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page 8 for the definition of effectively

Department of the Treasury connected income.


Internal Revenue Service ● Had income from any U.S. source (even
if its income is tax exempt under an
income tax treaty or code section).

Instructions for Note: If the corporation does not owe any


tax because it is claiming a treaty
exemption, it must still file Form 1120-F to
Form 1120-F show that the income was exempted by
treaty. To show this exemption, complete
the identifying information at the top of
U.S. Income Tax Return of a Foreign Corporation page 1 of the form and complete Item W at
the bottom of page 5 of the form.
Section references are to the Inter nal Revenue Code unless otherwise noted. If the foreign corporation does not owe
the branch profits tax or the tax on excess
Paperwork Reduction ● You can use your computer to get tax interest because it is claiming a treaty
forms and publications. If you subscribe to exemption, complete Item W and attach a
Act Notice an on-line service, ask if IRS information is statement explaining why the corporation is
available and, if so, how to access it. You a qualified resident or otherwise qualifies
We ask for the information on this form to for treaty benefits. Note that an exemption
can also get information through IRIS, the
carry out the Internal Revenue laws of the from tax under Section II based on the
Internal Revenue Information Services, on
United States. You are required to give us permanent establishment article of an
FedWorld, a government bulletin board.
the information. We need it to ensure that income tax treaty does not necessarily
Tax forms, instructions, publications, and
you are complying with these laws and to exempt the corporation from the branch
other IRS information, are available through
allow us to figure and collect the right profits tax.
IRIS.
amount of tax.
IRIS is accessible directly by calling A Mexican or Canadian branch of a U.S.
The time needed to complete and file mutual life insurance company must file
703-321-8020. On the Internet, telnet to
this form will vary depending on individual Form 1120-F on the same basis as a
fedword.gov or, for file transfer protocol
circumstances. The estimated average time foreign corporation if the U.S. company
services, connect to ftp.fedworld.gov. If
is: elects to exclude the branch’s income and
you are using the World-Wide Web,
Recordkeeping 105 hr., 56 min. connect to http://www.ustreas.gov. expenses from its own gross income.
Learning about FedWorld’s help desk offers technical A receiver, assignee, or trustee in
the law or the form 43 hr., 41 min. assistance on accessing IRIS (not tax help) dissolution or bankruptcy must file Form
during regular business hours at 1120-F if that person has or holds title to
Preparing the form 73 hr., 23 min. 703-487-4608. The IRS menus offer virtually all of a foreign corporation’s
Copying, assembling, information on available file formats and property or business. Form 1120-F is due
and sending the form software needed to read and print files. whether or not the property or business is
to the IRS 7 hr., 31 min. You must print the forms to use them; the being operated.
If you have comments concerning the forms are not designed to be filled out An agent in the United States must file
accuracy of these time estimates or on-screen. the return if the foreign corporation has no
suggestions for making this form simpler, Tax forms, instructions, and publications office or place of business in the United
we would be happy to hear from you. You are also available on CD-ROM, including States when the return is due.
can write to the Tax Forms Committee, prior-year forms starting with the 1991 tax Consolidated returns.—A foreign
Western Area Distribution Center, Rancho year. For ordering information and software corporation cannot belong to an affiliated
Cordova, CA 95743-0001. DO NOT send requirements, contact the Government group of corporations that files a
the tax form to this office. Instead, see Printing Office’s Superintendent of consolidated return unless it is a Canadian
Where To File on page 2. Documents (202 512-1800) or Federal or Mexican corporation maintained solely
Bulletin Board (202 512-1387). for complying with the laws of Canada or
Changes To Note Mexico for title and operation of property.
● Certain foreign corporations that had General Instructions Who Does Not File Form 1120-F
total deposits of withheld income, social
A foreign corporation does not need to file
security, and Medicare taxes during Purpose of Form Form 1120-F if any of the following apply:
calendar years 1993 or 1994 in excess of
$47 million are required to use the Use Form 1120-F to report the income, ● Its only income is not subject to U.S.
electronic funds transfer (EFT) system for gains, losses, deductions, credits, and to taxation under section 881(d).
depository taxes due in 1996. These rules figure the U.S. income tax liability of a ● It is a beneficiary of an estate or trust
apply to foreign corporations that maintain foreign corporation. Also, use Form 1120-F engaged in a U.S. trade or business, but
an office or place of business in the United to claim any refund that is due. would itself otherwise not need to file.
States. Corporations required to use the ● It files Form 1120-L, U.S. Life Insurance
EFT system in 1995 must continue to use Who Must File Company Income Tax Return, as a foreign
the system in 1996. For details, see Except for corporations described in Who life insurance company, or Form 1120-PC,
Depository method of tax payment on Does Not File Form 1120-F below, every U.S. Property and Casualty Insurance
page 3. foreign corporation must file Form 1120-F Company Income Tax Return, as a foreign
● Final regulations have been issued on if, during the tax year, it: property and casualty insurance company.
the capitalization of interest expense paid ● Overpaid income tax that it wants ● It did not engage in a U.S. trade or
or incurred during the production period of refunded. business during the year, and its full U.S.
certain property. For details, see tax was withheld at source.
Regulations sections 1.263A-8 through 15. ● Engaged in a trade or business in the
United States, whether or not it had ● It has filed Form 8279, Election To Be
These regulations, which generally are
income from that trade or business. Treated as a FSC or as a Small FSC, and
effective for tax years beginning after
● Had income, gains, or losses treated as the election is still in effect. These
1994, may require a change in accounting
if they were effectively connected with that corporations must file Form 1120-FSC,
method. Any such change must be made
U.S. trade or business. See Section II on U.S. Income Tax Return of a Foreign Sales
under Rev. Proc. 95-19, 1995-12 I.R.B. 6.
Corporation.

Cat. No. 11475L


When To File described in 1 to extend the time to file Accounting Methods
may not later choose the option described
The requirements for when to file Form in 2. Figure taxable income using the method of
1120-F depend on whether the foreign accounting regularly used in keeping the
A new corporation filing a short-period
corporation has an office or place of corporation’s books and records.
return must generally file by the 15th day
business in the United States. Permissible methods include the cash,
of the 3rd month after the short period
A foreign corporation that does not accrual, or any other method authorized by
ends. A corporation that has dissolved
maintain an office or place of business in the Internal Revenue Code. In all cases,
must generally file by the 15th day of the
the United States must file Form 1120-F by the method used must clearly show
3rd month after the date it dissolved.
the 15th day of the 6th month after the taxable income.
If the due date falls on a Saturday,
end of its tax year. A 6-month extension of Generally, a corporation (other than a
Sunday, or legal holiday, the corporation
time to file can be requested by filing qualified personal service corporation)
may file on the next business day.
Form 7004, Application for Automatic must use the accrual method of
Extension of Time To File Corporation Form 1120-F must be filed on a timely accounting if its average annual gross
Income Tax Return. However, this basis or the foreign corporation may be receipts exceed $5 million. See section
extension does not extend the time for denied the benefit of certain deductions 448(c). A corporation engaged in farming
payment of tax. Therefore, if the tax is paid and credits. A foreign corporation is only operations must also use the accrual
after the 15th day of the 6th month after allowed to take deductions and credits method. For exceptions, see section 447.
the end of its tax year, the corporation against its effectively connected income if
Under the accrual method, an amount is
must pay interest on the late payment and it timely files Form 1120-F in a true and
includible in income when all the events
is subject to a penalty for late payment of accurate manner.
have occurred that fix the right to receive
tax. See Interest and Penalties on page For these purposes, Form 1120-F is the income and the amount can be
4. generally considered to be timely filed if it determined with reasonable accuracy. See
A foreign corporation that does maintain is filed no later than 18 months after the Regulations section 1.451-1(a) for details.
an office or place of business in the United due date of the current year’s return. An
Generally, an accrual basis taxpayer can
States must file Form 1120-F by the 15th exception may apply to foreign
deduct accrued expenses in the tax year in
day of the 3rd month after the end of its corporations that have yet to file Form
which (1) all events that determine the
tax year. However, the corporation may get 1120-F for the preceding tax year.
liability have occurred, (2) the amount of
an extension of time to file by: A foreign corporation is allowed the the liability can be figured with reasonable
1. Filing Form 7004 by the 15th day of following deductions and credits regardless accuracy, and (3) economic performance
the 3rd month after the end of its tax year of whether Form 1120-F is timely filed: takes place with respect to the expense.
to obtain a 6-month extension. However, ● The charitable contributions deduction There are exceptions to the economic
the extension that is granted by the timely (page 3, Section II, line 19); performance rule for certain items,
filing of Form 7004 does not extend the ● The credit from regulated investment including recurring expenses. See section
time for payment of the tax. Therefore, if companies (page 1, line 6f); 461(h) and the related regulations for the
the tax is paid after the 15th day of the 3rd rules for determining when economic
● The credit for Federal tax on fuels
month following the close of the performance takes place.
(page 1, line 6g); and
corporation’s tax year, the corporation Long-term contracts (except for certain
must pay interest on the late payment and ● U.S. income tax paid or withheld at
real property construction contracts) must
is subject to the penalty for late payment source (page 1, line 6h).
generally be accounted for using the
of tax, OR See Regulations section 1.882-4 for percentage of completion method
2. Utilizing the 3-month extension details. described in section 460. See section 460
described in Regulations section 1.6081-5 for general rules on long-term contracts.
by attaching to Form 1120-F the statement Where To File Generally, the corporation may change
described in those regulations. If this the method of accounting used to report
option is chosen, the corporation is not File Form 1120-F with the Internal Revenue
Service Center, Philadelphia, PA 19255. taxable income (for income as a whole or
required to file Form 7004 unless it needs for any material item) only by getting
additional time beyond the 3-month consent on Form 3115, Application for
extension period. If the corporation needs Who Must Sign Change in Accounting Method. For more
additional time, it must file Form 7004 The return must be signed and dated by information, see Pub. 538, Accounting
before the end of the 3-month extension the president, vice president, treasurer, Periods and Methods.
period to obtain up to an additional 3 assistant treasurer, chief accounting Mark-to-market accounting method for
months to file its return. If the corporation officer, or any other corporate officer (such dealers in securities.—Dealers in
fails to file Form 7004 by the expiration of as tax officer) authorized to sign. securities must use the mark-to-market
such 3-month extension period, and files Receivers, trustees, or assignees must also accounting method described in section
its income tax return after such period, it sign and date any return filed on behalf of 475 for tax years ending on or after
may be liable for the penalty for failure to a corporation. December 31, 1993. Under this method,
file described in Interest and Penalties. In
If a corporate officer completes Form any security that is inventory to the dealer
no event may the total extension period
1120-F, the Paid Preparer’s space should must be included in inventory at its fair
exceed 6 months from the original due
remain blank. Anyone who prepares Form market value. Any security held by a dealer
date of the return (i.e., the return must be
1120-F but does not charge the that is not inventory and that is held at the
filed by the 15th day of the 9th month after
corporation should not sign the return. close of the tax year is treated as sold at
the end of its tax year). See Rev. Rul.
Generally, anyone who is paid to prepare its fair market value on the last business
93-85, 1993-2 C.B. 297.
the return must sign it and fill in the Paid day of the tax year. Any gain or loss must
The corporation is still required to pay Preparer’s Use Only area. be taken into account in determining gross
the tax due by the 15th day of the 3rd income. The gain or loss taken into
month after the end of its tax year. If it The paid preparer must complete the
required preparer information and— account is generally treated as ordinary
does not, the corporation must pay the gain or loss.
interest on the late payment but is not ● Sign the return, by hand, in the space
provided for the preparer’s signature Dealers required to change their
subject to the penalty for late payment of
(signature stamps or labels are not accounting method to comply with the new
tax if it pays the tax due by the 15th day
acceptable). law are considered as having initiated the
of the 6th month after the end of its tax
change with consent of the IRS. Generally,
year. ● Give a copy of the return to the the net amount of the section 481(a)
The options described in 1 and 2 above taxpayer. adjustment (reported in Section II, line 10)
are mutually exclusive. Thus, for example, is taken into account ratably over a 5-year
a corporation that chooses the option period, beginning with the first tax year
Page 2
ending on or after December 31, 1993. For Electing corporations are subject to Foreign corporations that do maintain an
details, including exceptions, see section minimum distribution requirements under office or place of business in the United
475, the related temporary regulations, and section 280H(c) for each year the election States must pay the tax due (page 1, line
Rev. Rul. 94-7, 1994-1 C.B. 151. is in effect. If the requirements are not met, 8) in full when they file their tax return, but
the deduction allowable for certain not later than the 15th day of the 3rd
Change in Accounting amounts paid to employee-owners is month after the end of the tax year.
limited. Disallowed amounts are carried Depository method of tax payment.—If
Period over to the following tax year. Get the foreign corporation does maintain an
Generally, before changing an accounting Schedule H (Form 1120), Section 280H office or place of business in the United
period, a corporation must get the Limitations for a Personal Service States and does not use the electronic
Commissioner’s approval (Regulations Corporation (PSC), to figure the required fund transfer (EFT) system, deposit
section 1.442-1) by filing Form 1128, minimum distributions and the maximum corporation income tax payments (and
Application To Adopt, Change, or Retain a deductible amount. estimated tax payments) with Form 8109,
Tax Year. Also see Pub. 538. If a section 444 election is terminated Federal Tax Deposit Coupon. Do not send
Specified foreign corporation.—The and the termination results in a short tax deposits directly to an IRS office. Mail or
annual accounting period of a specified year, type or print at the top of the first deliver the completed Form 8109 with the
foreign corporation is generally required to page of Form 1120-F for the short tax year payment to a qualified depository for
be the tax year of its majority U.S. “SECTION 444 ELECTION TERMINATED.” Federal taxes or to the Federal Reserve
shareholder (see section 898(c) for details). See Temporary Regulations section bank (FRB) servicing the corporation’s
1.444-1T(a)(5) for more information. geographic area. Make checks or money
A specified foreign corporation is any
orders payable to that depository or FRB.
foreign corporation: (1) that is treated as a
controlled foreign corporation under Rounding Off to Whole To help ensure proper crediting, write
subpart F (sections 951 through 964) or is the corporation’s employer identification
Dollars number, the tax period to which the
a foreign personal holding company (as
defined in section 552); and (2) that meets The corporation may show amounts on the deposit applies, and “Form 1120-F” on the
the 50% U.S. ownership requirements of return and accompanying schedules as check or money order. Be sure to darken
section 898(b)(2). whole dollars. To do so, drop any amount the “1120” box on the coupon. Records of
less than 50 cents and increase any these deposits will be sent to the IRS.
If the specified foreign corporation made
amount from 50 cents through 99 cents to A penalty may be imposed if the
an election under section 898(c)(1)(B) or
the next higher dollar. deposits are mailed or delivered to an IRS
changed its tax year to conform to the tax
year required by section 898, see Rev. office rather than to an authorized
Proc. 90-26, 1990-1 C.B. 512. Recordkeeping depository or FRB.
Note: A specified foreign corporation may Keep the corporation’s records for as long For more information about deposits,
elect to change its required annual as they may be needed for the see the instructions in the coupon booklet
accounting period back to the taxable year administration of any provision of the (Form 8109) and Pub. 583, Starting a
it used immediately before conforming to Internal Revenue Code. Usually, records Business and Keeping Records.
the tax year required by section 898. This that support an item of income, deduction, Caution: If the corporation owes tax when
is applicable for returns due (including or credit on the return must be kept for 3 it files Form 1120-F, do not include the
extensions) and timely filed after March 14, years from the date the return is due or payment with the tax return. Instead, mail
1995, but no later than March 14, 1997. filed, whichever is later. Keep records that or deliver the payment with Form 8109 to a
For more details, see Notice 95-13, verify the corporation’s basis in property qualified depository or FRB or use the EFT
1995-15, I.R.B. 21. for as long as they are needed to figure system, if applicable.
