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Line 11. All FSCs (except small FSCs)

year by the number of days that would

However, the FSC may elect to waive the

must answer these questions. On line

have made up a full tax year and enter

carryback period and instead carry the

11b, indicate how the FSC met the

the resulting fraction on line 6d as a

NOL forward to future tax years. To make

foreign direct costs requirement of section

decimal less than 1.00000.

the election, see the instructions for line 7

924(d) for all transactions that generated

on page 9.

Example. For its 2003 calendar year

foreign trading gross receipts reported on

tax year, a small FSC has a short tax year

See Form 1139 for details, including

lines 1 through 5 of Schedule B. Also,

of 73 days. The FSC enters 0.200 (73/

other elections that may be available,

complete line 11a and/or line 11d to make

365) on line 6d.

which must be made no later than 6

an election to use either of the annual

months after the due date (excluding

Line 6f. If commission income is reported

grouping election(s) indicated. See the

extensions) of the FSC’s tax return.

in the total for line 6a of Schedule B, total

instructions for Foreign Economic

receipts for purposes of line 6f are figured

Process Rules on page 3 for details.

Schedule E

as follows:

Schedule B

Exemption Percentages Used in

1. Enter total of columns (a) and (b),

Figuring Exempt Foreign Trade

line 6a, Schedule B . . . . . . . . . . . 1.

Taxable Income or (Loss)

Income

2. Enter total commission income

Use Schedule B to compute taxable

reported on line 1 and line 2,

For purposes of the Note at the top of

income from all sources.

Schedule B . . . . . . . . . . . . . . . . 2.

Schedule E, a C corporation is a

Part I

3. Subtract line 2 from line 1 . . . . . . . 3.

corporation other than an S corporation.

Use Part I to compute net income

Shareholders, other than C corporations,

4. With respect to the commission

attributable to nonexempt foreign trade

are individuals, partnerships, S

income reported on line 2 above,

income. Income and expenses on lines 1

corporations, trusts, and estates.

enter total gross receipts on the

through 15 are reported in column (a) if

sale, lease, or rental of property on

Use lines 2a through 2d to figure the

which the commission income

the administrative pricing rules were used

exemption percentage for foreign trade

arose (section 927(b)(2)) . . . . . . . 4.

in the transaction that produced the

income determined by not using the

income.

5. Add lines 3 and 4. Enter here and

administrative pricing rules. See section

on line 6f, Schedule B . . . . . . . . . 5.

Report in column (b) all foreign trade

923(a)(2).

income from all transactions in which the

Line 6h. When making the line 6h

Use lines 3a through 3d to figure the

administrative pricing rules were not

allocation, allocate only the commission

exemption percentage for foreign trade

used. Attach a schedule that shows the

income from the gross receipts on line 4

income that was determined by using the

computation of the taxable and

above. If the small FSC’s foreign trading

administrative pricing rules (see section

nontaxable income included on line 15,

gross receipts for the tax year (line 6f,

923(a)(3)). If a qualified cooperative is a

column (b). Include only the taxable

Schedule B) exceed its allowable

shareholder of the FSC, see section

amount on line 16.

limitation (line 6e, Schedule B), the small

923(a)(4).

Nonaccrual experience method.

FSC may select the gross receipts to

Corporations that qualify to use the

which the limitation is allocated. In such a

Schedule F

nonaccrual experience method (described

case, allocate the amount on line 6g

on page 6) should attach a schedule

Net Income From Nonexempt

between columns (a) and (b) on line 6h

showing total gross receipts, the amount

based on whether the administrative

Foreign Trade Income and

not accrued as a result of the application

pricing rules were used for the gross

Taxable Nonforeign Trade

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

receipts selected. See Regulations

Income

accrued. Enter the net amount on the

section 1.921-2(b) Q&A-4.

applicable line of Schedule B.

Part I

Part II

Lines 1 through 5. Enter the foreign

Enter net income from nonexempt foreign

trading gross receipts requested on lines

Line 19a. Net operating loss deduction.

trade income and related expenses in

1 through 5. See section 924 and

A FSC may use the net operating loss

Part I.

Foreign Trading Gross Receipts on

(NOL) incurred in one tax year to reduce

page 3 of these instructions for receipts

its taxable income in another tax year.

Line 2. Enter FSC income that resulted

that are excluded and other details.

Enter on line 19a the total NOL

from the FSC’s cooperation with an

Report commission income on line 1 or

carryovers from other tax years, but do

international boycott. See section

line 2 based on the sale, lease, or rental

not enter more than the FSC’s taxable

927(e)(2) and Form 5713 and related

of property on which that commission

income (after the dividends-received

schedules and instructions.

arose.

deduction). Attach a schedule showing

Line 3. Enter the amount, if any, of illegal

the computation of the NOL deduction.

Line 5. If the 50% gross receipts test of

payments, bribes, or kickbacks that the

Also complete line 8 in Additional

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

FSC paid, directly or indirectly, to

Information on page 2 of the form.

FSC’s gross receipts that would have

government officials, employees, or

otherwise qualified under that section on

For details on the NOL deduction, see

agents. See section 927(e)(2).

line 16, Schedule F, instead of line 5,

Pub. 542, section 172, and Form 1139.

Line 5. See the instructions for Schedule

Schedule B.

Line 19b. Dividends-received

A before completing this line.

Lines 6b through 6h. See section

deduction. A FSC may be entitled to a

Part II

924(b)(2)(B) for the rules regarding the

deduction for dividends it receives from

limitation on the amount of foreign trading

other corporations. Complete the

Enter the taxable portion of gross income

gross receipts that a small FSC may take

worksheet on page 11 using the

of the FSC that was not derived from

into account in determining its exempt

instructions that begin on that page.

foreign trading gross receipts. This type of

foreign trade income.

Attach the completed worksheet to Form

income includes:

•

1120-FSC.

Line 6d. Temporary Regulations section

Small FSCs only. Amounts specifically

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

Line 20. Taxable income or (loss). If

excluded from foreign trade income

of a small FSC having a short tax year,

line 20 is zero or less, the FSC may have

because of the small FSC limitation (the

the dollar limitation reported on line 6b or

a net operating loss (NOL) that can be

amount by which line 6f of Schedule B

6c is to be prorated on a daily basis. A

carried back or forward as a deduction to

exceeds line 6e of Schedule B). (Enter

small FSC having a short tax year must

other tax years. Generally, a FSC first

the excess, if any, on line 7 of Schedule

divide the number of days in its short tax

carries back an NOL 2 tax years.

F.)

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Instructions For Form 1120-Fsc - U.s. Income Tax Return Of A Foreign Sales Corporation - 2003 Page 10

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