1120[1].Sup

2006 Schedule N (Form 1120), Foreign Operations of U.S. Corporations

Purpose: This is the first circulated draft of the 2006 Schedule N (Form 1120) for

your review and comments. See below for a discussion of the major changes.

TPCC Meeting: None, but may be arranged if requested.

Other Products: Circulations of draft tax forms, instructions, notices, and

publications are posted at: http://taxforms.web.irs.gov/draft_products.html

Comments: Please email, fax, call, or mail any comments by June 20, 2006.

Clarence Light

Tax Forms and Publications

SE:W:CAR:MP:T:B:C

Email: [email protected]

Phone: 202-622-3096

Fax: 202-622-3262

Major Change to 2006 Schedule N (Form 1120)

On page 1, we modified line 1a and the related instructions to clarify the

circumstances under which a corporation is required to attach Form 8858.

Draft as of

03/29/2006

1

I.R.S. SPECIFICATIONS

TO BE REMOVED BEFORE PRINTING

DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

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INSTRUCTIONS TO PRINTERS

SCHEDULE N (FORM 1120), PAGE 1 OF 2

MARGINS; TOP 13mm (

1

⁄

2

"), CENTER SIDES. PRINTS: HEAD TO HEAD

PAPER: WHITE WRITING, SUB. 20.

INK: BLACK

FLAT SIZE: 216mm (8

1

⁄

2

") x 279mm (11")

PERFORATE: NONE

SCHEDULE N

(Form 1120)

Department of the Treasury

Internal Revenue Service

Foreign Operations of U.S. Corporations

©

Attach to Form 1120, 1120-IC-DISC, 1120-L,

1120-PC, 1120-REIT, 1120-RIC, or 1120S.

OMB No. 1545-0123

Name

Employer identification number (EIN)

Foreign Operations Information

Yes

No

1a

During the tax year, did the corporation own (directly or indirectly) any foreign entity that was disregarded as

an entity separate from its owner under Regulations sections 301.7701-2 and 301.7701-3 (see instructions)?

If “Yes,” you are generally required to attach Form 8858, Information Return of U.S. Persons With Respect to

Foreign Disregarded Entities, for each foreign disregarded entity (see instructions).

2

Enter the number of Forms 8865, Return of U.S. Persons With Respect to Certain Foreign

Partnerships, attached to the corporation’s income tax return

©

3

Excluding any partnership for which a Form 8865 is attached to the tax return, did the corporation own at least

a 10% interest, directly or indirectly, in any other foreign partnership (including an entity treated as a foreign

partnership under Regulations section 301.7701-2 or 301.7701-3)?

If “Yes,” see instructions for required attachment.

4a

Was the corporation a U.S. shareholder of any controlled foreign corporation (CFC)? (See sections 951 and 957.)

If “Yes,” attach Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations,

for each CFC.

b

Enter the number of Forms 5471 attached to the tax return

©

5

During the tax year, did the corporation receive a distribution from, or was it the grantor of, or transferor to, a

foreign trust?

If “Yes,” the corporation may have to file Form 3520, Annual Return To Report Transactions With Foreign Trusts

and Receipt of Certain Foreign Gifts.

6a

At any time during the 2006 calendar year, did the corporation have an interest in or a signature or other authority

over a financial account (such as a bank account, securities account, or other financial account) in a foreign

country?

See the instructions for exceptions and filing requirements for Form TD F 90-22.1, Report of Foreign Bank and

Financial Accounts.

b

If “Yes,” enter the name of the foreign country

©

Instructions

Section references are to the Internal Revenue Code unless

otherwise noted.

For Privacy Act and Paperwork Reduction Act Notice, see the Instructions for Forms 1120 and 1120-A.

Cat. No. 26294K

Schedule N (Form 1120) 2006

Who Must File

Corporations that, at any time during the tax year, had assets

in or operated a business in a foreign country or a U.S.

possession may have to file Schedule N. If the corporation

answers “Yes” to any of the questions above, attach

Schedule N and the applicable forms and schedules to the

corporation’s income tax return.

7a

Is the corporation claiming the extraterritorial income exclusion?

If “Yes,” attach a separate Form 8873, Extraterritorial Income Exclusion, for each transaction or group of

transactions.

b

Enter the number of Forms 8873 attached to the tax return

©

Enter the total of the amounts from line 54 (extraterritorial income exclusion (net of

disallowed deductions)) of all Forms 8873 attached to the tax return

©

c

$

b

Enter the number of Forms 8858 attached to the tax return

©

Question 1a

Check the “Yes” box if the corporation is the “tax owner”

(defined below) of a foreign disregarded entity (FDE) or it is

A corporation that is the tax owner of an FDE is generally

required to attach Form 8858 to its return. However, if the

Exception below applies, the corporation should attach a

statement (described below) in lieu of Form 8858.