Foreign corporations that are personal the basis of the original or replacement Generally, corporations that maintain an
service corporations.—Personal service property. office or place of business in the United
corporations (defined in the instructions for The corporation should keep copies of States that had total deposits of withheld
Item O on page 8), must use a calendar all filed returns. They help in preparing income, social security, and Medicare
year unless: (1) the corporation can future returns and amended returns. taxes during calendar year 1993 or 1994
establish to the satisfaction of the that exceeded $47 million are required to
Commissioner that there is a business deposit all depository taxes due in 1996 by
purpose for having a different tax year, or
Payment of Tax Due EFT. TAXLINK, an electronic remittance
(2) the corporation elects under section The requirements for payment of tax processing system, must be used to make
444 to have a tax year other than a depend on whether the foreign corporation deposits by EFT. Corporations that are not
calendar year. has an office or place of business in the required to make deposits by EFT may
Personal service corporations that wish United States. voluntarily participate in TAXLINK. For
to establish a business purpose for having Foreign corporations that do not more details on TAXLINK, call the toll-free
a different tax year should see Rev. Rul. maintain an office or place of business in TAXLINK HELPLINE at 1-800-829-5469 (for
87-57, 1987-2 C.B. 117. See Rev. Proc. the United States must pay the tax due TAXLINK information only), or write to:
87-32, 1987-2 C.B. 396, for procedures to (page 1, line 8) in full when they file their Internal Revenue Service
use in adopting, retaining, or changing the tax return, but not later than the 15th day Cash Management Office
corporation’s tax year. Personal service of the 6th month after the end of the tax P.O. Box 47669, Stop 295
corporations that wish to adopt or retain a year. Doraville, GA 30362
noncalendar tax year must file Form 1128. The tax must be paid directly to the IRS
Personal service corporations that wish (i.e., do not use the depository or the Estimated Tax Payments
to elect under section 444 to have a tax electronic funds transfer (EFT) method of
year other than a calendar year must file tax payment described below). The tax Generally, a foreign corporation must make
Form 8716, Election To Have a Tax Year may be paid by check or money order, installment payments of estimated tax if it
Other Than a Required Tax Year. payable to the Internal Revenue Service. expects its estimated tax to be $500 or
Generally, Form 8716 must be filed by the To help ensure proper crediting, write the more. For a calendar or fiscal year
earlier of (1) the 15th day of the 5th month corporation’s employer identification corporation, the installments are due by
following the month that includes the 1st number, “Form 1120-F,” and the tax period the 15th day of the 4th, 6th, 9th, and 12th
day of the tax year for which the election to which the payment applies on the check months of the tax year. If any date falls on
will be effective, or (2) the due date (not or money order. Enclose the payment a Saturday, Sunday, or legal holiday, the
including extensions) of the income tax when the corporation files Form 1120-F installment is due on the next regular
return resulting from the section 444 with the Internal Revenue Service Center, business day. Use Form 1120-W,
election. Philadelphia, PA 19255. Estimated Tax for Corporations, as a

Page 3
worksheet to compute estimated tax. reporting requirements of sections 6035, and backup withholding. Also see Trust
Foreign corporations that maintain an 6038, 6046, and the related regulations. fund recovery penalty on page 5.
office or place of business in the United If the corporation is a foreign personal Form 1042, Annual Withholding Tax Return
States must use the deposit coupons holding company, certain shareholders of for U.S. Source Income of Foreign
(Forms 8109) to make deposits of the corporation are required to attach to Persons, and Form 1042-S, Foreign
estimated tax. For more information on their personal returns a statement Person’s U.S. Source Income Subject to
estimated tax payments, including containing the information required by Withholding. Use these forms to report and
penalties that apply if the corporation fails section 551(c). For more information, see send withheld tax on payments or
to make required payments, see Line 7. section 552 and Regulations section distributions made to nonresident alien
Estimated Tax Penalty on page 7. 1.551-4. In addition, section 6035 (and the individuals, foreign partnerships, or foreign
If the corporation overpaid estimated related regulations) requires certain corporations, to the extent payments or
tax, it may be able to get a quick refund officers, directors, and shareholders of a distributions constitute gross income from
by filing Form 4466, Corporation foreign personal holding company to file U.S. sources. See Special Rules for
Application for Quick Refund of Schedule N (Form 5471) and the Foreign Corporations—Source Rules, on
Overpayment of Estimated Tax. The appropriate schedules of Form 5471. See page 5. Also, for more information, see
overpayment must be at least 10% of the the Instructions for Form 5471 for sections 1441 and 1442, and Pub. 515,
corporation’s expected income tax liability additional information. Withholding of Tax on Nonresident Aliens
and at least $500. To apply for a quick Form 5472.—Information Return of a 25% and Foreign Corporations.
refund, file Form 4466 before the 16th day Foreign-Owned U.S. Corporation or a Form 1096.—Annual Summary and
of the 3rd month after the end of the tax Foreign Corporation Engaged in a U.S. Transmittal of U.S. Information Returns.
year, but before the corporation files its Trade or Business. This form is filed by a Form 1098.—Mortgage Interest Statement.
income tax return. Do not file Form 4466 foreign corporation engaged in a U.S. trade This form is used to report the receipt from
before the end of the corporation’s tax or business that had certain reportable any individual of $600 or more of mortgage
year. transactions with a related party. See interest and points in the course of the
section 6038A and the related regulations, corporation’s trade or business for any
Interest and Penalties section 6038C, and the instructions for calendar year.
Form 5472 for additional information.
Interest.—Interest is charged on taxes Forms 1099-A, B, C, DIV, INT, MISC, R,
paid late, even if an extension of time to Note: A $10,000 penalty applies for failure and S.—Use these information returns to
file is granted. Interest is also charged on to file Form 5472. The penalty also applies report certain payments, such as dividends
penalties imposed for failure to file, for failure to maintain records as required and interest. For more information, see the
negligence, fraud, gross valuation by Regulations section 1.6038A-3. For Instructions for Forms 1099, 1098, 5498,
overstatements, and substantial details, see Form 5472. and W-2G.
understatements of tax from the due date Form W-2, Wage and Tax Statement, and Form 5713.—International Boycott Report,
(including extensions) to the date of Form W-3, Transmittal of Income and Tax for persons having operations in or related
payment. The interest charge is figured at Statements. to “boycotting” countries. Also, persons
a rate determined under section 6621. Form 720.—Quarterly Federal Excise Tax who participate in or cooperate with an
Penalty for late filing of return.—A Return. This form is used to report the international boycott may have to complete
corporation that does not file its tax return luxury tax on passenger vehicles, Schedule A or Schedule B and Schedule C
by the due date, including extensions, may environmental excise taxes, of Form 5713 to compute their loss of the
be penalized 5% of the unpaid tax for communications and air transportation foreign tax credit, the deferral of earnings
each month or part of a month the return taxes, fuel taxes, manufacturers taxes, ship of a controlled foreign corporation, DISC
is late, up to a maximum of 25% of the passenger tax, and certain other excise benefits, and FSC benefits.
unpaid tax. The minimum penalty for a taxes. Also see Trust fund recovery Form 8264.—Application for Registration
return that is over 60 days late is the penalty on page 5. of a Tax Shelter. Tax shelter organizers use
smaller of the tax due or $100. The penalty Form 940 or Form 940-EZ.—Employer’s Form 8264 to register tax shelters with the
will not be imposed if the corporation can Annual Federal Unemployment (FUTA) Tax IRS to get a tax shelter registration
show that the failure to file on time was Return. The corporation may be liable for number.
due to reasonable cause. Corporations that FUTA tax and may have to file Form 940 or Form 8271.—Investor Reporting of Tax
file late must attach a statement explaining 940-EZ if it paid wages of $1,500 or more Shelter Registration Number. This form is
the reasonable cause. in any calendar quarter during the calendar used by taxpayers who have acquired an
Penalty for late payment of tax.—A year (or the preceding calendar year) or interest in a tax shelter that is required to
corporation that does not pay the tax when one or more employees worked for the be registered to report the tax shelter’s
due may have to pay a penalty of 1⁄2 of 1% corporation for some part of a day in any registration number. Form 8271 must be
of the unpaid tax for each month or part of 20 different weeks during the calendar year attached to any tax return (including an
a month the tax is not paid, up to a (or the preceding calendar year). application for tentative refund (Form 1139)
maximum of 25% of the unpaid tax. The Form 941.—Employer’s Quarterly Federal and an amended return) on which a
penalty will not be imposed if the Tax Return. Employers must file this form deduction, credit, loss, or other tax benefit
corporation can show that the failure to quarterly to report income tax withheld and from a tax shelter is taken or any income
pay on time was due to reasonable cause. employer and employee social security and from a tax shelter is reported.
Other penalties.—Other penalties can be Medicare taxes. Agricultural employers Form 8275.—Disclosure Statement.
imposed for negligence, substantial must file Form 943, Employer’s Annual Tax Taxpayers and income tax return preparers
understatement of tax, and fraud. See Return for Agricultural Employees, instead file Form 8275 to disclose items or
sections 6662 and 6663. of Form 941, to report income tax withheld positions (except those contrary to a
and employer and employee social security regulation—see Form 8275-R below) that
and Medicare taxes for farmworkers. Also
Other Forms, Returns, see Trust fund recovery penalty on page
are not otherwise adequately disclosed on
a tax return. The disclosure is made to
Schedules, and Statements 5. avoid parts of the accuracy-related penalty
That May Be Required Form 945.—Annual Return of Withheld imposed for disregard of rules or
Federal Income Tax. File Form 945 to substantial understatement of tax. Form
Forms, Returns, and Schedules report income tax withholding from 8275 is also used for disclosures relating
Form 5471.—Information Return of U.S. nonpayroll distributions or payments. to preparer penalties for understatements
Persons With Respect To Certain Foreign Nonpayroll payments include pensions, due to unrealistic positions or for disregard
Corporations. This form is filed by certain annuities, IRAs, military retirement, of rules.
officers, directors, or U.S. shareholders of gambling winnings, Indian gaming profits, Form 8275-R.—Regulation Disclosure
certain foreign corporations to satisfy the Statement. File this form to disclose any
Page 4
item on a tax return for which a position 730, or Form 2240. See the instructions to If the refund results from tax that was
has been taken that is contrary to Treasury Form 8849 and Pub. 378, Fuel Tax Credits withheld at source, a statement from the
regulations. and Refunds, for more information. payer/withholding agent (or from an
Form 8300.—Report of Cash Payments Schedule PH (Form 1120).—U.S. Personal intermediate nominee acting on the
Over $10,000 Received in a Trade or Holding Company Tax. See Line 4. corporation’s behalf as the foreign
Business. File this form to report the Personal Holding Company Tax on recipient of the income) may be
receipt of more than $10,000 in cash or page 6. substituted for Form 1042-S. The
foreign currency in one transaction or in a statement should show:
Trust fund recovery penalty.—This
series of related transactions. penalty may apply if certain excise, ● The amount(s) of tax withheld;
Cashier’s checks (including treasurer’s income, social security, and Medicare ● The name(s) and address(es) of the U.S.
checks and bank checks), bank drafts, and taxes that must be collected or withheld withholding agent(s);
money orders with face amounts of are not collected or withheld, or these ● The U.S. tax identification number of the
$10,000 or less are considered cash under taxes are not paid to the IRS. These taxes U.S. withholding agent;
certain circumstances. For more are generally reported on Forms 720, 941,
● The name in which the tax was withheld,
information, see Form 8300 and 943, or 945. The trust fund recovery
if different from the name of the taxpayer
Regulations section 1.6050I-1(c). penalty may be imposed on all persons
claiming the refund; and
Form 8594.—Asset Acquisition Statement who are determined by the IRS to have
been responsible for collecting, accounting ● If applicable, enough information to
Under Section 1060. This form must be
for, and paying over these taxes, and who show that the taxpayer was entitled to a
filed by both the purchaser and seller of a
acted willfully in not doing so. The penalty reduced tax rate under a treaty.
group of assets that make up a trade or
business if section 197 intangibles attach, is equal to the unpaid trust fund tax. See
or could attach, to such assets and if the the instructions for Form 720, Pub. 15 Special Rules for Foreign
purchaser’s basis in the assets is (Circular E), Employer’s Tax Guide, or
Pub. 51 (Circular A), Agricultural
Corporations
determined only by the amount paid for
the assets. Employer’s Tax Guide, for details, including Source Rules
the definition of responsible persons.
Form 8621.—Return by a Shareholder of a
Passive Foreign Investment Company or Interest Income
Statements
Qualified Electing Fund. A corporation that The source of interest income is usually
was a shareholder in a passive foreign Transfers to a corporation controlled by determined by the residence of the obligor.
investment company (as defined in section the transferor.—If a person receives stock For example, interest paid by an obligor
1296) at any time during the tax year must of a corporation in exchange for property, who is a resident of the United States is
complete and attach this form to its return. and no gain or loss is recognized under U.S. source income and interest paid by
Form 8697.—Interest Computation Under section 351, the person (transferor) and the an obligor who is a resident of a country
the Look-Back Method for Completed transferee must each attach to their tax other than the United States is foreign
Long-Term Contracts. Use this form to returns the information required by source income.
figure the interest due or to be refunded Regulations section 1.351-3.
Exceptions.—The following types of
under the look-back method of section Statements instead of schedules.—If the interest income are treated as foreign
460(b)(2) on certain long-term contracts foreign corporation has no gross income source income:
that are accounted for under either the for the tax year, do not complete the Form
1. Interest income received from foreign
percentage of completion-capitalized cost 1120-F schedules. Instead, attach a
branches of U.S. banks and savings and
method or the percentage of completion statement to the return showing the types
loan associations.
method. and amounts of income excluded from
gross income. 2. Interest income received from a U.S.
Form 8810.—Corporate Passive Activity corporation or a resident alien individual, if
Loss and Credit Limitations. Closely held Attachments 80% or more of the U.S. corporation’s (or
corporations and personal service resident alien individual’s) gross income is
corporations that are subject to the Attach Form 4136, Credit for Federal Tax active foreign business income during the
passive activity limitations of section 469 Paid on Fuels, after page 6, Form 1120-F. testing period.
use this form to compute their allowable Attach schedules in alphabetical order and
passive activity loss and credit. other forms in numerical order after Form Active foreign business income is
4136. income from sources outside the United
Form 8833.—Treaty-Based Return Position States attributable to the active conduct of
Disclosure Under Section 6114 or 7701(b). Complete every applicable entry space a trade or business in a foreign country or
Use this form to make the treaty-based on Form 1120-F. Do not write “See U.S. possession.
return position disclosure required by attached” instead of completing the entry
section 6114. Also complete Item W at the spaces. If more space is needed on the The testing period is generally the 3 tax
bottom of page 5 of Form 1120-F. forms or schedules, attach separate years of the U.S. corporation or resident
sheets. Use the same size and format as alien individual preceding the tax year
Form 8842.—Election To Use Different during which the interest is paid. If the
Annualization Periods for Corporate on the printed forms. But show all totals
on the printed forms. Attach these payer existed for fewer than 3 years before
Estimated Tax. Corporations use this form the tax year of the payment, the testing
for each year they want to elect one of the separate sheets after all the schedules and
forms. Be sure to put the corporation’s period is the term of the payer’s existence
annualization periods in section before the current year. If the payment is
6655(e)(2)(C) for figuring estimated tax name and EIN on each sheet.
made during the payer’s first tax year, that
payments under the annualized income year is the testing period.
installment method. Claim for Refund 3. The interest allowable as a deduction
Form 8848.—Consent To Extend the Time If a foreign corporation has only income to a foreign corporation (under Regulations
To Assess the Branch Profits Tax Under that is not effectively connected with the section 1.882-5) in figuring its effectively
Regulations Sections 1.884-2T(a) and (c). conduct of a U.S. trade or business and connected taxable income is treated as
File this form if the foreign corporation has Form 1120-F is being used as a claim for paid by a domestic corporation. This
completely terminated all of its U.S. trade refund of tax paid or withheld at source, interest is treated as U.S. source interest,
or business within the meaning of attach Form(s) 1042-S, 8805, 8288-A, etc., although the actual payer of the interest is
Regulations section 1.884-2T(a) during the to the return to verify the amount(s) of a foreign corporation. For more details, see
tax year. withholding credit reported. Include all the instructions for Section III, Part II.
