Form 5735 Possessions Corporation Tax Credit

Form

5735

Possessions Corporation Tax Credit
䊳

Department of the Treasury
Internal Revenue Service

For calendar year 20

OMB No. 1545-0217

(Under Sections 936 and 30A)

(Rev. April 2003)

䊳

See separate instructions.
Attach to the corporation’s tax return.

, or other tax year beginning

, 20

, and ending

, 20

.

Employer identification number

Name

Part I

Gross Income in Applicable Period (See instructions.)

Tax year (Use a separate line for each tax year
ending with or within your applicable period. Start
with the earliest such tax year.)
(a)
Beginning

(c)
Name of U.S. possession in which trade or
business was actively conducted

(b)
Ending

Periods in which trade or business was actively
conducted in a U.S. possession (Dates are
inclusive)
(d)
From

(e)
To

Gross income during periods shown in columns (d) and (e)
Gross income from the active conduct of a trade or business in a U.S. possession
(g)
From all other sources
outside the U.S.

(h)
From sources in
the U.S.

(i)
Gross qualified
possession source
investment income
(QPSII) (see instructions)

All other gross income
(j)
From sources in U.S.
possessions

(k)
From all other sources
outside the U.S.

(l)
From sources in the
U.S.

Totals

(f)
From sources in U.S.
possessions

1
2
3
4
5

Total gross income in applicable period (add totals of columns (f) through (l))
Gross income in applicable period from sources in U.S. possessions (add total of columns (f), (i), and (j))
Divide line 2 by line 1. If less than 80%, stop here. The possessions tax credit is not allowed
Gross income from the active conduct of a trade or business in a U.S. possession (total of
columns (f), (g), and (h))
Divide line 4 by line 1. If less than 75%, stop here. The possessions tax credit is not allowed

Part II

Qualified gross income in current year:
a From sources outside the U.S. from the active conduct of a trade or business in a
U.S. possession
b From sources outside the U.S. from the sale or exchange of substantially all assets
used in a possessions trade or business
c Total active business income. Add lines 6a and 6b
d Enter gross qualified possession source investment income

7a
b
c
d
e

Amounts received in the U.S
Intangible property income (section 936(h)(2))
Other intangible property income
Add lines 7a, 7b, and 7c
Subtract line 7d, column A from line 6c, column A.
Subtract line 7d, column B from line 6d, column B.

8

Applicable deductions
Cost sharing amount
Definitely allocable deductions
Ratable part of other deductions not definitely allocable
Add lines 8a, 8b, and 8c

9

4
5

Taxable Income From Possession Sources (See instructions.)
When completing Part II, do not take into account any deduction for possession income taxes.

6

a
b
c
d

1
2
3

A
Active Business
Income

B
Gross QPSII
(see instructions)

其

Qualified taxable income before adjustments. Subtract line 8d from line 7e

For Paperwork Reduction Act Notice, see separate instructions.

Cat. No. 12090G

Form

5735

(Rev. 4-2003)

Form 5735 (Rev. 4-2003)

Part II

Adjustments
Current year losses from nonqualified sources
Recapture of prior year overall foreign losses
Income against which foreign tax credit is claimed
Add lines 10a through 10c

11

Qualified taxable income. Subtract line 10d from line 9. Caution: Do not enter
more than the corporation’s adjusted base period income in column A (see
instructions)
Total taxable income from all sources (enter taxable income from the corporation’s
䊳
tax return)
For each column, divide line 11 by line 12. Enter result as a decimal
Total U.S. income tax against which possessions credit is allowed 䊳
For each column, multiply line 14 by line 13

13
14
15

Part III

2

Taxable Income From Possession Sources (continued)

10
a
b
c
d

12

Page
A
Active Business
Income

B
Gross QPSII
(see instructions)

Possessions Credit Using the Percentage Limitation Method (See instructions.)

If the corporation elects to claim a reduced credit under section 936(a)(4)(B), check here and complete Part III. Skip Part IV and
䊳
go to Part V, line 28
16
16 Multiply line 15, column A, by 40%
17 Possessions credit. Add line 15, column B, and line 16. Enter here and on Form 1120,
Schedule J, line 6b, or the appropriate line of other returns
17

Part IV

Possessions Credit Using the Economic-Activity Limitation Method (See instructions.)

18 Enter 60% of qualified compensation
19 Enter applicable portion of depreciation deductions
20 Add lines 18 and 19
21 Subtract line 20 from line 15, Column A
22 Divide line 21 by line 14. Enter the result as a decimal
Note: If the corporation used the profit split method, skip lines 23 and 24. Enter the amount from line
20 on line 25. Complete the rest of Part IV and go to Part V, line 32. If the corporation did not use the
profit split method, complete lines 23 through 27; skip Part V and go to Part VI.

18
19
20
21
22

23
24
25
26
27

23
24
25
26

Enter possession income taxes (but not more than 9% of taxable income)
Possession taxes allocable to nonsheltered income. Multiply line 23 by line 22
Add lines 20 and 24
Economic-activity limitation. Enter the smaller of line 15, column A, or line 25
Possessions credit. Add line 15, column B, and line 26. Enter the result here and on Form 1120,
Schedule J, line 6b, or the appropriate line of other returns

Part V

27

Deduction For Possession Income Taxes (See instructions.)

Note: Complete Part V only if the corporation is electing the percentage limitation (reduced credit), or
the corporation is using the economic-activity limitation and the profit split method.
Corporations Using Percentage Limitation (Reduced Credit)
28 Subtract line 16 from line 15, Column A
29 Divide line 28 by line 14. Enter the result as a decimal
30 Enter possession income taxes
31 Deduction for possession income taxes. Multiply line 30 by line 29. Include the result on Form
1120, page 1, line 17, or the applicable line of other returns
Corporations Using the Economic-Activity Limitation and the Profit Split Method
32 Enter possession income taxes
33 Deduction for possession income taxes. Multiply line 32 by line 22. Include the result on Form
1120, page 1, line 17, or the applicable line of other returns

Part VI
34
a
b
35
a
b
c
d
e

28
29
30
31
32
33

Summary From Schedule P (Form 5735) (See instructions.)

Enter the total sales of possession products to which each income method applies:
Cost sharing method
Profit split method
Enter the total sales of possession products that qualify under each business presence test:
Direct labor test
Value-added test
Alternative test
Start-up test
None of the above

34a
34b
35a
35b
35c
35d
35e