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453A(c) interest” and the amount. Attach

Tax Computation Worksheet for Members of a Controlled Group

a schedule showing the computation.

(keep for your records)

Schedule L

Note: Each member of a controlled group (except a qualified personal service

corporation) must compute the tax using this worksheet.

Balance Sheets per Books

Enter taxable income (Schedule B, line 20)

The balance sheet should agree with the

Enter line 1 or the FSC’s share of the $50,000 taxable income bracket,

FSC’s books and records. Include

whichever is less

certificates of deposit as cash on line 1,

Subtract line 2 from line 1

Schedule L.

Enter line 3 or the FSC’s share of the $25,000 taxable income bracket,

whichever is less

Line 5. Tax-exempt securities. Include

Subtract line 4 from line 3

on this line:

•

Enter line 5 or the FSC’s share of the $9,925,000 taxable income bracket,

State and local government obligations,

whichever is less

the interest on which is excludible from

Subtract line 6 from line 5

gross income under section 103(a) and

•

Multiply line 2 by 15%

Stock in a mutual fund or other

Multiply line 4 by 25%

regulated investment company that

10.

Multiply line 6 by 34%

10.

distributed exempt-interest dividends

11.

Multiply line 7 by 35%

11.

during the tax year of the FSC.

12.

If the taxable income of the controlled group exceeds $100,000, enter this

Line 27. Adjustments to shareholders’

member’s share of the smaller of: 5% of the taxable income in excess of

equity. Some examples of adjustments

$100,000, or $11,750 (see the instructions for Schedule J, line 2b)

12.

to report on this line include:

13.

If the taxable income of the controlled group exceeds $15 million, enter this

•

Foreign currency translation

member’s share of the smaller of: 3% of the taxable income in excess of $15

million, or $100,000 (see the instructions for Schedule J, line 2b)

13.

adjustments.

•

14.

Total. Add lines 8 through 13. Enter here and on Schedule J, line 3

14.

The excess of additional pension

liability over unrecognized prior service

cost.

qualified personal service corporation if it

exempt from the AMT for its tax year

If the total adjustment to be entered on

meets both of the following tests:

beginning in 2003 if:

line 27 is a negative amount, enter the

•

Substantially all of the FSC’s activities

amount in parentheses.

1. It was treated as a small

involve the performance of services in the

corporation exempt from the AMT for all

fields of engineering, architecture, or

Schedule M-1

prior tax years beginning after 1997 and

management consulting and

2. Its average annual gross receipts

•

At least 95% of the corporation’s stock,

Reconciliation of Income (Loss)

for the 3-tax-year period (or portion

by value, is owned, directly or indirectly,

thereof during which the FSC was in

per Books With Income per

by (1) employees performing the services,

existence) ending before its tax year

Return

(2) retired employees who had performed

beginning in 2003 did not exceed $7.5

the services listed above, (3) any estate

Line 5c. Travel and entertainment.

million.

of the employee or retiree described

Include on line 5c any of the following:

•

above, or (4) any person who acquired

Meal and entertainment expenses not

Line 6

the stock of the FSC as a result of the

deductible under section 274(n).

•

Foreign tax credit. Generally, a FSC

death of an employee or retiree (but only

Expenses for the use of an

may not claim a foreign tax credit. It may,

for the 2-year period beginning on the

entertainment facility.

•

however, claim a foreign tax credit for any

date of the employee’s or retiree’s death).

The part of business gifts over $25.

•

foreign taxes imposed on foreign source

See Temporary Regulations section

Expenses of an individual over $2,000,

taxable nonforeign trade income

1.448-1T(e) for details.

which are allocable to conventions on

(Schedule F, Part II) that is treated as

cruise ships.

Note: If the FSC meets these tests,

•

effectively connected with a U.S. trade or

Employee achievement awards over

check the box on line 3, Schedule J, Form

business. See Temporary Regulations

$400.

1120-FSC.

•

section 1.921-3T(d)(2) for more details.

The cost of entertainment tickets over

face value (also subject to 50% limit

Line 8

Line 4

under section 274(n)).

•

Personal holding company tax. See

The cost of skyboxes over the face

Alternative minimum tax (AMT). Unless

Personal Holding Companies and

value of nonluxury box seat tickets.

the FSC is treated as a small corporation

•

Foreign Personal Holding Companies

The part of luxury water travel

exempt from the AMT, it may owe the

on page 5.

expenses not deductible under section

AMT if it has any of the adjustments and

274(m).

Line 9

tax preference items listed on Form 4626,

•

Expenses for travel as a form of

Alternative Minimum Tax – Corporations.

education.

Total tax

The FSC must file Form 4626 if its

•

Other nondeductible travel and

taxable income (or loss) combined with

Interest on tax deferred under the

entertainment expenses.

these adjustments and tax preference

installment method for certain

For more information, see Pub. 542.

items is more than the smaller of $40,000

nondealer installment obligations. If an

or the FSC’s allowable exemption amount

Line 7a. Tax-exempt interest. Include

obligation arising from the disposition of

(from Form 4626).

on line 7a any exempt-interest dividends

property to which section 453A applies is

received as a shareholder in a mutual

outstanding at the close of the year, the

For this purpose, taxable income does

fund or other regulated investment

FSC must include the interest due under

not include the NOL deduction. See Form

company.

section 453A(c) in the amount on line 9,

4626 for details.

Schedule J. On the dotted line to the left

Exception for small corporations. A

of line 9, Schedule J, write “Section

FSC is treated as a small corporation

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Instructions For Form 1120-Fsc - U.s. Income Tax Return Of A Foreign Sales Corporation - 2003 Page 14

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