Form 8849.—Claim for Refund of Excise income from U.S. sources on the return, Look-thru rule.—If the foreign corporation
Taxes. Use this form in the first three even though all tax due on it was paid or is a related person to a U.S. corporation or
quarters of the tax year, to claim a refund withheld at source. resident alien individual that meets the
of excise taxes paid on Form 720, Form
Page 5
80% rule described in 2 above, the foreign ● Income from the purchase and sale of less than 12 months that begins and ends
corporation will have foreign source inventory property is generally sourced in 1996 and (2) the 1996 Form 1120-F is
income only when the income of the payer under sections 861(a)(6) and 862(a)(6); not yet available at the time the corporation
was from foreign sources. See section ● Income from the production and sale of is required to file its return. However, the
861(c)(2)(B) for more information. inventory property is generally sourced corporation must show its 1996 tax year on
under section 863(b)(2); the 1995 Form 1120-F and incorporate any
Dividend Income tax law changes that are effective for tax
● Income from the sale of depreciable
The source of dividend income is usually years beginning after December 31, 1995.
property is generally sourced under section
determined by the payer. For example, 865(c); and
dividends paid by a corporation that was Address and Employer
● Income from the sale of intangibles is Identification Number (EIN)
incorporated in the United States are U.S.
generally sourced under section 865(d).
source income and dividends paid by a Address.—Include the suite, room, or
corporation that was incorporated in a Foreign corporations with an office or
fixed place of business in the United other unit number after the street address.
foreign country are foreign source income. If a preaddressed label is used, please
States.—Income from the sale of personal
Exceptions relating to U.S. corporation include this information on the label.
property attributable to such office or fixed
payers.—Dividends paid by a U.S. If the Post Office does not deliver mail to
place of business is U.S. source income
corporation are foreign source income: the street address and the corporation has
regardless of any of the above rules
1. If the U.S. corporation has made a relating to the source of income from the a P.O. box, show the box number instead
valid election under section 936, relating to sale or exchange of personal property of the street address.
certain U.S. corporations operating in a unless the foreign corporation is an export If the corporation’s address has changed
U.S. possession, or trade corporation (see sections 865(e)(2)(A) from the last time Form 1120-F was filed,
2. To the extent the dividends are from and 971). check the box at the top of page 1.
qualified export receipts described in Exception: Income from the sale of Note: If a change in address occurs after
section 993(a)(1) (other than interest and inventory property is foreign source income the return is filed, use Form 8822, Change
gains described in section 995(b)(1)). if the goods were sold for use, disposition, of Address, to notify the IRS of the new
Exceptions relating to foreign or consumption outside the United States address.
corporation payers.—Dividends paid by a and a foreign office of the corporation Employer identification number (EIN).—
foreign corporation are U.S. source materially participated in the sale. Show the corporation’s correct EIN. If the
income: corporation does not have an EIN, it
1. If the dividend is treated under section Other Special Rules should apply for one on Form SS-4,
243(e) as a distribution from the Basis of Property and Inventory Costs Application for Employer Identification
accumulated profits of a predecessor U.S. for Property Imported by a Related Number. Form SS-4 can be obtained at
corporation, or Person most IRS or Social Security Administration
2. To the extent the foreign corporation’s offices. If the corporation has not received
effectively connected gross income for the If property is imported into the United its EIN by the time the return is due, write
testing period bears to all of the foreign States by a related person in a transaction “Applied for” in the space for the EIN. See
corporation’s gross income for the testing and the property has a customs value, the Pub. 583 for more information.
period, but only if 25% or more of the basis or inventory cost to the importer
foreign corporation’s gross income during cannot exceed the customs value. For
more information, see section 1059A. Computation of Tax Due or
the testing period was effectively
connected with the conduct of a U.S. trade Income of Foreign Governments and
Overpayment
or business. International Organizations Line 4. Personal Holding Company Tax
The testing period is generally the 3 tax
years of the foreign corporation payer Income of foreign governments and If the corporation is a personal holding
preceding the tax year during which it international organizations from the company (as defined in section 542) but
declared the dividend. If the foreign following sources is generally not subject not a foreign personal holding company, it
corporation existed for fewer than 3 years to taxation: must file Schedule PH (Form 1120) with
before the tax year of declaration, the ● Investments in the United States in Form 1120-F and report the personal
testing period is the term of the foreign stocks, bonds, or other domestic securities holding company tax on line 4. See section
corporation’s existence before the current owned by such foreign government or 542 and Schedule PH (Form 1120) for
year. If the foreign corporation declared the international organization. details.
dividend in its first tax year, that year is the ● Interest on deposits in banks in the Line 6b. Estimated Tax Payments
testing period. Regardless of source, United States of moneys belonging to such
however, there is no tax imposed on any foreign government or international Enter any estimated tax payments the
dividends paid by a foreign corporation out organization. corporation made for the tax year.
of earnings and profits for a tax year in ● Investments in the United States in Beneficiaries of trusts.—If the corporation
which the foreign corporation was subject financial instruments held (by a foreign is the beneficiary of a trust, and the trust
to the branch profits tax (determined after government) in executing governmental makes a section 643(g) election to credit
application of any income tax treaty). financial or monetary policy. However, the its estimated tax payments to its
types of income described in section beneficiaries, include the corporation’s
Rent and Royalty Income share of the estimated tax payment in the
892(a)(2) that are received directly or
The source of rent and royalty income for indirectly from commercial activities are total for line 6b. Write “T” and the payment
the use of property is determined based on subject to tax. (They are also subject to amount on the dotted line next to the entry
where the property is located. withholding.) space.
Income From the Sale or Exchange of Line 6g. Credit for Federal Tax on Fuels
Real Estate Specific Instructions Complete Form 4136 if the corporation
The source of this income is determined qualifies to take this credit. Attach Form
Period Covered 4136 after page 6 of Form 1120-F.
based on where property is located.
File the 1995 return for calendar year 1995 Credit for ozone-depleting chemicals.—
Income From the Sale or Exchange of and fiscal years that begin in 1995 and end Include on line 6g any credit the
Personal Property in 1996. For a fiscal year, fill in the tax year corporation is claiming under section
Income from the sale of personal property space at the top of the form. 4682(g)(4) for tax paid on ozone-depleting
by a foreign corporation is generally Note: The 1995 Form 1120-F may also be chemicals. Write “ODC” on the dotted line
sourced as follows: used if (1) the corporation has a tax year of to the left of the entry space.
Page 6
Line 6i. Total Payments premiums, annuities, compensation, and Note: A corporation created or organized
other FDAP gains, profits, and income. in Guam, American Samoa, the Northern
Backup withholding.—If the corporation
Certain portfolio interest is not taxable for Mariana Islands, or the U.S. Virgin Islands
had income tax withheld from any
obligations issued after July 18, 1984. See will not be treated as a foreign corporation
payments it received, because, for
section 881(c) for more details. (for purposes of determining whether its
example, it failed to give the payer its
2. Gains described in section 631(b) or income is taxable under section 881(a)) if it
correct EIN, include the amount withheld in
(c), relating to disposal of timber, coal, or meets the rules of section 881(b).
the total for line 6i. This type of withholding
is called backup withholding. Show the domestic iron ore with a retained economic
Line 9. Gross Transportation Income
amount withheld in the blank space in the interest.
right-hand column between lines 5 and 6i, 3. On a sale or exchange of an OID A tax of 4% is imposed on a foreign
and write “backup withholding.” obligation, the OID accruing while the corporation’s U.S. source gross
obligation was held by the foreign transportation income for the tax year.
Line 7. Estimated Tax Penalty corporation, unless this amount was taken U.S. source gross transportation income
into account on a payment. generally is any gross income that is
A corporation that does not make
transportation income (defined below) if
estimated tax payments when due may be 4. On a payment received on an OID such income is treated as from U.S.
subject to an underpayment penalty for the obligation, the amount of the OID accruing sources (as explained below). However,
period of underpayment. Generally, a while the obligation was held by the U.S. source gross transportation income
corporation is subject to the penalty if its foreign corporation, if such OID was not does not include income that is effectively
tax liability is $500 or more, and it did not previously taken into account and if the tax connected with the conduct of a U.S. trade
timely pay the smaller of (a) 100% of its imposed on the OID does not exceed the or business (as explained below) or income
tax liability for 1995, or (b) 100% of its payment received less the tax imposed on that is taxable in a possession of the
prior year’s tax. See section 6655 for any interest included in the payment United States under the provisions of the
details and exceptions, including special received. This rule applies to payments Internal Revenue Code as applied to that
rules for large corporations. received for OID obligations issued after possession.
Form 2220, Underpayment of Estimated March 31, 1972.
Transportation income is any income
Tax by Corporations, is used to see if the Certain OID is not taxable for OID from, or connected with (a) the use (or
corporation owes a penalty and to figure obligations issued after July 18, 1984. See hiring or leasing for use) of a vessel or
the amount of the penalty. Generally, the section 881(c) for more details. aircraft or (b) the performance of services
corporation does not have to file this form For rules that apply to other OID directly related to the use of a vessel or
because the IRS can figure any penalty obligations, see Pub. 515. aircraft. For purposes of the preceding
and bill the corporation for it. However,
5. Gains from the sale or exchange of sentence, the term “vessel or aircraft”
even if the corporation does not owe the
patents, copyrights, and other intangible includes any container used in connection
penalty, complete and attach Form 2220 if
property if the gains are from payments with a vessel or aircraft.
either of the following applies:
that are contingent on the productivity, Generally, 50% of all transportation
● The annualized income or adjusted use, or disposition of the property or income that is attributable to transportation
seasonal installment method is used. interest sold or exchanged. that either begins or ends in the United
● The corporation is a large corporation ● The amount received is includible in the States is treated as from U.S. sources.
computing its first required installment gross income of the foreign corporation. However, see section 863(c)(2)(B) for a
based on the prior year’s tax. (See the Therefore, receipts that are excluded from special rule for personal service income.
Form 2220 instructions for the definition of gross income (e.g., interest income Transportation income of the corporation
a large corporation.) received on state and local bonds that is will not be treated as effectively connected
If Form 2220 is attached, check the box excluded from gross income under section income unless (a) the corporation has a
on line 7 of Form 1120-F and enter any 103) would not be included as income in fixed place of business in the United
penalty on this line. Section I. States involved in the earning of
● The amount received is from U.S. transportation income and (b) substantially
Section I.—Certain Gains, sources (see Source Rules on page 5). all of the corporation’s U.S. source gross
● The amount received is not effectively transportation income (determined without
Profits, and Income From regard to the rule that such income does
connected with the conduct of a U.S. trade
U.S. Sources That Are NOT or business. The amount received is not include effectively connected income)
Effectively Connected With generally not effectively connected if is attributable to regularly scheduled
neither the asset-use test nor the transportation (or, in the case of income
the Conduct of a Trade or business-activities test is met. See from the leasing of a vessel or aircraft, is
Business in the United Section II. attributable to a fixed place of business in
the United States). For more information,
States ● The amount received is not exempt from
see section 887.
taxation. Therefore, receipts that are
Include in Section I amounts received by Enter the foreign corporation’s U.S.
exempted by code (e.g., interest on
the foreign corporation that meet all of the source gross transportation income on line
deposits that are exempted by section
following conditions: 9, column (b). Also, attach a statement
881(d)) would not be included as income in
● The amount received is fixed or Section I. showing the dates the vessels or aircraft
determinable, annual or periodic (FDAP). entered or left the United States and the
For more information, see section 881(a)
This includes: amount of gross income for each trip.
and Regulations section 1.881-2.
1. Interest (other than original issue
discount (OID) as defined in section 1273),
dividends, rents, royalties, salaries, wages,

Page 7
used to offset income (either as a conduct of the U.S. trade or business
carryback or carryover) in a tax year prior would be effectively connected income.
Additional Information to 1995. Do not reduce the amount by any Also, interest income earned from the
Required NOL deduction reported on page 3, temporary investment of funds needed in
Section II, line 30a. the foreign corporation’s U.S. trade or
Be sure to complete all additional business would be effectively connected
information on page 2 that applies to the Pub. 536 has a worksheet for figuring a
corporation’s NOL carryover. income.
corporation.
Business-activities test. The activities
Item O Item T of the U.S. trade or business were a
Check the “Yes” box if the corporation is a material factor in the realization of the
A personal service corporation is a FDAP items.
corporation whose principal activity during subsidiary in a parent-subsidiary controlled
the testing period for the tax year is group. The “Yes” box must be checked If neither test is met, FDAP items are
performing personal services that are even if the corporation is a subsidiary generally not effectively connected income
substantially performed by employee- member of one group and the parent (and are therefore includible in Section I
owners who own more than 10% of the corporation of another. instead of Section II).
fair market value of the corporation’s Note: If the corporation is an “excluded For more information, see section
outstanding stock as of the last day of the member” of a controlled group (see section 864(c)(2) and the examples in Regulations
testing period for the tax year. 1563(b)(2)), it is still considered a member section 1.864-4(c).
The testing period for a tax year is of a controlled group for this purpose. U.S. source income other than FDAP
generally the tax year preceding the tax A parent-subsidiary controlled group is items is effectively connected income.
year. The testing period for a new one or more chains of corporations
corporation in its first tax year is the period connected through stock ownership Foreign Source Effectively Connected
beginning on the first day of its first tax (section 1563(a)(1)). Both of the following Income
year and ending on the earlier of the last requirements must be met: Foreign source income is generally not
day of its first tax year or the last day of 1. 80% of the total combined voting effectively connected income. However, if
the calendar year in which the first tax year power of all classes of stock entitled to the foreign corporation has an office or
began. vote or at least 80% of the total value of other fixed place of business in the United
Personal service activities are those that all classes of stock of each corporation in States, the following types of foreign
involve performing services in the health, the group (except the parent) must be source income it receives from that U.S.
law, engineering, architecture, accounting, owned by one or more of the other office are effectively connected income:
actuarial science, performing arts, or corporations in the group. ● Rents or royalties received for the use
consulting fields (as defined in Temporary 2. The common parent must own at outside the United States of intangible
Regulations section 1.448-1T(e)). least 80% of the total combined voting personal property described in section
Personal services are substantially power of all classes of stock entitled to 862(a)(4) if from the active conduct of a
performed by employee-owners if more vote or at least 80% of the total value of U.S. trade or business;
than 20% of the corporation’s all classes of stock of at least one of the ● Dividends or interest from foreign
compensation cost for the testing period other corporations in the group. Stock sources if from the active conduct of a
for performing the personal services is owned directly by other members of the U.S. banking, financing, or similar
attributable to personal services performed group is not counted when computing the business, OR if the principal business of
by employee-owners. voting power or value. the foreign corporation is trading in stocks
A person is considered to be an See section 1563(d)(1) for the definition or securities for its own account; or
employee-owner if the person is an of stock for purposes of determining the ● Income derived from the sale or
employee of the corporation on any day of stock ownership above. exchange of inventory outside the United
the testing period and the person owns States through the U.S. office, unless the
any outstanding stock of the corporation Section II.—Income property is sold or exchanged for use,
on any day of the testing period. Stock consumption, or disposition outside the
ownership is determined under the Effectively Connected With United States and an office of the foreign
attribution rules of section 318 (except that the Conduct of a Trade or corporation in a foreign country
“any” is substituted for “50%” in section Business in the United participated materially in the sale.
318(a)(2)(C)). See section 864(c)(5)(A) and Regulations
For more details, see Temporary States section 1.864-7 for definition of office or
Regulations section 1.441-4T. Foreign Corporations Engaged in other fixed place of business in the United
States. See sections 864(c)(5)(B) and (C)
Item P a U.S. Trade or Business and Regulations section 1.864-6 for special
Enter any tax-exempt interest received or These corporations are taxed on their rules for determining when foreign source
accrued in the space provided. Include any effectively connected income using the income received by a foreign corporation is
exempt-interest dividends received as a same graduated tax rate schedule (see from an office or other fixed place of
shareholder in a mutual fund or other page 16) that applies to domestic business in the United States.
regulated investment company. corporations. Effectively connected Foreign insurance companies.—Foreign
income can be U.S. source or foreign source income of a foreign insurance
Item R source. company that is attributable to its U.S.
