Instructions For Form 1118 - 2016 printable pdf download

Instructions for Form 1118

Department of the Treasury

Internal Revenue Service

(Rev. December 2017)

(Use with the December 2015 revision of Form 1118)

Foreign Tax Credit—Corporations

Passive Category Income

appearing on the IRS version. For more

Section references are to the Internal Revenue

Code unless otherwise noted.

information, see Pub. 1167, General Rules

Passive category income includes passive

and Specifications for Substitute Forms

Future Developments

income and specified passive category

and Schedules.

income.

How To Complete

For the latest information about

Passive income. Generally, passive

developments related to Form 1118 and

income is:

Form 1118

its instructions, such as legislation

Any income received or accrued that

enacted after they were published, go to

would be foreign personal holding

Important. Complete a separate

IRS.gov/Form1118.

company income (defined in section

Schedule A; Schedule B, Parts I & II;

954(c)) if the corporation were a controlled

Schedules C through G; Schedule I; and

What’s New

foreign corporation (CFC) (defined in

Schedule K for each applicable separate

section 957). This includes any gain on

category of income. See

Categories of

the sale or exchange of stock that is more

Temporary and proposed regulations

Income, later. Complete Schedule B, Part

than the amount treated as a dividend

have been issued under section 901(m).

III; Schedule H; and Schedule J only once.

under section 1248. However, in

See T.D. 9800 and REG-129128-14 for

Use Schedule A to compute the

determining if any income would be

additional information.

corporation's income or loss before

foreign personal holding company income,

adjustments for each applicable category

General Instructions

the rules of section 864(d)(6) will apply

of income.

only for income of a CFC.

Use Schedule B to determine the total

Any amount includible in gross income

Purpose of Form

foreign tax credit after certain limitations.

under section 1293 (which relates to

Use Schedule C to compute taxes

certain passive foreign investment

Use Form 1118 to compute a

deemed paid by the domestic corporation

companies).

corporation's foreign tax credit for certain

filing the return.

taxes paid or accrued to foreign countries

Passive income does not include:

Use Schedules D and E to compute

or U.S. possessions. See

Taxes Eligible

Any financial services income that is

taxes deemed paid by lower-tier foreign

for a

Credit, later.

general category income (see

General

corporations.

Category

Income, later),

Use Schedule F to report gross income

Who Must File

Any export financing interest unless it is

and definitely allocable deductions from

also related person factoring income (see

Any corporation that elects the benefits of

foreign branches.

section 904(d)(2)(G) and Regulations

the foreign tax credit under section 901

Use Schedule G to report required

section 1.904-4(h)(3)),

must complete and attach Form 1118 to

reductions of tax paid, accrued, or

Any high-taxed income (see

General

its income tax return.

deemed paid.

Category Income

and the instructions for

Use Schedule H to apportion

When to Make the Election

Schedule A, later), or

deductions that cannot be definitely

Any active rents or royalties. See

allocated to some item or class of income.

The election to claim the foreign tax credit

Regulations section 1.904-4(b)(2)(iii) for

Use Schedule I (a separate schedule)

(or a deduction in lieu of a credit) for any

definitions and exceptions.

to compute reductions of taxes paid,

tax year may be made or changed at any

accrued, or deemed paid on foreign oil

time before the end of a special 10-year

Note. Certain income received from a

and gas extraction income.

period described in section 6511(d)(3) (or

CFC and certain dividends from a 10/50

Use Schedule J (a separate schedule)

section 6511(c) if the period is extended

corporation that would otherwise be

to compute adjustments to separate

by agreement). Note that while the

passive income may be assigned to

limitation income or losses in determining

limitations period for refund claims relating

another separate category under the

the numerators of limitation fractions,

to a foreign tax credit generally runs

look-through rules. See

Look-Through

year-end recharacterization balances, and

parallel with the election period, the

Rules, later.

overall foreign and domestic loss account

limitations period for refund claims relating

balances.

Specified passive category income.

to a deduction of foreign tax does not, and

Use Schedule K (a separate schedule)

This term includes:

may expire before the end of the election

to reconcile the corporation's prior year

Dividends from a DISC or former DISC

period.

foreign tax carryover with its current year

(as defined in section 992(a)) to the extent

Computer-Generated

foreign tax carryover.

such dividends are treated as foreign

source income, and

Form 1118

Categories of Income

Distributions from a former FSC out of

The corporation may submit a

earnings and profits attributable to foreign

Compute a separate foreign tax credit for

computer-generated Form 1118 and

trade income or interest or carrying

each applicable separate category

schedules if they conform to the IRS

charges (as defined in section 927(d)(1),

described below.

version. However, if a software program is

before its repeal) derived from a

used, it must be approved by the IRS for

transaction which results in foreign trade

use in filing substitute forms. This ensures

the proper placement of each item

Aug 08, 2017

Cat. No. 10905I

Instructions For Form 1118 - 2016

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