership, and
Cat. No. 39897X


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