Instructions For Form 1120-Fsc - 2016 (Page 8 of 14) in pdf

modified by Rev. Proc. 2011-14, 2011-4

1. Name and EIN (if any) of the foreign

income included on line 15, column (b).

I.R.B. 330, or a successor.

partnership;

Include only the taxable amount on line 16.

FSCs that use erroneous valuation

2. Identify which, if any, of the following

Nonaccrual experience method for serv-

methods must change to a method permitted

forms the foreign partnership filed for its tax

ice providers. Accrual method FSCs are

for Federal income tax purposes. To make

year ending with or within the FSC's tax year:

not required to accrue certain amounts to be

this change, use Form 3115.

Form 1042, 1065 or 1065-B, or 8804;

received from the performance of certain

services that, on the basis of their

On line 9a, check the method(s) used for

3. Name of the tax matters partner (if

experience, will not be collected, if;

valuing inventories. Under lower of cost or

any) and

The services are in the fields of health,

market, the term “market” (for normal goods)

4. Beginning and ending dates of the

law, engineering, architecture, accounting,

means the current bid price prevailing on the

foreign partnership's tax year.

actuarial science, performing arts, or

inventory valuation date for the particular

consulting, or

merchandise in the volume usually

Line 6. If the FSC has a net operating loss

The corporation's average annual gross

purchased by the taxpayer. If section 263A

(NOL) for its current tax year, it generally can

receipts have not exceeded $5 million for

applies to the taxpayer, the basic elements

elect to waive the entire carryback period for

any prior 3-tax-year period. For more details,

of cost must reflect the current bid price of all

the NOL and instead carry the NOL forward

see Regulations sections 1.448-2(a)(2) and

direct costs and all indirect costs properly

to future tax years. To do so, check the box

1.448-1T(f)(2).

allocable to goods on hand at the inventory

on line 6 and file the tax return by its due

date.

This provision does not apply to any

date, including extensions (do not attach the

amount if interest is required to be paid on

statement described in Temporary

Inventory may be valued below cost when

Regulations section 301.9100-12T). Once

the amount or if there is any penalty for

the merchandise is unsalable at normal

failure to timely pay the amount. For more

made, the election is irrevocable. See Form

prices or unusable in the normal way

information, see Regulations section

1139, Corporation Application for Tentative

because the goods are subnormal due to

Refund, for more details.

1.448-2.

damage, imperfections, shop wear, etc. The

goods may be valued at the current bona

Corporations that qualify to use the

Line 7. Enter the amount of the NOL

fide selling price, minus direct cost of

nonaccrual experience method should attach

carryover to the tax year from prior years,

disposition (but not less than scrap value).

a statement showing total gross receipts, the

even if some of the loss is used to offset

Bona fide selling price means actual offering

amount not accrued as a result of the

income on this return. The amount to enter is

of goods during a period ending not later

application of section 448(d)(5), and the net

the total of all NOLs generated in prior years

than 30 days after inventory date.

amount accrued. Enter the net amount on

but not used to offset income (either as a

the applicable line of

If this is the first year the Last-in, First-out

carryback or carryover) to a tax year prior to

Schedule B.

(LIFO) inventory method was either adopted

the current tax year. Do not reduce the

or extended to inventory goods not

amount by any NOL deduction reported on

Lines 1 through 5. Enter the foreign trading

previously valued under the LIFO method

line 19a, Part II of Schedule B.

gross receipts requested on lines 1 through

provided in section 472, attach Form 970,

5. See section 924 and Foreign Trading

Lines 8c and 9b(2). See Definition of a

Application To Use LIFO Inventory Method,

Gross Receipts on page 2 of these

Foreign Sales Corporation (FSC), earlier, for

or a statement with the information required

instructions for receipts that are excluded

definitions of qualifying foreign country and

by Form 970. Also check the LIFO box on

and other details. Report commission

U.S. possession.

line 9c. On line 9d, enter the amount of total

income on line 1 or line 2 based on the sale,

closing inventories computed under section

Line 9. All FSCs (except small FSCs) must

lease, or rental of property on which that

472. Estimates are acceptable.

answer these questions. For more

commission arose.

information, see Foreign Management

If the FSC changed or extended its

Line 5. If the 50% gross receipts test of

Rules, earlier.

inventory method to LIFO and had to write up

section 924(a)(5) is not met, report the FSC's

the opening inventory to cost in the year of

Line 10. All FSCs (except small FSCs) must

gross receipts that would have otherwise

election, report the effect of the write-up as

answer these questions. On line 10b,

qualified under that section on line 16,

other income (as appropriate on Schedule F,

indicate how the FSC met the foreign direct

Schedule F, instead of line 5,

line 16), proportionately over a 3-year period

costs requirement of section 924(d) for all

Schedule B.

that begins with the year of the LIFO

transactions that generated foreign trading

election.

Lines 6b through 6h. See section 924(b)

gross receipts reported on lines 1 through 5

(2)(B) for the rules regarding the limitation on

For more information on inventory

of Schedule B. Also, complete line 10a

the amount of foreign trading gross receipts

valuation methods, see Pub. 538. For more

and/or line 10d to make an election to use

that a small FSC can take into account in

information on changes in the method of

either of the annual grouping election(s)

determining its exempt foreign trade income.

accounting for inventory, see Form 3115 and

indicated. See Foreign Economic Process

the Instructions for Form 3115.

Rules, earlier, for details.

Line 6d. Temporary Regulations section

1.921-1T(b)(5) indicates that, in the case of a

Additional Information

Schedule B

small FSC having a short tax year, the dollar

limitation reported on line 6b or 6c is to be

Use Schedule B to compute taxable income

Line 2. Enter any tax-exempt interest

prorated on a daily basis. A small FSC

from all sources.

received or accrued. Include any

having a short tax year must divide the

exempt-interest dividends received as a

Part I

number of days in its short tax year by the

shareholder in a mutual fund or other

number of days that would have made up a

Use Part I to compute net income attributable

regulated investment company. Also include

full tax year and enter the resulting fraction

to nonexempt foreign trade income. Income

this amount on Schedule M-1, line 7a.

on line 6d as a decimal less than 1.00000.

and expenses on lines 1 through 15 are

Line 5. If the FSC owned at least a 10%

reported in column (a) if the administrative

Example. For its 2017 calendar year tax

interest, directly or indirectly, in any foreign

pricing rules were used in the transaction

year, a small FSC has a short tax year of 73

partnership, attach a statement listing the

that produced the income.

days. The FSC enters 0.20 (73/365) on

following information for each foreign

line 6d.

Report in column (b) all foreign trade

partnership. For this purpose, a foreign

income from all transactions in which the

Line 6f. If commission income is reported in

partnership includes an entity treated as a

administrative pricing rules were not used.

the total for line 6a of Schedule B, total

foreign partnership under Regulations

Attach a statement that shows the

receipts for purposes of line 6f are figured as

section 301.7701-2 or 301.7701-3.

computation of the taxable and nontaxable

follows:

Instructions for Form 1120-FSC (Rev. 12-2016)

-8-

Instructions For Form 1120-Fsc - 2016 Page 8

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