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(Form 1120-FSC)
OMB No. 1545-0935
(Rev. December 2006) For amount reported on line , Schedule , Form 1120-FSC.
Department of the Treasury
Internal Revenue Service © Attach Schedule P to Form 1120-FSC.
Name as shown on Form 1120-FSC Employer identification number
Format of tabular schedules. If a supplier’s cost of goods sold, and the same controlled group and the related
tabular schedule is attached to Schedule supplier’s and the FSC’s supplier) for any other sale, or group of
P, the schedule must: noninventoriable costs that relate to the sales, during the tax year that falls
● Be in spreadsheet or similar format; foreign trading gross receipts. See within the same NAICS code (or, if
● List the taxpayer’s name and EIN on Regulations section 1.471-11(c)(2)(ii). applicable, SIC code) as the subject
each numbered page; Also see Temporary Regulations section sale.
1.925(a)-1T(c)(6)(iii) for special rules
● Be formatted in columns that regarding gross receipts and total costs. Section B–23% of Combined
correspond to items A, C, and each line Taxable Income Method
item in Parts I, II, and III of Schedule P; Line 2b. Include an apportionment of
deductions that are not definitely Under this method, the related supplier
and figures an allowable transfer price to
allocable, such as interest expense and
● Show totals in each column. stewardship expenses. See Temporary charge the FSC (or an allowable
Item C–Principal Business Activity Regulations sections 1.861-11T(f) and commission to pay to the FSC) so that
Code. If applicable, use the list of 1.861-14T(f) for details on the the FSC will profit on the sale.
Principal Business Activity codes on the apportionment. The profit is limited to 23% of the
last page of the Instructions for Form FSC’s and the supplier’s combined
1120-FSC to group activities. Enter the Marginal Costing
taxable income attributable to the
six-digit number that relates to the Under the marginal costing rules, the foreign trading gross receipts from the
corresponding product or product line combined taxable income of the FSC sale. Also see item 3 (regarding
reported in item A. and its related supplier is figured by incomplete transactions) under When
Note. If the FSC used the SIC codes for subtracting from foreign trading gross Not To File on page 2.
Schedule P in prior tax years, it may receipts the direct material and direct
continue using the SIC codes for the labor costs of producing a particular Section C–1.83% of Foreign
current tax year. item, product, or product line. See Trading Gross Receipts Method
Regulations section 1.471-11(b)(2)(ii). Under this method, the related supplier
Part I The combined taxable income also may figures an allowable transfer price to
be limited to the overall profit charge the FSC (or an allowable
Section A–Combined Taxable percentage (line 10) multiplied by the line commission to pay to the FSC) so that
Income 4 foreign trading gross receipts. the FSC will profit on the sale.
Under the administrative pricing rules, See Temporary Regulations section The profit is limited to 1.83% of the
the methods discussed below may be 1.925(b)-1T for more information on the FSC’s foreign trading gross receipts. It is
used in the same tax year of the FSC for marginal costing rules. Also see section further limited to twice the profit
separate transactions (or separate 1.925(a)-1T for information on the determined under either (a) the 23% of
groups of transactions). transfer pricing rules. combined taxable income method or
Full Costing Limit on FSC Income (No-loss Rules) (b) the marginal costing rules (described
Foreign trading gross receipts are the If there is a combined loss on a above). Also see item 3 (regarding
gross receipts of a FSC (other than a transaction or group of transactions, the incomplete transactions) under When
small FSC) that has met the foreign FSC may not earn a profit under either Not To File on page 2.
management and foreign economic the 23% method or the 1.83% method.
process rules. The receipts must be Under the 1.83% method, the FSC’s
Part II
from the sale, lease, or rental of export profit on line 17 may not exceed the full Line 20. If the transfer price from the
property for use outside the United costing combined taxable income related supplier to the FSC is entered on
States or for engineering or architectural reported on line 3. The related supplier more than one line on Form 1120-FSC,
services for a construction project may, however, set a transfer price or attach an explanation indicating the
located outside the United States. For rental payment or pay a commission in portion of line 20 that applies to each
details, see section 924 and Foreign an amount that will enable the FSC to line.
Trading Gross Receipts in the recover its costs, if any, even if the
Instructions for Form 1120-FSC. result is a loss for the related supplier. Part III
If the FSC is the principal in the sale If the FSC recognizes income while Line 23. If the FSC commission from the
of export property, the combined taxable the related supplier recognizes a loss on related supplier is entered on more than
income of the FSC and its related a sale under the section 482 method, one line on Form 1120-FSC, attach an
supplier is the excess of the FSC’s neither the 23% method nor the 1.83% explanation indicating the portion of line
foreign trading gross receipts from the method may be used by the FSC and 23 that applies to each line.
sale over the total costs of the FSC and the related supplier (or by a FSC in the
related supplier. These costs include the