Check this box if the corporation elects trade or business is effectively connected
under section 172(b)(3) to forego the U.S. Source Effectively Connected income.
carryback period for a net operating loss Income
Exceptions.—Foreign source income that
(NOL). If this box is checked, do not attach Fixed or determinable, annual or periodic would otherwise be effectively connected
the statement described in Temporary (FDAP) items are generally effectively income under any of the above rules for
Regulations section 301.9100-12T(d). connected income (and are therefore foreign source income is excluded if:
includible in Section II) if one or both of the 1. It is foreign source dividends, interest,
Item S following tests is met. or royalties paid by a foreign corporation in
Enter the NOL carryover to the tax year Asset-use test. The FDAP items are which the taxpayer owns or is considered
from prior years, regardless of whether any from assets used in, or held for use in, the to own (within the meaning of section 958)
of the loss is used to offset income on this conduct of the U.S. trade or business. For 50% or more of the total combined voting
return. The amount to enter is the total of example, interest income earned on a power of all classes of stock entitled to
all NOLs generated in prior years but not trade or note receivable acquired in the vote; or
Page 8
2. The taxpayer is a controlled foreign from the disposition as effectively any amount if interest is required to be
corporation (as defined in section 957) and connected income, even if the corporation paid on that amount or if there is any
the foreign source income is subpart F is not engaged in a U.S. trade or business. penalty for failure to timely pay that
income (as defined in section 952). This gain or loss must be figured on amount. Corporations that fall under this
For more information, see section Schedule D (Form 1120), Capital Gains provision should attach a schedule
864(c)(4) and Regulations section 1.864-5. and Losses, and the result must be carried showing total gross receipts, the amount
over to Section II, line 8, on page 3 of not accrued as a result of the application
Foreign Corporations NOT Form 1120-F. A foreign corporation may of section 448(d)(5), and the net amount
Engaged in a U.S. Trade or elect to be treated as a domestic accrued. Enter the net amount on line 1a.
corporation for purposes of sections 897 For more information and guidelines on
Business and 1445. See sections 897(i) and 882(d). this “non-accrual experience method,” see
Report income in Section II only if these See Temporary Regulations section Temporary Regulations section 1.448-2T.
corporations: 1.897-5T for the applicability of section Line 2. Cost of goods sold.—See
● Had current year income or gain from a 897 to reorganizations and liquidations. instructions for Schedule A beginning on
sale or exchange of property or from If the corporation had income tax page 13. Enter the amount from line 8 of
performing services (or any other withheld on Form 8288-A, Statement of Schedule A.
transaction) in any other tax year and Withholding on Dispositions by Foreign Line 4. Dividends.—See instructions for
would have been effectively connected Persons of U.S. Real Property Interests, Schedule C on page 14. Enter the amount
income in that other tax year (see section include the amount withheld in line 6h, from line 14 of Schedule C.
864(c)(6)); page 1. Line 5. Interest.—Enter taxable interest on
● Had current year income or gain from a U.S. obligations and on loans, notes,
disposition of property that is no longer mortgages, bonds, bank deposits,
used or held for use in conducting a U.S. Income corporate bonds, tax refunds, etc.
trade or business within the 10-year period Line 1. Gross Receipts.—Enter gross Do not offset interest expense against
before the disposition and would have income effectively connected with the interest income.
been effectively connected income conduct of a U.S. trade or business
immediately before such cessation (see (except those income items that must be Line 6. Gross rents.—Enter the gross
section 864(c)(7)); reported on lines 4 through 10). For amount received for the rent of property.
Deduct expenses such as repairs, interest,
● Elected to treat real property income as reporting advance payments, see
taxes, and depreciation on the proper lines
effectively connected income (see below); Regulations section 1.451-5. To report
income from long-term contracts, see for deductions. A rental activity held by a
● Were created or organized and are closely held corporation or a personal
conducting a banking business in a U.S. section 460.
service corporation may be subject to the
possession, and receive interest on U.S. Installment sales.—Generally, the passive activity loss rules. See Form 8810
obligations that is not portfolio interest (see installment method cannot be used for and its instructions.
section 882(e)); or dealer dispositions of property. A dealer
disposition is any disposition of personal Line 8. Capital gain net income.—Every
● Had gain or loss from disposing of a sale or exchange of a capital asset must
U.S. real property interest (see below). property by a person who regularly sells or
otherwise disposes of property of the same be reported in detail on Schedule D (Form
type on the installment plan. The 1120) even though no gain or loss is
Election to Treat Real Property indicated. In computing the adjustments to
disposition of property used or produced in
Income as Effectively Connected the farming business is not included as a the accumulated earnings tax under
Income dealer disposition. See section 453(l) for section 535(b)(6), foreign corporations must
details and exceptions. only include capital gains and losses that
A foreign corporation that receives, during are effectively connected with a U.S. trade
the tax year, any income from real property Enter on line 1 (and carry to line 3) the or business.
located in the United States, or from any gross profit on collections from installment
sales for any of the following: Line 10. Other income.—Enter any other
interest in such real property, may elect, taxable income not reported on lines 1
for the tax year, to treat all such income as ● Dealer dispositions of property before through 9. List the type and amount of
effectively connected income. Income to March 1, 1986. income on an attached schedule. If the
which this election applies includes: ● Dispositions of property used or corporation has only one item of other
● Gains from the sale or exchange of real produced in the trade or business of income, describe it in parentheses on line
property or an interest therein; farming. 10. Examples of other income to report on
● Rents or royalties from mines, wells, or ● Certain dispositions of timeshares and line 10 are:
other natural deposits; and residential lots reported under the ● Any adjustment under section 481(a)
● Gain described in sections 631(b) or (c). installment method. required to be included in income during
The election may be made whether or Attach a schedule showing the following the current tax year due to a change in a
not the corporation is engaged in a U.S. information for the current and the 3 method of accounting.
trade or business during the tax year for preceding years: (a) gross sales, (b) cost ● Recoveries of bad debts deducted in
which the election is made or whether or of goods sold, (c) gross profits, prior years under the specific charge-off
not the corporation has income from real (d) percentage of gross profits to gross method.
property that, for the tax year, is effectively sales, (e) amount collected, and (f) gross ● The credit for alcohol used as fuel
connected with the conduct of a U.S. trade profit on the amount collected. (determined regardless of the limitation
or business. For sales of timeshares and residential based on tax) that was entered on Form
To make the election, attach a statement lots reported under the installment method, 6478, Credit for Alcohol Used as Fuel.
that includes the information required in the corporation’s income tax is increased ● Refunds of taxes deducted in prior years
Regulations section 1.871-10(d)(1)(ii) to by the interest payable under section if they reduced income subject to tax in
Form 1120-F for the first tax year for which 453(l)(3). To report this addition to the tax, the year deducted (see section 111). Do
the election is to apply. Use Section II to see the instructions on page 17 for not offset current year taxes against tax
figure the tax on this income. Schedule J, line 9. refunds.
Special rule for services.—Accrual basis ● Any deduction previously taken under
Disposition of U.S. Real Property taxpayers do not need to accrue certain section 179A that is subject to recapture.
Interest by a Foreign Corporation amounts to be received from performing The corporation must recapture the benefit
services that, on the basis of their of any allowable deduction for qualified
A foreign corporation that disposes of a
experience, will not be collected (section clean-fuel vehicle property (or clean-fuel
U.S. real property interest (as defined in
448(d)(5)). This provision does not apply to vehicle refueling property), if, within 3 years
section 897(c)) must treat the gain or loss
Page 9
of the date the property was placed in produced for use by the corporation if corporation is not a personal service
service, the property ceases to qualify. See substantial construction occurred before corporation. Certain organizations are
Regulations section 1.179A-1 for details. March 1, 1986. treated as individuals for purposes of this
● Ordinary income from trade or business In the case of inventory, some of the test. (See section 542(a)(2).) For rules of
activities of a partnership (from Schedule indirect costs that must be capitalized are determining stock ownership, see section
K-1 (Form 1065), line 1). administration expenses; taxes; 544 (as modified by section 465(a)(3)).
depreciation; insurance; compensation Generally, there are two kinds of passive
paid to officers for services; rework labor; activities: trade or business activities in
Deductions and contributions to pension, stock bonus, which the corporation did not materially
In computing the taxable income of a and certain profit-sharing, annuity, or participate (see Temporary Regulations
foreign corporation engaged in a U.S. trade deferred compensation plans. section 1.469-1T(g)(3)) for the tax year, and
or business, deductions are allowed only if The costs that must be capitalized under rental activities regardless of its
they are connected with income effectively section 263A are not deductible until the participation. For exceptions, see Form
connected with the conduct of a trade or property to which the costs relate is sold, 8810. An activity is a trade or business
business in the United States. Charitable used, or otherwise disposed of by the activity if the activity involves the conduct
contributions, however, may be deducted corporation. of a trade or business (i.e., deductions
whether or not they are so connected. See from the activity would be allowable under
Current deductions may still be claimed
section 882(c) and Regulations section section 162 if other limitations, such as the
for reasonable research and experimental
1.882-4(b) for more information. passive loss rules, did not apply), or the
costs under section 174, intangible drilling
activity involves research and experimental
Apportionment of Expenses costs for oil and gas and geothermal
costs that are deductible under section
property, and mining and exploration and
Expenses that are directly related to a 174 (or would be deductible if the
development costs incurred in the conduct
class of gross income (including corporation chose to deduct rather than
of a U.S. trade or business. Regulations
tax-exempt income) must be allocated to capitalize them), and the activity is not a
section 1.263A-1(e)(3) specifies other
that class of gross income. Expenses not rental activity.
indirect costs that may be currently
directly related to a class of gross income deducted and those that must be Corporations subject to the passive
should be allocated to all classes of capitalized with respect to production or activity limitations must complete Form
income based on the ratio of gross income resale activities. For more information, see 8810 to compute their allowable passive
in each class of income to total gross Regulations sections 1.263A-1 through activity loss and credit. Before completing
income, or some other ratio that clearly 1.263A-3. Form 8810, see Temporary Regulations
relates to the classes of income. See section 1.163-8T, which provides rules for
Transactions between related
Regulations section 1.861-8 and allocating interest expense among
taxpayers.—Generally, an accrual basis
Temporary Regulations section 1.861-8T activities. If a passive activity is also
taxpayer may only deduct business
for more information. subject to the at-risk rules of section 465,
expenses and interest owed to a related
Attach a schedule showing each class of the at-risk rules apply before the passive
party in the year the payment is included in
gross income, and the expenses directly loss rules. For more information, see
the income of the related party. See
allocable to each class. For expenses that section 469, the related regulations, and
sections 163(e)(3), 163(j), and 267 for
are not directly allocable to a class of Pub. 925, Passive Activity and At-Risk
limitations on deductions for unpaid
gross income, show the computation of Rules.
interest and expenses.
the expense allocated to each class. Reducing certain expenses for which
Section 291 limitations.—Corporations
credits are allowable.—For each credit
Limitations on Deductions may be required to adjust deductions for
listed below, the corporation must reduce
depletion of iron ore and coal, intangible
Section 263A uniform capitalization the otherwise allowable deductions for
drilling and exploration and development
rules.—These rules require corporations to expenses used to figure the credit by the
costs, certain deductions for financial
capitalize or include in inventory certain amount of the current year credit:
institutions, and the amortizable basis of
costs incurred in producing real and pollution control facilities. See section 291 1. The credit for increasing research
tangible personal property held in inventory to determine the amount of adjustment. activities.
or held for sale in the ordinary course of Also see section 43. 2. The enhanced oil recovery credit.
business. Tangible personal property Golden parachute payments.—A portion 3. The disabled access credit.
produced by a corporation includes a film, of the payments made by a corporation to
sound recording, video tape, book, or 4. The jobs credit.
key personnel that exceeds their usual
similar property. The rules also apply to 5. The employer credit for social security
compensation may not be deductible. This
personal property (tangible and intangible) and Medicare taxes paid on tips.
occurs when the corporation has an
acquired for resale. Corporations subject to agreement (golden parachute) with these 6. The empowerment zone employment
these rules are required to capitalize not key employees to pay them these credit.
only direct costs but an allocable portion excessive amounts if control of the 7. The Indian employment credit.
of most indirect costs (including taxes) that corporation changes. See section 280G.
relate to the assets produced or acquired If the corporation has any of these
for resale. Interest expense paid or Business startup expenses.—Business credits, be sure to figure each current year
incurred during the production period must startup expenses must be capitalized credit before figuring the deduction for
be capitalized and is governed by special unless an election is made to amortize expenses on which the credit is based.
rules. For more information, see them over a period of 60 months. See
section 195. Line 12. Compensation of Officers
Regulations sections 1.263A-8 through
1.263A-15. The uniform capitalization rules Passive activity limitations.—Limitations Enter deductible officers’ compensation on
also apply to the production of property on passive activity losses and credits line 12 and complete Schedule E on page
constructed or improved by a corporation under section 469 apply to closely held 4 of Form 1120-F if total receipts (line 1a,
for use in its trade or business or in an corporations (defined below) and personal plus lines 4 through 10, on page 3) are
activity engaged in for profit. service corporations as defined in $500,000 or more. Do not include
Section 263A does not apply to personal Temporary Regulations section 1.441-4T. compensation claimed elsewhere on the
property acquired for resale if the See the instructions for Item O on page 8. return, such as amounts included in cost
taxpayer’s annual average gross receipts For this purpose, a corporation is a of goods sold, elective contributions to a
for the 3 prior tax years are $10 million or closely held corporation if at any time section 401(k) cash or deferred
less. It does not apply to timber or to most during the last half of the tax year more arrangement, or amounts contributed
property produced under a long-term than 50% in value of its outstanding stock under a salary reduction SEP agreement.
contract. Special rules apply for farmers. is owned, directly or indirectly, by or for Include only the deductible part of
The rules do not apply to property that is not more than five individuals, and the officers’ compensation on Schedule E.
Page 10
(See Disallowance of deduction for attach a schedule showing how it arrived Line 19. Charitable Contributions
employee compensation in excess of $1 at the current year’s provision.
Enter contributions or gifts actually paid
million below.) Complete Schedule E, line Caution: A cash basis taxpayer may not within the tax year to or for the use of
1, columns (a) through (f), for all officers. claim a bad debt deduction unless the charitable and governmental organizations
The corporation determines who is an amount was previously included in income. described in section 170(c) and any
officer under the laws where incorporated. unused contributions carried over from
Line 16. Rents.—If the corporation rented
Disallowance of deduction for employee or leased a vehicle, enter the total annual prior years.
compensation in excess of $1 million.— rent or lease expense paid or incurred Note: This deduction is allowed for all
Publicly held corporations may not deduct during the year. Also complete Part V of contributions, whether or not connected
compensation to a “covered employee” to Form 4562, Depreciation and Amortization. with income that is effectively connected
the extent that the compensation exceeds If the corporation leased a vehicle for a with the conduct of a trade or business in
$1 million. Generally, a covered employee term of 30 days or more, the deduction for the United States (see section 882(c)(1)(B)).
is: vehicle lease expense may have to be
The total amount claimed may not
● The chief executive officer of the reduced by an amount called the inclusion
exceed 10% of taxable income (Section II,
corporation (or an individual acting in that amount. The corporation may have an
line 31) computed without regard to the
capacity) as of the end of the tax year, or inclusion amount if:
following:
● An employee whose total compensation And the vehicle’s
1. Any deduction for contributions;
fair market value
must be reported to shareholders under
on the first day of 2. The special deductions on line 30b;
the Securities Exchange Act of 1934 The lease term began: the lease exceeded:
because the employee is among the four 3. The deduction allowed under section
After 12/31/94 $15,500 249;
highest compensated officers for that tax
year (other than the chief executive officer). After 12/31/93 but before 1/1/95 $14,600 4. Any net operating loss (NOL)
For this purpose, compensation does not After 12/31/92 but before 1/1/94 $14,300 carryback to the tax year under section
include the following: After 12/31/91 but before 1/1/93 $13,700 172; and
● Income from certain employee trusts, After 12/31/90 but before 1/1/92 $13,400 5. Any capital loss carryback to the tax
annuity plans, or pensions; or After 12/31/86 but before 1/1/91 $12,800 year under section 1212(a)(1).