Tax owner of an FDE. The tax owner of an FDE is the

person that is treated as owning the assets and liabilities of

the FDE for purposes of U.S. income tax law.

required to file Form 5471 or Form 8865 with respect to a

CFC or a CFP that is the tax owner of an FDE.

Exception. In certain cases where a corporation owns an

FDE indirectly or constructively through a foreign entity, the

corporation may not be required to attach Form 8858. See

Who Must File on page 1 of the instructions for Form 8858.

20

06

Draft as of

03/29/2006

1

I.R.S. SPECIFICATIONS

TO BE REMOVED BEFORE PRINTING

DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

INSTRUCTIONS TO PRINTERS

SCHEDULE N (FORM 1120), PAGE 2 OF 2

MARGINS; TOP 13mm (

1

⁄

2

"), CENTER SIDES. PRINTS: HEAD TO HEAD

PAPER: WHITE WRITING, SUB. 20.

INK: BLACK

FLAT SIZE: 216mm (8

1

⁄

2

") x 279mm (11")

PERFORATE: NONE

Schedule N (Form 1120) 2006

Page

2

● The combined value of the accounts was more than

$10,000 at any time during the calendar year and

● The account was not with a U.S. military banking facility

operated by a U.S. financial institution.

2. The corporation owns more than 50% of the stock in any

corporation that would answer “Yes” to item 1 above.

● File Form TD F 90-22.1 on or before June 30, 2007, with

the Department of the Treasury at the address shown on the

form. Because Form TD F 90-22.1 is not a tax form, do not

file it with the corporation’s tax return. You can order Form

TD F 90-22.1 by calling 1-800-TAX-FORM (1-800-829-3676)

or you can download it from the IRS website at

www.irs.gov.

If “Yes” is checked for this question:

Question 6

Check the “Yes” box if either 1 or 2 below applies to the

corporation. Otherwise, check the “No” box.

1. At any time during the 2006 calendar year, the

corporation had an interest in or signature or other authority

over a bank, securities, or other financial account in a foreign

country (see Form TD F 90-22.1) and:

● Enter the name of the foreign country or countries (attach

a separate sheet if more space is needed) and

3. Name of the tax matters partner (if any).

4. Beginning and ending dates of the foreign partnership’s

tax year.

Question 5

The corporation may be required to file Form 3520 if:

● It directly or indirectly transferred money or property to a

foreign trust (for this purpose, any U.S. person who created a

foreign trust is considered a transferor),

● It is treated as the owner of any part of the assets of a

foreign trust under the grantor trust rules, or

● It received a distribution from a foreign trust.

For more information, see the Instructions for Form 3520.

Note. An owner of a foreign trust must ensure that the trust

files an annual information return on Form 3520-A, Annual

Information Return of Foreign Trust With a U.S. Owner. For

details, see Form 3520-A.

2. Identify which, if any, of the following forms the foreign

partnership filed for its tax year ending with or within the

corporation’s tax year: Form 1042, 1065 or 1065-B, or 8804.

Question 3

If the corporation owned at least a 10% interest, directly or

indirectly, in any foreign partnership (other than any

partnership for which a Form 8865 is attached to the tax

return), attach a statement listing the following information

for each foreign partnership. For this purpose, a foreign

partnership includes an entity treated as a foreign

partnership under Regulations section 301.7701-2 or

301.7701-3.

1. Name and EIN (if any) of the foreign partnership.

Question 3

If the corporation owned at least a 10% interest, directly or

indirectly, in any foreign partnership (other than any

partnership for which a Form 8865 is attached to the tax

return), attach a statement listing the following information

for each foreign partnership. For this purpose, a foreign

partnership includes an entity treated as a foreign

partnership under Regulations section 301.7701-2 or

301.7701-3.

1. Name and EIN (if any) of the foreign partnership.

Question 3

If the corporation owned at least a 10% interest, directly or

indirectly, in any foreign partnership (other than any

partnership for which a Form 8865 is attached to the tax

return), attach a statement listing the following information

for each foreign partnership. For this purpose, a foreign

partnership includes an entity treated as a foreign

partnership under Regulations section 301.7701-2 or

301.7701-3.

1. Name and EIN (if any) of the foreign partnership.

Statement in lieu of Form 8858. This statement must list

the name, country under whose laws the entity was

organized, and EIN (if any) of each applicable FDE.