Instructions For Form 8858 - 2011 (Page 4 of 5) in pdf

same meaning given to them by U.S.

Report these amounts in U.S. dollars.

use the average exchange rate for the

GAAP (see Opinion No. 30 of the

Enter on line 5 the DASTM gain or loss

FDE’s tax year. See section 989(b).

Accounting Principles Board and

figured under Regulations section

Report the exchange rate in the entry

Statement No. 16 of the Financial

1.985-3(d).

space provided at the top of Schedule M

Accounting Standards Board).

(Form 8858) using the “divide-by

Lines 2 and 3. Certain adjustments

convention” specified under Reporting

Important: Differences between this

must be made to the FDE’s line 1 net

Exchange Rates on Form 8858 on page

functional currency amount and the

book income or (loss) to determine its

amount of taxes that reduce E&P (in the

current E&P or taxable income. The

case of an FDE of a CFC) or are

adjustments may include those needed to

Every U.S. person that is required to

deductible in computing U.S. taxable

conform the foreign book income to U.S.

file Schedule M (Form 8858) (see Who

income (in the case of an FDE of a U.S.

GAAP and to U.S. tax accounting

Must File on page 1) must file the

person or a CFP) should be accounted for

principles. If the FDE’s books are

schedule to report the transactions that

on line 2 or 3 of Schedule H.

maintained in functional currency in

occurred during the FDE’s annual

accordance with U.S. GAAP, enter on line

accounting period ending with or within

Schedule C-1

1 the functional currency GAAP income or

the U.S. person’s tax year.

(loss) from line 8 of Schedule C, rather

Complete a separate Schedule C-1 for

If a U.S. corporation is the U.S. person

than starting with foreign book income,

each recipient that has a functional

filing Schedule M (Form 8858) and is a

and show GAAP-to-tax adjustments on

currency that is different than the

member of a consolidated group, list the

lines 2 and 3.

functional currency of the FDE. See

common parent as the U.S. person filing

The adjustments may include the

section 987(3) for rules relating to branch

Schedule M (Form 8858).

following:

remittances.

Column headings. There are 2 sets of

•

Capital gains and losses.

column headings above lines 1 through

Schedule F

•

Depreciation, amortization, and

19. The first set of column headings is to

depletion.

Use Schedule F to report a summary

be used in cases where the tax owner is a

•

Investment or incentive allowance.

balance sheet for the FDE computed and

CFP. The second set of column headings

•

Charges to statutory reserves.

translated into U.S. dollars in accordance

is to be used in cases where the tax

•

Inventory adjustments. Inventories

owner is a CFC. If you are completing

with U.S. GAAP.

must be taken into account according to

Schedule M (Form 8858) for an FDE for

Special rule for DASTM. If the FDE

the rules of sections 471 (incorporating

which the tax owner is a CFP, check the

uses DASTM, Schedule F should be

the provisions of section 263A) and 472

box for CFPs and complete lines 1

prepared and translated into U.S. dollars

and the related regulations.

through 19 using the headings in columns

according to Regulations section

•

Taxes. See the instructions for

(a) through (e) of the CFP set of columns.

1.985-3(d), rather than U.S. GAAP.

Schedule C, line 7.

If you are completing Schedule M (Form

Schedule G

8858) for an FDE for which the tax owner

Attach a separate schedule that lists

is a CFC, check the box for CFCs and

each applicable adjustment item. For

Question 3

complete lines 1 through 19 using the

each adjustment item, indicate the

headings in columns (a) through (f) of the

adjustment amount and whether the

If the tax owner of the FDE is claiming a

CFC set of columns.

amount is a net addition or net

section 165 loss with respect to worthless

subtraction. The separate schedule

Column (e). Use column (e) to report

stock or with respect to certain

should also show two totals, the total net

transactions between the FDE and any

obligations, see Regulations section

additions amount to be entered on line 2,

U.S. person with a 10% or more direct

1.6011-4 for information relating to a

and the total net subtractions amount to

interest in the CFP or any 10% or more

disclosure statement that must be

be entered on line 3.

U.S. shareholder of any corporation

attached to Form 8858 if certain

controlling the CFC. If you are a Category

Line 5. DASTM gain or (loss), reflecting

requirements are met.

1 filer of Form 8865, or a Category 4 filer

unrealized exchange gain or loss, should

Question 4

of Form 5471, do not report transactions

be entered on line 5 only for FDEs that

If the FDE is not owned directly or

between yourself and the FDE under

use DASTM.

indirectly by a domestic corporation or the

column (e). Report the transactions only

Line 7. Enter the line 6 functional

FDE did not incur an NOL for the year,

under column (b).

currency amount translated into U.S.

please write “N/A” across the “Yes/No”

Line 6. Report on line 6 dividends

dollars at the average exchange rate for

entry spaces for line 4 to indicate that the

received by the FDE that were not

the FDE’s tax year. See section 989(b).

question is not applicable. Otherwise, if

previously taxed under subpart F in the

Report the exchange rate using the

you are checking the “Yes” box, you may

current year or in any prior year.

“divide-by convention” specified under

need to attach an elective relief

Reporting Exchange Rates on Form 8858

Lines 18 and 19. Report on lines 18 and

agreement and/or an annual certification

on page 2. If the FDE uses DASTM, enter

19 the largest outstanding balances

as provided in Regulations sections

on line 7 the same amount entered on

during the year of gross amounts

1.1503(d)-6(d) or (g).

line 6.

borrowed from, and gross amounts

loaned to, the related parties described in

Blocked income. The E&P or taxable

Schedule H

columns (b) through (f). Do not enter

income of the FDE, as reflected on

Use Schedule H to report the FDE’s

aggregate cash flows, year-end loan

Schedule H, must not be reduced by all or

current earnings and profits (E&P) (if the

balances, average balances, or net

any part of such E&P or taxable income

tax owner is a CFC) or taxable income (if

balances. Do not include open account

that could not have been distributed by

the tax owner is a U.S. person or a CFP).

balances resulting from sales and

the FDE due to currency or other

Generally, enter the amounts on lines 1

purchases reported under other items

restrictions or limitations imposed under

through 6 in functional currency.

listed on Schedule M (Form 8858) that

the laws of any foreign country.

Special rules for DASTM. If the FDE

arise and are collected in full in the

Schedule M

uses DASTM, enter on line 1 the dollar

ordinary course of business.

GAAP income or (loss) from line 8 of

Important: In translating the amounts

Schedule C. Enter on lines 2 and 3 the

from functional currency to U.S. dollars,

adjustments made in figuring current E&P

or taxable income for U.S. tax purposes.

-4-

Instructions For Form 8858 - 2011 Page 4

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