● Any benefit paid to an employee that is Charitable contributions over the 10%
excluded from the employee’s income. If the lease term began after June 18, limitation may not be deducted for the tax
1984, but before January 1, 1987, see year but may be carried over to the next 5
The deduction limit does not apply to: Pub. 917, Business Use of a Car, to find tax years.
● Commissions based on individual out if the corporation has an inclusion
performance; amount. Also see Pub. 917 for instructions Special rules apply if the corporation has
an NOL carryover to the tax year. In
● Qualified performance-based on figuring the inclusion amount.
figuring the charitable contributions
compensation; and Line 17. Taxes and licenses.—Enter taxes deduction for the tax year, the 10% limit is
● Income payable under a written, binding paid or accrued during the tax year, but do applied using the taxable income after the
contract in effect on February 17, 1993. not include any of the following: deduction for the NOL.
The $1 million limit is reduced by 1. Federal income taxes (except the To figure the amount of any remaining
amounts disallowed as excess parachute environmental tax under section 59A). NOL carryover to later years, taxable
payments under section 280G. 2. Foreign or U.S. possession income income must be modified (see section
For details, see section 162(m) and taxes if a tax credit is claimed (however, 172(b)). To the extent that contributions are
Notice 94-68, 1994-1, C.B. 376. see the Instructions for Form 5735 for used to reduce taxable income for this
Line 13. Salaries and wages.—Enter the special rules for possession income taxes). purpose and increase an NOL carryover, a
amount of total salaries and wages paid for 3. Taxes not imposed on the contributions carryover is not allowed. See
the tax year, less the amount of any jobs corporation. section 170(d)(2)(B).
credit from Form 5884, empowerment 4. Taxes, including state or local sales Corporations on the accrual basis may
zone credit from Form 8844, and Indian taxes, that are paid or incurred in acquiring elect to deduct contributions paid on or
employment credit from Form 8845. Do or disposing of property (such taxes must before the 15th day of the 3rd month after
not include salaries and wages deductible be treated as a part of the cost of the the end of the tax year if the contributions
elsewhere on the return, such as amounts acquired property or, for a disposition, as a are authorized by the board of directors
included in cost of goods sold, elective reduction in the amount realized on the during the tax year. Attach to the return a
contributions to a section 401(k) cash or disposition). declaration, signed by an officer, stating
deferred arrangement, or amounts 5. Taxes assessed against local benefits that the resolution authorizing the
contributed under a salary reduction SEP that increase the value of the property contributions was adopted by the board of
agreement. assessed (such as for paving, etc.). directors during the tax year. Also attach a
Caution: If the corporation provided copy of the resolution.
6. Taxes deducted elsewhere on the
taxable fringe benefits to its employees, return, such as those reflected in cost of Substantiation requirements.—Generally,
such as personal use of a car, do not goods sold. no deduction is allowed for any
deduct as wages the amount allocated for contribution of $250 or more unless the
depreciation and other expenses claimed See section 164(d) for apportionment of corporation gets a written acknowledgment
on lines 20 and 27. taxes on real property between seller and from the donee organization that shows
purchaser. the amount of cash contributed, describes
Line 14. Repairs and maintenance.—
Enter the cost of incidental repairs and If the corporation is liable for the any property contributed, and gives an
maintenance not claimed elsewhere on the environmental tax under section 59A, get estimate of the value of any goods or
return, such as labor and supplies, that do Form 4626, Alternative Minimum Tax— services provided in return for the
not add to the value of the property or Corporations, for computation of the contribution. The acknowledgment must be
appreciably prolong its life. New buildings, environmental tax deduction. obtained by the due date (including
machinery, or permanent improvements See section 906(b)(1) for rules extensions) of the corporation’s return, or if
that increase the value of the property are concerning certain foreign taxes imposed earlier, the date the return is filed. Do not
not deductible. They must be depreciated on income from U.S. sources that may not attach the acknowledgment to the tax
or amortized. be deducted or credited. return, but keep it with the corporation’s
Line 18. Interest.—See section 882(c) and records. These rules apply in addition to
Line 15. Bad debts.—Enter the total debts
Regulations section 1.882-5 for rules for the filing requirements for Form 8283
that became worthless in whole or in part
interest deductions allowed to foreign described below.
during the tax year. A small bank or thrift
institution using the reserve method should corporations.

Page 11
For more information on substantiation 2. The principal purpose of the organization expenses, etc. See Form
and recordkeeping, see the regulations contribution was to avoid Federal income 4562.
under section 170 and Pub. 526, tax by obtaining a deduction for activities Also include ordinary losses from trade
Charitable Contributions. that would have been nondeductible under or business activities of a partnership (from
Contributions of property other than the lobbying expense rules if conducted Schedule K-1 (Form 1065), line 1).
cash.—If a corporation (other than a directly by the donor.
A corporation may deduct dividends it
closely held or personal service Line 20. Depreciation.—In addition to pays in cash on stock held by an
corporation) contributes property other depreciation, include on line 20 the part of employee stock ownership plan. However,
than cash and claims more than a $500 the cost that the corporation elected to a deduction may only be taken if,
deduction for the property, it must attach a expense under section 179 for certain according to the plan, the dividends are:
schedule to the return describing the kind tangible property placed in service during
● Paid in cash directly to the plan
of property contributed and the method tax year 1995, or carried over from 1994.
participants or beneficiaries;
used to determine its fair market value. See Form 4562, Depreciation and
Closely held corporations and personal Amortization, and its instructions. ● Paid to the plan, which distributes them
service corporations must complete Form in cash to the plan participants or their
Line 23. Depletion.—See sections 613
8283, Noncash Charitable Contributions, beneficiaries, no later than 90 days after
and 613A for percentage depletion rates
and attach it to Form 1120-F. All other the end of the plan year in which the
applicable to natural deposits. Also, see
corporations must generally complete and dividends are paid; or
section 291 for the limitation on the
attach Form 8283 for contributions of depletion deduction for iron ore and coal ● Used to make payments on a loan
property other than money if the total (including lignite). described in section 404(a)(9).
claimed deduction for all property See section 404(k) for more details and
Foreign intangible drilling costs and
contributed was more than $5,000. the limitation on certain dividends.
foreign exploration and development costs
If the corporation made a “qualified must either be added to the corporation’s Generally, a deduction may not be taken
conservation contribution” under section basis for cost depletion purposes or be for any amount that is allocable to a class
170(h), also include the fair market value of deducted ratably over a 10-year period. of exempt income. See section 265(b) for
the underlying property before and after See sections 263(i), 616, and 617 for exceptions.
the donation, as well as the type of legal details. Meals, travel, and entertainment.—
interest contributed, and describe the Generally, the corporation can deduct only
Attach Form T (Timber), Forest
conservation purpose furthered by the 50% of the amount otherwise allowable for
Activities Schedules, if a deduction for
donation. If a contribution carryover is meals and entertainment expenses paid or
depletion of timber is claimed.
included, show the amount and how it was incurred in its trade or business. Also,
determined. Line 25. Pension, Profit-sharing, etc., meals must not be lavish or extravagant; a
Special rule for contributions of certain Plans bona fide business discussion must occur
property.—For a charitable contribution of Enter the amount of contributions to during, immediately before, or immediately
property, reduce the contribution by the qualified pension, profit-sharing, or other after the meal; and an employee of the
sum of: funded deferred compensation plans. corporation must be present at the meal.
1. The ordinary income, short-term Employers who maintain any such plan See section 274(k)(2) for exceptions. If the
capital gain that would have resulted if the generally must file one of the forms listed corporation claims a deduction for
property were sold at its fair market value; below, even if the plan is not a qualified unallowable meal expenses, it may have to
and plan under the Internal Revenue Code. The pay a penalty.
2. For certain contributions, all of the filing requirement applies even if the Additional limitations apply to deductions
long-term capital gain that would have corporation does not claim a deduction for for gifts, skybox rentals, luxury water
resulted if the property were sold at its fair the current tax year. There are penalties for travel, convention expenses, and
market value. failure to file these forms on time and for entertainment tickets. See section 274 and
The reduction for the long-term capital overstating the pension plan deduction. Pub. 463, Travel, Entertainment, and Gift
gain applies to: For more information, see sections 6652(e) Expenses.
and 6662(f). No deduction is allowed for dues paid or
1. Contributions of tangible personal
property for use by an exempt organization Form 5500.—File this form for each plan incurred for membership in any club
for a purpose or function unrelated to the with 100 or more participants. organized for business, pleasure,
basis for its exemption, and Form 5500-C/R.—File this form for each recreation, or other social purpose. This
plan with fewer than 100 participants. includes country clubs, golf and athletic
2. Contributions of any property to or for
clubs, airline and hotel clubs, and clubs
the use of certain private foundations. See Form 5500-EZ.—File this form for a
operated to provide meals under
section 170(e) and Regulations section one-participant plan. A one-participant
conditions favorable to business
1.170A-4. plan includes plans that cover the owners
discussion. But it does not include civic or
For special rules for contributions of and their spouses and plans that cover
public service organizations, professional
inventory and other property to certain partners in a business partnership (or the
organizations (such as bar and medical
organizations, see section 170(e)(3) and partners and their spouses).
associations), business leagues, trade
Regulations section 1.170A-4A. Line 26. Employee benefit programs.— associations, chambers of commerce,
Charitable contributions of scientific Enter contributions to employee benefit boards of trade, and real estate boards,
property used for research.—A programs not claimed elsewhere on the unless a principal purpose of the
corporation (other than a personal holding return (e.g., insurance, health, and welfare organization is to entertain or provide
company or a service organization) can programs) that are not an incidental part of entertainment facilities for members or
receive a larger deduction for contributing a pension, profit-sharing, etc., plan their guests.
scientific property used for research to an included on line 25.
Also, no deduction is allowed for travel
institution of higher education. For more Line 27. Other Deductions expenses paid or incurred for a spouse,
details, see section 170(e). dependent, or other individual
Contributions to organizations Note: Do not deduct fines and penalties accompanying an officer or employee of
conducting lobbying activities.— paid to a government for violating any law. the corporation on business travel, unless
Contributions made to an organization that Attach a schedule listing by type and that spouse, dependent, or other individual
conducts lobbying activities are not amount, all allowable deductions that are is an employee of the corporation and the
deductible if: not deductible elsewhere on Form 1120-F. travel is for a bona fide business purpose
1. The lobbying activities relate to Include on this line the deduction for and would otherwise be deductible by that
matters of direct financial interest to the amortization of pollution control facilities, person.
donor’s trade or business, and
Page 12
Generally, a corporation can deduct all amount at risk and gross income and shifts in ownership occurred. Also, see
other ordinary and necessary travel and deductions for the activities with losses. Regulations section 1.382-6(b) for details
entertainment expenses paid or incurred in If the corporation sells or otherwise on how to make the closing-of-the-books
its trade or business. It cannot, however, disposes of an asset or its interest (either election.
deduct an expense paid or incurred for a total or partial) in an activity to which the See section 384 for the limitation on the
facility (such as a yacht or hunting lodge) at-risk rules apply, determine the net profit use of preacquistion losses of one
used for an activity that is usually or loss from the activity by combining the corporation to offset recognized built-in
considered amusement, entertainment, or gain or loss on the sale or disposition with gains of another corporation.
recreation. the profit or loss from the activity. If the Exceptions to carryback rules.—A
Note: The corporation may be able to corporation has a net loss, it may be corporation may make an irrevocable
deduct otherwise nondeductible meals, limited because of the at-risk rules. election to forego the carryback period and
travel, and entertainment expenses if the Treat any loss from an activity not instead carry the NOL over to each of the
amounts are treated as compensation and allowed for the tax year as a deduction 15 years following the year of the loss. To
reported on Form W-2 for an employee or allocable to the activity in the next tax make this election, check the box in Item
on Form 1099-MISC for an independent year. R at the bottom of page 2 of the form. The
contractor. return must be timely filed (including
Deduction for clean-fuel vehicles and Line 30a. Net Operating Loss Deduction extensions).
certain refueling property.—Section 179A A corporation may use the net operating Different carryback periods apply for
allows a deduction for part of the cost of loss (NOL) incurred in one tax to reduce its certain losses. The part of an NOL that is
qualified clean-fuel vehicle property and taxable income in another year. Generally, from a specified liability loss, including a
qualified clean-fuel vehicle refueling a corporation may carry an NOL back to product liability loss, may be carried back
property placed in service after June 30, each of the 3 years preceding the year of 10 years (section 172(b)(1)(C)). See
1993. For more information, see Pub. 535. the loss and then carry any remaining Regulations section 1.172-13(c) for the
Lobbying expenses.—Generally, lobbying amount over to each of the 15 years statement that must be attached to Form
expenses are not deductible. These following the year of the loss (but see 1120-F if the corporation is claiming the
expenses include amounts paid or incurred Exceptions to carryback rules below). 10-year carryback period for a product
in connection with influencing Federal or Enter on line 30a the total NOL carryovers liability loss.
state legislation (but not local legislation), from prior tax years, but do not enter more Special rules apply to the carryback of
or amounts paid or incurred in connection than the corporation’s taxable income losses that are from interest paid for
with any communication with certain (after special deductions). An NOL corporate equity reduction transactions
Federal executive branch officials in an deduction cannot be taken in a year in (CERTs). The rules apply if a corporation
attempt to influence the official actions or which the corporation has a negative has a corporate equity reduction interest
positions of the officials. See Regulations taxable income. Attach a schedule loss in a loss limitation year ending after
section 1.162-29 for the definition of showing the computation of the NOL August 2, 1989. See section 172(b)(1)(E).
“influencing legislation.” If certain in-house deduction. Also complete Item S at the
Personal service corporations may not
lobbying expenditures do not exceed bottom of page 2 of the form.
carry back an NOL to or from any tax year
$2,000, they are deductible. Dues and For more information, get Pub. 536, Net to which a section 444 election applies.
other similar amounts paid to certain Operating Losses.
tax-exempt organizations may not be Line 30b. Special deductions.—See the
Carryback and carryover rules.— instructions for Schedule C.
deductible. See section 162(e)(3). For Generally, an NOL first must be carried
information on contributions to charitable back to the third tax year preceding the
organizations that conduct lobbying Schedule A—Cost of Goods Sold
year of the loss. To carry back the loss
activities, see the instructions for line 19. and obtain a refund of taxes, use Form Inventories are required at the beginning
For more information on lobbying 1139, Corporation Application for Tentative and end of each tax year if the production,
expenses, see section 162(e). Refund. Form 1139 must be filed within 12 purchase, or sale of merchandise is an
months after the close of the tax year of income-producing factor. See Regulations
Line 29. Taxable Income Before NOL section 1.471-1. If inventories are not
Deduction and Special Deductions the loss. See section 6411 for details. Do
not attach Form 1139 to the corporation’s used, enter zero on lines 1 and 7 of
At-risk rules.—Generally, special at-risk income tax return. Mail it in a separate Schedule A.
rules under section 465 apply to closely envelope to the service center where the See Section 263A uniform
held corporations (see Passive activity corporation files its income tax return. capitalization rules on page 10 before
limitations on page 10) engaged in any completing Schedule A.
For carryback claims filed later than 12
activity as a trade or business, or for the Line 4. Additional section 263A costs.—
months after the close of the tax year of
production of income. These corporations An entry is required on this line only for
the loss, file an amended Form 1120-F
may have to adjust the amount on line 29. corporations that have elected a simplified
instead of Form 1139.
But, the at-risk rules do not apply to: method of accounting.
After the corporation applies the NOL to
● Holding real property placed in service the first tax year to which it may be For corporations that have elected the
by the taxpayer before 1987; carried, the taxable income of that year is simplified production method, additional
● Equipment leasing under sections modified (as described in section 172(b)) to section 263A costs are generally those
465(c)(4), (5), and (6); or determine how much of the remaining loss costs, other than interest, that were not
● Any qualifying business of a qualified may be carried to other years. See section capitalized under the corporation’s method
corporation described in section 465(c)(7). 172(b) and the related regulations for of accounting immediately prior to the
details. effective date of section 263A that are now
However, the at-risk rules do apply to required to be capitalized under section
holding mineral property. Special rules apply when an ownership
change occurs (i.e., for any tax year ending 263A. For details, see Regulations section
If the at-risk rules apply, adjust the 1.263A-2(b).
after a post-1986 ownership change, the
amount on line 29 for any section 465(d) For corporations that have elected the
amount of the taxable income of a loss
losses. These losses are limited to the simplified resale method, additional section
corporation that can be offset by
amount for which the corporation is at risk 263A costs are generally those costs
pre-change NOL carryovers is limited). See
for each separate activity at the close of incurred for the following categories:
section 382 and the related regulations.
the tax year. If the corporation is involved off-site storage or warehousing;
Also see Temporary Regulations section
in one or more activities, any of which purchasing; handling, processing,
1.382-2T(a)(2)(ii), which requires that a loss
incurs a loss for the year, report the loss assembly, and repackaging; and general
corporation file an information statement
for each activity separately. Attach Form and administrative costs (mixed service
with its income tax return for each tax year
6198, At-Risk Limitations, showing the
that it is a loss corporation and certain
Page 13
costs). For details, see Regulations section line 10 on page 3) proportionately over a receive a notice from the RIC specifying
1.263A-3(d). 3-year period that begins with the year of the amount of dividends that qualify for the
Enter on line 4 the balance of section the LIFO election (see section 472(d)). deduction.
263A costs paid or incurred during the tax For more information on inventory
Line 3, Columns (b) and (c)
year not included on lines 2, 3, and 5. valuation methods, see Pub. 538,
Line 5. Other costs.—Enter on line 5 any Accounting Periods and Methods. Dividends received on debt-financed stock
costs paid or incurred during the tax year acquired after July 18, 1984, are not
not entered on lines 2 through 4. Schedule C—Dividends and entitled to the full 70% or 80%
Special Deductions dividends-received deduction. The 70% or
Line 7. Inventory at end of year.—See 80% deduction is reduced by a percentage
Regulations section 1.263A-1 through For purposes of the 20% ownership test that is related to the amount of debt
1.263A-3 for details on figuring the amount on lines 1 through 7, the percentage of incurred to acquire the stock. See section
of additional section 263A costs to be stock owned by the corporation is based 246A. Also see section 245(a) before
included in ending inventory. on voting power and value of the stock. making this computation for an additional
Line 9a. Inventory valuation methods.— Preferred stock described in section limitation that applies to dividends received
Inventories can be valued at (a) cost, 1504(a)(4) is not taken into account. from foreign corporations. Attach a
(b) cost or market value (whichever is schedule that shows how the amount on
lower), or (c) any other method approved Line 1, Column (a)
line 3, column (c) was figured.
by the IRS that conforms to the Enter dividends (except those received on
requirements of the applicable regulations debt-financed stock acquired after July 18, Line 4, Column (a)
cited below. The average cost (rolling 1984—see section 246A) that are received Enter dividends received on the preferred
average) method of valuing inventories from less-than-20%-owned domestic stock of a less-than-20%-owned public
generally does not conform to the corporations subject to income tax and utility that is subject to income tax and is
requirements of the regulations. See Rev. that are subject to the 70% deduction allowed the deduction provided in section
Rul. 71-234, 1971-1 C.B. 148. under section 243(a)(1). Include on this line 247 for dividends paid.
Corporations that use erroneous taxable distributions from an IC-DISC or
valuation methods must change to a former DISC that are designated as eligible Line 5, Column (a)
method permitted for Federal income tax for the 70% deduction and certain
Enter dividends received on preferred
purposes. To make this change, use Form dividends of Federal Home Loan Banks.
stock of a 20%-or-more-owned public
3115. See section 246(a)(2).
utility that is subject to income tax and is
On line 9a, check the method(s) used for Also include on line 1 dividends (except allowed the deduction provided in section
valuing inventories. Under lower of cost or those received on debt-financed stock 247 for dividends paid.
market, the term “market” (for normal acquired after July 18, 1984) from a
goods) means the current bid price regulated investment company (RIC). The Line 6, Column (a)
prevailing on the inventory valuation date amount of dividends eligible for the
Enter the U.S.-source portion of dividends
for the particular merchandise in the dividends-received deduction under
that are received from less-than-20%-
volume usually purchased by the taxpayer. section 243 is limited by section 854(b).
owned foreign corporations and that
For a manufacturer, market applies to the The corporation should receive a notice
qualify for the 70% deduction under
basic elements of cost—raw materials, from the RIC specifying the amount of
section 245(a). To qualify for the 70%
labor, and burden. If section 263A applies dividends that qualifiy for the deduction.
deduction, the corporation must own at
to the taxpayer, the basic elements of cost Report so-called dividends or earnings least 10% of the stock of the foreign
must reflect the current bid price of all received from mutual savings banks, etc., corporation by vote and value.
direct costs and all indirect costs properly as interest. Do not treat them as dividends.
allocable to goods on hand at the Line 7, Column (a)
inventory date. Line 2, Column (a)
Enter the U.S.-source portion of dividends
Inventory may be valued below cost Enter dividends (except those received on that are received from 20%-or-more-
when the merchandise is unsalable at debt-financed stock acquired after July 18, owned foreign corporations and that
normal prices or unusable in the normal 1984) that are received from 20%-or-more- qualify for the 80% deduction under
way because the goods are subnormal owned domestic corporations subject to section 245(a).
because of damage, imperfections, shop income tax and that are subject to the
wear, etc., within the meaning of 80% deduction under section 243(c). Line 8, Column (c)
Regulations section 1.471-2(c). The goods Include on this line taxable distributions Limitation on dividends-received
may be valued at a current bona fide from an IC-DISC or former DISC that are deduction.—Generally, line 8 of column (c)
selling price, minus direct cost of considered eligible for the 80% deduction. may not exceed the amount from the
disposition (but not less than scrap value) worksheet on page 15. However, in a year
if such a price can be established. Line 3, Column (a)
in which an NOL occurs, this limitation
If this is the first year the Last-in, Enter dividends on debt-financed stock does not apply even if the loss is created
First-out (LIFO) inventory method was acquired after July 18, 1984, that are by the dividends-received deduction. See
either adopted or extended to inventory received from domestic and foreign sections 172(d) and 246(b). Certain
goods not previously valued under the corporations subject to income tax and financial institutions to which section
LIFO method provided in section 472, would otherwise be subject to the 593(a) applies should see section 596 for
attach Form 970, Application To Use LIFO dividends-received deduction under the special limitation on the
Inventory Method, or a statement with the section 243(a)(1), 243(c), or 245(a). dividends-received deduction.
information required by Form 970. Also Generally, debt-financed stock is stock
check the LIFO box on line 9c. On line 9d, that the corporation acquired by incurring Line 9, Column (a)
enter the amount or the percent of total a debt (e.g., it borrowed money to buy the Enter all other dividends received from
closing inventories covered under section stock). foreign corporations that are not reportable
472. Estimates are acceptable. Include on line 3 dividends received from on lines 3, 6, or 7 of column (a). Also
If the corporation changed or extended a regulated investment company (RIC) on include on line 9 the corporation’s share of
its inventory method to LIFO and had to debt-financed stock. The amount of the ordinary earnings of a qualified electing
write up its opening inventory to cost in dividends eligible for the fund from Form 8621, line 6c, or the
the year of election, report the effect of dividends-received deduction is limited by amount of any excess distributions from a
this write up as other income (Section II, section 854(b). The corporation should

Page 14
investment companies and that are not
Worksheet for Schedule C, Line 8 subject to the 70% deduction.
(Keep for your records.) ● Dividends from tax-exempt
organizations.
1. Refigure Section II, line 29 without any adjustment under section 1059 ● Dividends (other than capital gain
and without any capital loss carryback to the tax year under section dividends) received from a real estate
1212(a)(1) investment trust that qualifies, for the tax
2. Multiply line 1 by 80% year of the trust in which the dividends are
paid, under sections 856 through 860.
3. Add lines 2, 5, and 7, column (c) and the part of the deduction on line
● Dividends not eligible for a dividends-
3, column (c) that is attributable to dividends received from
received deduction because of the holding
20%-or-more-owned corporations
period of the stock or an obligation to
4. Enter the smaller of line 2 or line 3. If line 3 is greater than line 2, stop make corresponding payments for similar
here; enter the amount from line 4 on line 8, column (c), and do not stock.
complete the rest of this worksheet Two situations in which the dividends-
5. Enter the total amount of dividends received from 20%-or-more-owned received deduction will not be allowed on
corporations that are included on lines 2, 3, 5, and 7, column (a) any share of stock are:
6. Subtract line 5 from line 1 1. If the corporation held it 45 days or
7. Multiply line 6 by 70% less (see section 246(c)(1)(A)), or
8. Subtract line 3 above from line 8, column (c) 2. To the extent the corporation is under
an obligation to make related payments for
9. Enter the smaller of line 7 or line 8 substantially similar or related property.
10. Dividends-received deduction after limitation (sec. 246(b)). Add lines 4 ● Any other taxable dividend income not
and 9. Enter the result here and on line 8, column (c) properly reported above (including
distributions under section 936(h)(4)).
Tax Computation Worksheet for Members of a Controlled Group If patronage dividends or per-unit retain
allocations are included on line 12, identify
(Keep for your records.) the total of these amounts in a schedule
and attach it to Form 1120-F.
Note: Each member of a controlled group (except qualified personal service corporations)
must compute its tax as follows. Line 13, Column (c)
1. Enter taxable income (Section II, line 31) Section 247 allows public utilities a
2. Enter line 1 or the corporation’s share of the $50,000 taxable income deduction of 40% of the smaller of:
bracket, whichever is less 1. Dividends paid on their preferred
3. Subtract line 2 from line 1 stock during the tax year, or
4. Enter line 3 or the corporation’s share of the $25,000 taxable income 2. Taxable income computed without
bracket, whichever is less regard to this deduction.
5. Subtract line 4 from line 3 In a year in which an NOL occurs,
compute the deduction without regard to
6. Enter line 5 or the corporation’s share of the $9,925,000 taxable section 247(a)(1)(B). See section 172(d).
income bracket, whichever is less
7. Subtract line 6 from line 5 Schedule J—Tax Computation
8. Multiply line 2 by 15% Note: Members of a controlled group must
9. Multiply line 4 by 25% attach a statement showing the
computation of the tax entered on line 3.
10. Multiply line 6 by 34%
11. Multiply line 7 by 35% Lines 1 and 2. Members of a Controlled
Group
12. If the taxable income of the controlled group exceeds $100,000, enter
this member’s share of the smaller of (a) 5% of the excess over Members of a controlled group (as defined
$100,000, or (b) $11,750. (See Additional 5% tax on page 16.) in section 1563) must check the box on
13. If the taxable income of the controlled group exceeds $15 million, enter line 1 and complete lines 2a and 2b of
this member’s share of the smaller of 3% of the taxable income in Schedule J. They are entitled to one
$50,000, one $25,000, and one $9,925,000
excess of $15 million, or $100,000 (See Additional 3% tax on
taxable income bracket amount (in that
page 16.)
order) on line 2a.
14. Add lines 8 through 13. Enter here and on line 3, Schedule J When a controlled group adopts or later
amends an apportionment plan, each
passive foreign investment company from No deduction is allowed under section member must attach to its tax return a
Form 8621, line 11b. Exclude distributions 243 for a dividend from an IC-DISC or copy of its consent to this plan. The copy
constructively taxed in the current year or former DISC (as defined in section 992(a)) (or an attached statement) must show the
in prior years under subpart F (sections to the extent the dividend: part of the amount in each taxable income
951 through 964). bracket apportioned to that member. See
1. Is paid out of the corporation’s Regulations section 1.1561-3(b) for other
accumulated IC-DISC income or previously requirements and for the time and manner
Line 10, Column (a)
taxed income, or of making the consent.
If the corporation claims the foreign tax 2. Is a deemed distribution under section
credit, enter the tax that is deemed paid Equal apportionment plan.—If no
995(b)(1). apportionment plan is adopted, the
under sections 902 and 960. See sections
78 and 906(b)(4). Line 12, Column (a) members of the controlled group must
divide the amount in each taxable income
Line 11, Column (a) Include the following: bracket equally among themselves.
● Dividends (other than capital gain Example. Controlled group AB consists of
Enter taxable distributions from an IC-DISC
dividends and exempt-interest dividends) corporation A and corporation B. They do
or former DISC that are designated as not
that are received from regulated not elect an apportionment plan. Therefore,
eligible for a dividends-received deduction.
Page 15
both corporation A and corporation B are Qualified personal service corporation.— Form 3800, General Business Credit, if the
entitled to $25,000 (one-half of $50,000) in A qualified personal service corporation is corporation has two or more of these
the $50,000 taxable income bracket on line taxed at a flat rate of 35% on its taxable credits, a credit carryforward or carryback
2a(1), $12,500 (one-half of $25,000) in the income. A corporation is a qualified (including an ESOP credit), or a passive
$25,000 taxable income bracket on line personal service corporation if it meets activity credit. Enter the amount of the
2a(2), and $4,962,500 (one-half of BOTH of the following tests: general business credit on line 4c and
$9,925,000) in the $9,925,000 taxable ● Substantially all of its activities involve check the box for Form 3800. If the
income bracket on line 2a(3). performing services in the fields of health, corporation has only one credit, enter on
Unequal apportionment plan.—Members law, engineering, architecture, accounting, line 4c the amount of the credit from the
of a controlled group may elect an unequal actuarial science, performing arts, or form. Also be sure to check the
apportionment plan and divide the taxable consulting, and appropriate box for that form.
income bracket amounts as they wish. ● At least 95% of its stock, by value, is Investment credit. The corporation may
There is no need for consistency between owned, directly or indirectly, by claim the investment credit for property
taxable income brackets. Any member of (1) employees performing the services, placed in service that is qualified
the controlled group may be entitled to all, (2) retired employees who had performed rehabilitation, energy, timber, or transition
some, or none of the taxable income the services listed above, (3) any estate of property. See Form 3468, Investment
bracket. However, the total amount for all an employee or retiree described above, or Credit, for definitions and other details.
members of the controlled group cannot (4) any person who acquired the stock of Jobs credit. The corporation may qualify
be more than the total amount in each the corporation because of the death of an to take this credit if it hired members of
taxable income bracket. employee or retiree (but only for the 2-year special targeted groups during the tax
Additional 5% tax.—Members of a period beginning on the date of the year. See Form 5884, Jobs Credit, for
controlled group are treated as one employee’s or retiree’s death). See more information.
corporation to figure the applicability of the Temporary Regulations section 1.448-1T(e) Credit for alcohol used as fuel. Use
additional 5% tax that must be paid by for details. Form 6478, Credit for Alcohol Used as
corporations with taxable income over Note: If the corporation meets these tests, Fuel, to figure the credit.
$100,000. If the additional tax applies, check the box on line 3, Schedule J. Credit for increasing research activities.
each member of the controlled group will Additional tax under section 197(f).—A See Form 6765, Credit for Increasing
pay that tax based on the part of the corporation that elects to pay tax on the Research Activities, and section 41.
amount that is used in each taxable gain from the sale of an intangible under Low-income housing credit. See Form
income bracket to reduce that member’s the related person exception to the 8586, Low-Income Housing Credit, and
tax. See section 1561(a). Each member of anti-churning rules, should include any section 42.
the group must enter its share of the additional tax due under section 197(f)(9)(B)
additional 5% tax on line 2b(1) and attach Enhanced oil recovery credit. A
in the total for line 3. On the dotted line
to its tax return a schedule that shows the corporation may claim a credit for 15% of
next to line 3, write “Section 197” and the
taxable income of the entire group as well its qualified enhanced oil recovery costs.
amount. For more information, see Pub.
as how it figured its share of the additional Use Form 8830, Enhanced Oil Recovery
535, Business Expenses.
5% tax. Credit.
Additional 3% tax.—Members of a Line 4a. Foreign Tax Credit Disabled access credit. A corporation
controlled group are treated as one may be able to take a credit for certain
A foreign corporation engaged in a U.S.
corporation to figure the additional 3% tax expenditures paid or incurred to help
trade or business during the tax year can
that must be paid by corporations with individuals with disabilities. See Form
take a credit for income, war profits, and
taxable income over $15 million. If the 8826, Disabled Access Credit, and section
excess profits taxes paid, accrued, or
additional tax applies, each member of the 44.
deemed paid to any foreign country or U.S.
controlled group will pay that tax based on possession for income effectively Renewable electricity production credit.
the part of the amount used in each connected with the conduct of a trade or A corporation may be able to take a credit
taxable income bracket to reduce that business in the United States. See section for electricity produced by the corporation
member’s tax. See section 1561(a). Each 906 and Form 1118, Foreign Tax Credit— using closed-loop biomass or wind and
member of the group must enter its share Corporations, for additional information. sold to an unrelated person. See Form
of the additional 3% tax on line 2b(2) and 8835, Renewable Electricity Production
attach to its tax return a schedule that Line 4b Credit, for details.
shows the taxable income of the entire Complete line 4b if the corporation can Indian employment credit. A corporation
group as well as how it figured its share of take either of the following credits. Be sure may be able to claim a credit of 20% of a
the additional 3% tax. to check the appropriate box. limited amount of the wages and health
Line 3. Income Tax Nonconventional source fuel credit.—A insurance costs it pays or incurs for
credit is allowed for the sale of qualified qualified employees. A qualified employee
Most corporations figure their tax by using is a member of an enrolled Indian tribe (or
the Tax Rate Schedule below. Exceptions fuels produced from a nonconventional
source. Section 29 contains a definition of spouse of a member), who also meets
apply to members of a controlled group certain other qualifications. See Form
(see worksheet on page 15) and qualified qualified fuels, provisions for figuring the
credit, and other special rules. Attach a 8845, Indian Employment Credit, and
personal service corporations. (See the section 45A.
instructions below for more information.) separate schedule to the return showing
the computation of the credit. Credit for employer social security and
Also see Form 8827 if any of the 1994 Medicare taxes paid on certain
Tax Rate Schedule employee tips. Food and beverage
If its taxable income
credit was disallowed solely because of
the tentative minimum tax limitation. See establishments may claim a credit equal to
(Section II, line 31) is:
section 53(d). the employer’s social security and
Of the Medicare obligations attributable to tips in
But not amount Qualified electric vehicle credit.—Include excess of those treated as wages for
Over— over— Its tax is: over— on line 4b any credit from Form 8834, purposes of the minimum wage laws. See
Qualified Electric Vehicle Credit. Vehicles Form 8846, Credit for Employer Social
$0 $50,000 15% $0 that qualify for this credit are not eligible
50,000 75,000 $7,500 + 25% 50,000 Security and Medicare Taxes Paid on
75,000 100,000 13,750 + 34% 75,000
for the deduction for clean-fuel vehicles Certain Employee Tips, and section 45B.
100,000 335,000 22,250 + 39% 100,000 under section 179A.
Credit for contributions to certain
335,000 10,000,000 113,900 + 34% 335,000
10,000,000 15,000,000 3,400,000 + 35% 10,000,000 Line 4c. General Business Credit community development corporations.
15,000,000 18,333,333 5,150,000 + 38% 15,000,000 Corporations may claim a credit of 5% of
Complete this line if the corporation can qualified cash contributions to certain
18,333,333 ----- 35% 0
take any of the following credits. Complete
Page 16
community development corporations Line 8a. Alternative Minimum Tax the equity of the foreign corporation’s U.S.
(CDCs) selected by the Secretary of The corporation may owe the alternative trade or business (i.e., U.S. net equity) are
Housing and Urban Development. See minimum tax if it has any of the used as a measure of whether earnings
Form 8847, Credit for Contributions to adjustments and tax preference items have been reinvested in, or disinvested
Selected Community Development (including the adjusted current earnings from, a U.S. trade or business. An increase
Corporations. adjustment) listed on Form 4626, in U.S. net equity during the tax year is
Note: The empowerment zone employment Alternative Minimum Tax–Corporations. generally treated as a reinvestment of
credit (described below), is a component of The corporation must file Form 4626 if its earnings for the current tax year. A
the general business credit, but is figured taxable income (loss) combined with these decrease in U.S. net equity is generally
separately and is not carried to Form 3800. adjustments and tax preference items is treated as a disinvestment of prior year’s
more than the smaller of (a) $40,000 or earnings that have not previously been
Empowerment zone employment credit.
(b) the corporation’s allowable exemption subject to the branch profits tax. The
A corporation that has employees that live
amount (from Form 4626). See Form 4626 amount subject to the branch profits tax
and work for the corporation in an area
for details. for the tax year is the dividend equivalent
designated by the Federal government as
amount.
an “empowerment zone” may be able to Reduce alternative minimum tax by any
take a credit for wages paid to certain amounts from Form 3800, Schedule A, line Corporations exempt from the branch
employees. The credit is equal to 20% of 34, and Form 8844, line 21. On the dotted profits tax.—A foreign corporation is
the first $15,000 of qualified wages and is line next to line 9a, write “Section 38(c)(2)” exempt from the branch profits tax on its
limited to $3,000 per year per employee. (“EZE” if from Form 8844) and the dividend equivalent amount if (1) it is a
See Form 8844, Empowerment Zone amounts. qualified resident of a country with which
Employment Credit, and section 1396. the U.S. has an income tax treaty in effect
Line 8b. Environmental Tax for the year in which the dividend
Line 4d. Credit for Prior Year Minimum equivalent arises and (2) the income tax
Tax The corporation may be liable for the treaty with that country has not been
environmental tax if its modified alternative modified on or after January 1, 1987. See
To figure the minimum tax credit and any minimum taxable income exceeds $2
carryforward of the credit, use Form 8827, Regulations section 1.884-1(g)(3) for a list
million. See Form 4626 for details. of the qualifying countries. See Item X on
Credit for Prior Year Minimum Tax—
Corporations. Line 9 page 19 for the definition of qualified
resident. If the foreign corporation is
Line 5 Interest on tax attributable to payments exempt from the branch profits tax, skip
received on installment sales of certain Part I of Section III, but be sure to
Include in the total for line 5 any orphan timeshares and residential lots. If the complete Items W and X at the bottom of
drug credit. On the dotted line next to the corporation elected to pay interest on the page 5 of the form.
entry space, write “ODC” and the amount. tax attributable to payments received on Partnerships engaged in a U.S. trade or
installment obligations from disposing of business.—A foreign corporate partner of
Line 7. Recapture Taxes
certain timeshares and residential lots a partnership engaged in a U.S. trade or
Recapture of investment credit. If the under section 453(l)(3), it must include the business is subject to the branch profits
corporation disposed of investment credit interest due in the amount to be entered tax on its ECEP attributable to its
property or changed its use before the end on line 9, Schedule J. In the margin below distributive share of effectively connected
of its useful life or recovery period, it may line 9, write “Section 453(l)(3) interest” and income.
owe a tax. See Form 4255, Recapture of the amount. Attach a schedule showing
Investment Credit, for details. the computation. Foreign governments.—A foreign
government is subject to both the branch
Recapture of low-income housing credit. Interest on tax deferred under the profits tax and the branch-level interest
If the corporation disposed of property (or installment method for certain nondealer taxes. However, no branch profits tax or
there was a reduction in the qualified basis installment obligations. If an obligation branch-level interest taxes will be imposed
of the property) for which it took the from the disposition of property to which on ECEP and interest accrued prior to
low-income housing credit, it may owe a section 453A applies is outstanding at the September 11, 1992. See Regulations
tax. See Form 8611, Recapture of close of the tax year, the corporation must section 1.884-0.
Low-Income Housing Credit, and section include the interest due under section
42(j) for details. 453A(c) in the amount to be entered on Line 2
Recapture of qualified electric vehicle line 9, Schedule J. Write in the margin
below line 9, “Section 453A(c) interest” Attach a schedule showing the following
(QEV) credit. The corporation must adjustments (based on the principles of
recapture part of the QEV credit it claimed and the amount. Attach a schedule
showing the computation. section 312) to the corporation’s line 1
in a prior year, if, within 3 years of the date effectively connected taxable income
the vehicle was placed in service, it ceases Interest under the look-back method for (ECTI) (before the NOL deduction and
to qualify for the credit. See Regulations completed long-term contracts. Include special deductions) to get ECEP:
section 1.30-1 for details on how to figure the interest due under the look-back
the recapture. Include the amount of the method of section 460(b)(2) on line 9, 1. Positive adjustments for certain
recapture in the total for line 7, Schedule J. Schedule J. In the margin below line 9, effectively connected income items that
On the dotted line next to the entry space, write “From Form 8697” and the amount of are excluded from ECTI but must be
write “QEV recapture” and the amount. interest due. included in computing ECEP (such as
tax-exempt interest income).
Recapture of Indian employment credit.
2. Positive adjustments for certain items
Generally, if an employer terminates a Section III—Branch Profits deducted in computing ECTI but cannot be
qualified employee less than 1 year after
the date of initial employment, any Indian Tax and Tax on Excess deducted in computing ECEP. Include
employment credit allowed for a prior year Interest adjustments for certain deductions claimed
by reason of wages paid or incurred to in computing ECTI, such as (a) excess of
that employee must be recaptured. For Part I—Branch Profits Tax percentage depletion over cost depletion,
details, see Form 8845 and section 45A. (b) excess of accelerated depreciation over
Section 884(a) imposes a 30% branch straight line depreciation (but only if 20%
Include the amount of the recapture in the profits tax on the aftertax earnings of a
total for line 7, Schedule J. On the dotted or more of the foreign corporation’s gross
foreign corporation’s U.S. trade or income from all sources is U.S. source),
line next to the entry space, write “45A” business (i.e., effectively connected
and the amount. and (c) capital loss carrybacks and
earnings and profits (ECEP)) that are not carryovers.
reinvested in a U.S. trade or business by
the close of the tax year, or are disinvested 3. Negative adjustments for certain
in a later tax year. Changes in the value of deductible items (that are allocable to

Page 17
effectively connected income) that cannot corporation under Regulations section Coordination with withholding tax.—If a
be deducted in computing ECTI but must 1.882-5, computed as of the end of the tax foreign corporation is subject to the branch
be deducted in computing ECEP (such as year, rather than as an average, as profits tax in a tax year, it will not be
Federal income taxes, capital losses in required under Regulations section subject to withholding at source (sections
excess of capital gains, and interest and 1.882-5. Special rules may apply to foreign 871(a), 881(a), 1441, or 1442) on dividends
expenses that are not deductible under insurance companies. See Regulations paid out of earnings and profits for the tax
section 265). section 1.884-1(e) for more details. year.
Note: Do not reduce ECEP by any Election to reduce liabilities.—If the
dividends or other distributions made by corporation is electing to reduce liabilities Part II—Tax on Excess Interest
the foreign corporation to its shareholders according to Regulations section If a foreign corporation is engaged in a
during the year. 1.884-1(e)(3), attach a statement that it is U.S. trade or business, has effectively
See Temporary Regulations section making the election and indicate the connected gross income, or has U.S.
1.884-2T for any adjustments to ECEP due amount of the reduction of U.S. liabilities assets for purposes of Regulations section
to a reorganization, liquidation, or and the corresponding reduction in interest 1.882-5, it is subject to the tax on excess
incorporation. expense. interest. Excess interest is the interest
Exceptions. Do not include the following Reporting requirements for schedules apportioned to effectively connected
types of income when computing ECEP: for lines 4a and 4b.—Report U.S. assets income of the foreign corporation
according to the categories of U.S. assets (including capitalized and nondeductible
1. Income from the operation of ships or interest) under Regulations section
in Regulations section 1.884-1(d).
aircraft exempt from taxation under section 1.882-5, less branch interest. Branch
883(a)(1) or (2). For U.S. liabilities, show the formula
used to calculate the U.S. liabilities figure. interest is the interest paid by the U.S.
2. FSC income and distributions treated trade or business of the foreign corporation
as effectively connected income under Line 6. Branch Profits Tax (including capitalized and other
section 921(d) or section 926(b) that are nondeductible interest).
not otherwise effectively connected Qualification for treaty benefits.—In
general, a foreign corporation must be a Corporations exempt from the tax on
income. excess interest.—See the instructions for
qualified resident (see Item X on page 19)
3. Gain on the disposition of an interest in the tax year in which it has a dividend line 10 below to determine if the foreign
in a domestic corporation that is a U.S. equivalent amount to obtain treaty benefits corporation is exempt. If it is exempt from
real property interest under section for the branch profits tax. It must also the tax, and not simply subject to a
897(c)(1)(A)(ii) if the gain is not otherwise meet the requirements of any limitation on reduced rate of tax, skip Part II of Section
effectively connected income. benefits article in the treaty. However, a III, but be sure to complete Items W and X
4. Related person insurance company foreign corporation is not required to be a at the bottom of page 5 of the form.
income that a taxpayer elects to treat as qualified resident if it meets the
effectively connected income under section Line 8. Branch Interest
requirements of a limitation on benefits
953(c)(3)(C) if the income is not otherwise article that entered into force after Foreign banks.—In general, branch
effectively connected income. December 31, 1986. Treaties other than interest of a foreign bank is limited to
5. Income that is exempt from tax under income tax treaties do not exempt a (a) interest paid for branch liabilities that
section 892. foreign corporation from the branch profits are reported to bank regulatory authorities;
tax. (b) interest paid for offshore shell
6. Interest income derived by a
Note: If a foreign corporation claims to be branches, if the U.S. branch performs
possession bank from U.S. obligations if
a qualified resident based on the two-part substantially all the activities required to
the interest is treated as effectively
stock ownership and base erosion test, a incur the liability; and (c) interest on
connected income under section 882(e)
special rule governs the period during liabilities that are secured predominantly by
and is not otherwise effectively connected
which it must be a qualified resident. (See U.S. assets or that cause certain
income.
the instructions for Item X.) nondeductible interest (such as capitalized
Note: Deductions and other adjustments interest) related to U.S. assets.
attributable (under the principles of Rate of tax.—If treaty benefits apply, the
rate of tax is the rate on branch profits All other foreign corporations.—In
Regulations section 1.861-8) to the types
specified in the treaty. If the treaty does general, branch interest of foreign
of income not includible in ECEP listed
not specify a rate for branch profits, the corporations (other than banks) includes
above do not reduce ECEP.
rate of tax is the rate specified in the treaty (a) interest on liabilities shown on the
Lines 4a and 4b. U.S. Net Equity for dividends paid by a wholly owned books and records of the U.S. trade or
domestic corporation to the foreign business for purposes of Regulations
U.S. net equity is U.S. assets reduced by section 1.882-5; (b) interest on liabilities
U.S. liabilities. U.S. net equity may be less corporation. See Regulations section
1.884-1(g) for applicable rates of tax. that are secured predominantly by U.S.
than zero. See Temporary Regulations assets or that cause certain nondeductible
section 1.884-2T for specific rules Benefits other than a rate reduction may
be available under certain treaties, such as interest (such as capitalized interest)
regarding the computation of the foreign related to U.S. assets; and (c) interest on
corporation’s U.S. net equity due to a the Canadian income tax treaty.
liabilities identified as liabilities of the U.S.
reorganization, liquidation, or incorporation. Effect of complete termination.—If the trade or business on or before the earlier
In general, property is a U.S. asset if all foreign corporation has completely of the date on which the first interest
income from its use and all gain from its terminated its U.S. trade or business payment is made or the due date
disposition (if used or sold on the last day (within the meaning of Temporary (including extensions) of the foreign
of the tax year) are or would be effectively Regulations section 1.884-2T(a)) during the corporation’s income tax return for the tax
connected income. The amount of property tax year, enter zero on line 6, and year. However, a liability may not be
taken into account as a U.S. asset is the complete Item V. In general, a foreign identified under (c) if the liability is incurred
adjusted basis (for purposes of computing corporation has terminated its U.S. trade in the ordinary course of the foreign
earnings and profits) of the property. or business if it no longer has any U.S. corporation’s trade or business, or if the
Special rules exist for specific types of assets, except those retained to pay off liability is secured predominantly by assets
property, such as depreciable property, liabilities. The foreign corporation (or a that are not U.S. assets. The interest on
inventory, and installment obligations. related corporation) may not use assets liabilities identified in (c) that will be treated
Special rules also exist to determine the from the terminated U.S. trade or business as interest paid by the U.S. trade or
amount of a partnership interest that is or the proceeds from their sale in a U.S. business is capped at 85% of the interest
treated as a U.S. asset. See Regulations trade or business within 3 years after the of the foreign corporation that would be
section 1.884-1(d). complete termination. excess interest before considering interest
In general, U.S. liabilities are on liabilities identified in (c) above. See
U.S.-connected liabilities of a foreign Regulations section 1.884-4.
Page 18
Interbranch interest.—Any interest paid these tests and certain circumstances in Active trade or business test. A foreign
for interbranch liabilities is disregarded in which a foreign corporation that does not corporation meets this test if it has a
computing branch interest of any meet these tests may obtain a ruling that it substantial presence in its country of
corporation. will be treated as a qualified resident. residence and its U.S. trade or business is
Eighty-percent rule.—If 80% or more of a Two-part ownership and base erosion an integral part of an active trade or
foreign corporation’s assets are U.S. test. A foreign corporation meets this test business conducted by the foreign
assets, the foreign corporation’s branch if (1) more than 50% of its stock (by value) corporation in its country of residence. See
interest will generally equal the interest is owned (directly or indirectly) during at Regulations section 1.884-5(e).
reported on line 7. However, any interest least half the number of days in the tax
included on line 7 that has accrued but year by qualifying shareholders, and
has not been paid will not be treated as (2) less than 50% of its income is used Schedules L, M-1, and M-2
branch interest on line 8 unless an election (directly or indirectly) to meet liabilities to
A foreign corporation may limit Schedules
is made under Regulations section persons who are not residents of such
L, M-1, and M-2 to:
1.884-4(c)(1) to treat such interest as paid foreign country or U.S. citizens or
in that year for all purposes of the Code. If residents. For this test, individuals resident 1. The corporation’s U.S. assets and its
this 80% rule applies, check the box on in the foreign country, U.S. citizens and other assets effectively connected with its
line 8. residents, governments of foreign U.S. trade or business and liabilities
countries, and foreign corporations that reported on its U.S. books and records;
Note: Branch interest of a foreign
meet the publicly traded test (described and
corporation is treated as if paid by a
domestic corporation. A foreign corporation later) are treated as qualifying 2. Its effectively connected income and
is thus required to withhold on interest paid shareholders. its other U.S. source income.
by its U.S. trade or business to foreign In general, stock owned by a Do not complete Schedules M-1 and
persons (unless the interest is exempt from corporation, partnership, trust, or estate is M-2 if total assets at the end of the tax
withholding under a treaty or the Code) treated as proportionately owned by the year (line 15, column (d) of Schedule L) are
and is required to file Forms 1042 and individual owners of such entities. less than $25,000.
1042-S for the payments as required under In order to satisfy the 50% stock
Regulations sections 1.1461-2 and ownership test described above, a foreign Schedule L—Balance Sheets
35a.9999-5. corporation must, before filing Form The balance sheet should agree with the
Caution: Special treaty shopping rules 1120-F for the tax year, obtain certain corporation’s books and records. Include
apply if the recipient of the interest paid by written documentation from the requisite certificates of deposit as cash on line 1,
the U.S. trade or business is a foreign number of its direct and indirect Schedule L.
corporation. shareholders to show that it meets the Line 5. Tax-exempt securities.—Include:
test, including a certificate of residency
Line 9b from each foreign individual resident 1. State and local government
signed by the Competent Authority of the obligations, the interest on which is
A foreign bank may treat a percentage of excludible from gross income under
its excess interest as if it were interest on individual’s country of residence. See
Regulations sections 1.884-5(a) through (c). section 103(a); and
deposits and thus exempt from tax.
Multiply the amount on line 9a by the If a foreign corporation is a qualified 2. Stock in a mutual fund or other
greater of 85% or the ratio of the foreign resident under this test and a portion of its regulated investment company that
bank’s worldwide interest-bearing deposits dividend equivalent amount for the tax year distributed exempt-interest dividends
to its worldwide interest-bearing liabilities is from ECEP earned in prior tax years, the during the tax year of the corporation.
as of the close of the tax year. foreign corporation will be entitled to treaty Schedule M-1
benefits for the entire dividend equivalent
Line 10. Tax on Excess Interest amount only if (a) the foreign corporation Reconciliation of Income or (Loss) per
The rate of tax on excess interest is the was a qualified resident for all tax years Books With Income per Return
same rate that would apply to interest paid within the 36-month period that includes
the tax year of the dividend equivalent Line 5c. Travel and entertainment
to the foreign corporation by a wholly expenses.—Include any of the following:
owned domestic corporation. The tax on amount, or (b) the foreign corporation was
excess interest is not prohibited by any a qualified resident for the tax year of the ● 50% of the meals and entertainment not
provision in any treaty to which the United dividend equivalent amount and for the allowed under section 274(n).
States is a party. The corporation may years in which the ECEP included in the ● Expenses for the use of an
qualify for treaty benefits if it meets certain dividend equivalent amount were earned. If entertainment facility.
requirements. See the instructions for line the foreign corporation fails the 36-month ● The part of business gifts over $25.
6 above and Item X below. The test but is a qualified resident for the tax
year, the portion of the dividend equivalent ● Expenses of an individual over $2,000,
corporation is exempt from the tax on which are allocable to conventions on
excess interest if the rate of tax that would amount for ECEP from any prior tax year
will not be entitled to treaty benefits if the cruise ships.
apply to interest paid to the foreign
corporation by a wholly owned domestic foreign corporation was not a qualified ● Employee achievement awards over
corporation is zero and the foreign resident for the tax year in which the ECEP $400.
corporation qualifies for treaty benefits. was earned. Thus, in some instances, ● The cost of entertainment tickets over
more than one rate of tax may apply to the face value (also subject to the 50%
dividend equivalent amount reported on disallowance under section 274(n)).
line 5, Section III. See Regulations section ● The cost of skyboxes over the face value
Additional Information 1.884-1(g)(2). of nonluxury box seat tickets.
Required Publicly traded test. A foreign corporation ● The part of the cost of luxury water
meets this test if (1) its stock is primarily travel not allowed under section 274(m).
Be sure to complete all additional and regularly traded on one or more
information on page 5 that applies to the ● Expenses for travel as a form of
established securities markets in its
corporation. education.
country of residence or the United States,
or (2) 90% or more of its stock is owned ● Other travel and entertainment expenses
Item X not allowed as a deduction.
(directly or indirectly) by another
Definition of qualified resident.—A corporation that meets the requirements of For more information, see Pub. 542.
foreign corporation is a qualified resident (1) and is a resident of the same country Line 7a. Tax-exempt interest.—Include
of a country if it meets one of the three or is a domestic corporation. See any exempt-interest dividends received as
tests explained below. See the regulations Regulations section 1.884-5(d). a shareholder in a mutual fund or other
under section 884 for detailed rules on regulated investment company.
Page 19
Codes for Principal Business Activity
These codes for the Principal Business Activity are industry group from which the largest percentage of activity is “Grain mill products,” the principal
designed to classify enterprises by the type of total receipts is derived. “Total receipts” means product or service may be “Cereal preparations.”
activity in which they are engaged to facilitate the gross receipts (line 1a, page 3) plus all other income If, as its principal business activity, the
administration of the Internal Revenue Code. (lines 4 through 10, page 3). corporation (1) purchases raw materials,
Though similar in format and structure to the Also, on page 1, under Question F, state the (2) subcontracts out for labor to make a finished
Standard Industrial Classification (SIC) codes, they principal business activity and principal product or product from the raw materials, and (3) retains title
should not be used as SIC codes. service that account for the largest percentage of to the goods, the corporation is considered to be a
Using the list below, enter on page 1, under total receipts. For example, if the principal business manufacturer and must enter one of the codes
Question F, the code number for the specific (2010 through 3998) under “Manufacturing.”

Agriculture, Forestry, and Code Transportation and Public Finance, Insurance, and Real
Fishing Chemicals and allied products: Utilities Estate
Code 2815 Industrial chemicals, plastics Code Code
materials and synthetics.
0400 Agricultural production. Transportation: Banking:
2830 Drugs.
0600 Agricultural services (except 4000 Railroad transportation. 6030 Mutual savings banks.
veterinarians), forestry, fishing, 2840 Soap, cleaners, and toilet goods.
4100 Local and interurban passenger 6060 Bank holding companies.
hunting, and trapping. 2850 Paints and allied products. transit. 6090 Banks, except mutual savings banks
Mining 2898 Agricultural and other chemical 4200 Trucking and warehousing. and bank holding companies.
products.
Metal mining: 4400 Water transportation. Credit agencies other than banks:
Petroleum refining and related industries
1010 Iron ores. (including those integrated with 4500 Transportation by air. 6120 Savings and loan associations.
1070 Copper, lead and zinc, gold and extraction): 4600 Pipe lines, except natural gas. 6140 Personal credit institutions.
silver ores. 2910 Petroleum refining (including 4700 Miscellaneous transportation 6150 Business credit institutions.
1098 Other metal mining. integrated). services.
6199 Other credit agencies.
1150 Coal mining. 2998 Other petroleum and coal products. Communication:
Security, commodity brokers and
Oil and gas extraction: Rubber and misc. plastics products: 4825 Telephone, telegraph, and other services:
communication services.
1330 Crude petroleum, natural gas, and 3050 Rubber products, plastics footwear, 6210 Security brokers, dealers, and
natural gas liquids. hose and belting. 4830 Radio and television broadcasting. flotation companies.
1380 Oil and gas field services. 3070 Miscellaneous plastics products. Electric, gas, and sanitary services: 6299 Commodity contracts brokers and
Leather and leather products: 4910 Electric services. dealers; security and commodity
Nonmetallic minerals, except fuels: exchanges; and allied services.
3140 Footwear, except rubber. 4920 Gas production and distribution.
1430 Dimension, crushed and broken
stone; sand and gravel. 4930 Combination utility services. Insurance:
3198 Other leather and leather products.
1498 Other nonmetallic minerals, except 4990 Water supply and other sanitary 6355 Life insurance.
Stone, clay, and glass products: services.
fuels. 6356 Mutual insurance, except life or
3225 Glass products. marine and certain fire or flood
Construction 3240 Cement, hydraulic. Wholesale Trade insurance companies.
General building contractors and 3270 Concrete, gypsum, and plaster Durable: 6359 Other insurance companies.
operative builders: products. 5008 Machinery, equipment, and supplies. 6411 Insurance agents, brokers, and service.
1510 General building contractors. 3298 Other nonmetallic mineral products. 5010 Motor vehicles and automotive Real estate:
1531 Operative builders. Primary metal industries: equipment. 6511 Real estate operators and lessors of
1600 Heavy construction contractors. 3370 Ferrous metal industries; misc. 5020 Furniture and home furnishings. buildings.
Special trade contractors: primary metal products. 5030 Lumber and construction materials. 6516 Lessors of mining, oil, and similar
1711 Plumbing, heating, and air conditioning. 3380 Nonferrous metal industries. 5040 Sporting, recreational, photographic, property.
1731 Electrical work. Fabricated metal products: and hobby goods, toys and supplies. 6518 Lessors of railroad property and
5050 Metals and minerals, except other real property.
1798 Other special trade contractors. 3410 Metal cans and shipping containers.
petroleum and scrap. 6530 Condominium management and
3428 Cutlery, hand tools, and hardware;
Manufacturing screw machine products, bolts, and 5060 Electrical goods. cooperative housing associations.
Food and kindred products: similar products. 5070 Hardware, plumbing and heating 6550 Subdividers and developers.
2010 Meat products. 3430 Plumbing and heating, except equipment and supplies. 6599 Other real estate.
2020 Dairy products. electric and warm air. 5098 Other durable goods. Holding and other investment companies,
3440 Fabricated structural metal products. Nondurable: except bank holding companies:
2030 Preserved fruits and vegetables.
3460 Metal forgings and stampings. 5110 Paper and paper products. 6744 Small business investment companies.
2040 Grain mill products.
2050 Bakery products. 3470 Coating, engraving, and allied services. 5129 Drugs, drug proprietaries, and 6749 Other holding and investment
3480 Ordnance and accessories, except druggists’ sundries. companies except bank holding
2060 Sugar and confectionary products. companies.
vehicles and guided missiles. 5130 Apparel, piece goods, and notions.
2081 Malt liquors and malt.
2088 Alcoholic beverages, except malt
3490 Misc. fabricated metal products. 5140 Groceries and related products. Services
liquors and malt. Machinery, except electrical: 5150 Farm-product raw materials. 7000 Hotels and other lodging places.
2089 Bottled soft drinks, and flavorings. 3520 Farm machinery. 5160 Chemicals and allied products. 7200 Personal services.
2096 Other food and kindred products. 3530 Construction and related machinery. 5170 Petroleum and petroleum products. Business services:
2100 Tobacco manufacturers. 3540 Metalworking machinery. 5180 Alcoholic beverages. 7310 Advertising.
Textile mill products: 3550 Special industry machinery. 5190 Miscellaneous nondurable goods. 7389 Business services, except advertising.
2228 Weaving mills and textile finishing. 3560 General industrial machinery. Auto repair; miscellaneous repair services:
3570 Office, computing, and accounting Retail Trade 7500 Auto repair and services.
2250 Knitting mills.
machines. Building materials, garden supplies, and
2298 Other textile mill products. 7600 Misc. repair services.
3598 Other machinery except electrical. mobile home dealers:
Apparel and other textile products: 5220 Building materials dealers. Amusement and recreation services:
Electrical and electronic equipment:
2315 Men’s and boys’ clothing. 5251 Hardware stores. 7812 Motion picture production,
3630 Household appliances. distribution, and services.
2345 Women’s and children’s clothing. 5265 Garden supplies and mobile home
3665 Radio, television, and communication 7830 Motion picture theaters.
2388 Other apparel and accessories. equipment. dealers.
2390 Miscellaneous fabricated textile 5300 General merchandise stores. 7900 Amusement and recreation services,
3670 Electronic components and except motion pictures.
products. accessories. Food stores:
Lumber and wood products: Other services:
3698 Other electrical equipment. 5410 Grocery stores.
2415 Logging, sawmills, and planing mills. 8015 Offices of physicians, including
3710 Motor vehicles and equipment. 5490 Other food stores. osteopathic physicians.
2430 Millwork, plywood, and related Transportation equipment, except motor Automotive dealers and service stations:
products. 8021 Offices of dentists.
vehicles: 5515 Motor vehicle dealers.
2498 Other wood products, including 8040 Offices of other health practitioners.
3725 Aircraft, guided missiles and parts. 5541 Gasoline service stations.
wood buildings and mobile homes. 8050 Nursing and personal care facilities.
3730 Ship and boat building and repairing. 5598 Other automotive dealers.
2500 Furniture and fixtures. 8060 Hospitals.
3798 Other transportation equipment, 5600 Apparel and accessory stores.
Paper and allied products: except motor vehicles. 8071 Medical laboratories.
2625 Pulp, paper, and board mills. 5700 Furniture and home furnishings 8099 Other medical services.
Instruments and related products: stores.
2699 Other paper products. 8111 Legal services.
3815 Scientific instruments and measuring 5800 Eating and drinking places.
Printing and publishing: devices; watches and clocks. 8200 Educational services.
Misc. retail stores: 8300 Social services.
2710 Newspapers. 3845 Optical, medical, and ophthalmic
goods. 5912 Drug stores and proprietary stores. 8600 Membership organizations.
2720 Periodicals.
3860 Photographic equipment and 5921 Liquor stores. 8911 Architectural and engineering services.
2735 Books, greeting cards, and supplies.
miscellaneous publishing. 5995 Other retail stores. 8930 Accounting, auditing, and bookkeeping.
2799 Commercial and other printing, and 3998 Other manufacturing products. 8980 Miscellaneous services (including
printing trade services. veterinarians).

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