Schedule K (Form 1118) - Foreign Tax Carryover Reconciliation Schedule

Instructions for Schedule K
(Form 1118)
(Rev. December 2009)
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
Purpose of Schedule
Schedule K (Form 1118) is used to
reconcile the corporation’s prior year
foreign tax carryover with its current year
foreign tax carryover. Corporations are
thus reporting running balances of their
foreign tax carryovers showing all activity
since the filing of the prior year income
tax return.
included
Lines 1 through 3. On these lines, the
corporation computes its adjusted foreign
tax carryover from the prior tax year
which is available for credit in the current
tax year. The line 3 total is entered on
Form 1118, Schedule B, Part II, line 5.
Line 4. If the corporation has a current
year excess limitation (defined below),
some or all of the line 3 adjusted foreign
tax carryover amount will be utilized in the
current tax year. This activity is shown on
line 4 of the Schedule K (Form 1118).
Lines 5 through 8. If the corporation
has current year excess foreign taxes
(defined below), none of the line 3 HD5
adjusted foreign tax carryover amount will
be utilized in the current tax year. If the
corporation has any remaining carryover
from the 10th preceding tax year, this
carryover amount will expire unused. This
activity is shown on line 5 of the Schedule
K (Form 1118). Furthermore, the
corporation will generate a foreign tax
carryover in the current tax year which
can be carried back to the prior tax year
and/or carried forward to future tax years
(see Carryback and Carryforward of
Excess Foreign Taxes in the instructions
for Form 1118 for details). This activity is
shown on lines 6 through 8 of the
Schedule K (Form 1118).

Who Must File
With respect to each separate category of
income, any corporation that has a
foreign tax carryover in the prior tax year
or in the current tax year or both must file
Schedule K (Form 1118) for that separate
category of income.

Definitions
Excess limitation. If the corporation’s
foreign tax credit limitation (Schedule B,
Part II, line 11) exceeds its foreign taxes
available for credit (the sum of Schedule
B, Part II, lines 1 through 4), the
corporation has excess limitation.

Department of the Treasury
Internal Revenue Service

of the 2010 Schedule K

Excess foreign taxes. If the
corporation’s foreign taxes available for
credit (the sum of Schedule B, Part II,
lines 1 through 4) exceed its foreign tax
credit limitation (Schedule B, Part II, line
11), the corporation has excess foreign
taxes.
HD5

Specific Instructions
Important: All information reported on
Schedule K (Form 1118) must be in
English. All amounts must be stated in
U.S. dollars.
HD5
Checkboxes at top of page 1.
Complete Schedule K separately for each
category of income. Check the box for the
category of income for which this
schedule is being completed.
Line 1. Foreign tax carryover from the
prior tax year. Enter on line 1 the
amount from line 6 of the worksheet on
page 2 of these instructions.
Line 2. Adjustments to line 1. Report
on lines 2a, 2b, 2c, 2d, etc. any
adjustments resulting from events that
occurred between the filing of the prior
year tax return and the filing of the current
year tax return.
Line 2a. Carryback adjustment. Enter
on line 2a, column (xii) the difference
between any estimated carryback amount
you may have used on your prior year
carryover schedule (i.e., the equivalent of
any estimated carryback amount that
would have been entered on line 7,
column (xiii) of the Schedule K (Form
1118) had that schedule existed last year)
and the actual carryback amount. delete
Example. In the 2009 tax year,
Corporation A has excess foreign taxes of
$100 (i.e., the sum of lines 1 through 4 of
Form 1118, Schedule B, Part II exceeds
Form 1118, Schedule B, Part II, line 11 by
$100) entered on Schedule K (Form
1118), line 6. Corporation A enters $20 on
line 7 as the estimated amount of line 6 to
be carried back to the 2008 tax year.
Corporation A enters $80 on line 8 as the
carryover amount for following years. The
actual carryback amount to the 2008 tax
year is later determined to be $15. In the
2010 tax year, Corporation A enters $80
on line 1, column (xii) as the carryover
from the 2009 tax year, corresponding to
the amount entered on line 8, column (xiii)
of the Schedule K filed for the 2009 tax
year. Because the estimated carryback
amount of $20 from the 2009 tax year to
the 2008 tax year (entered on line 7 of the
Schedule K filed for the 2009 tax year)
exceeds the actual carryback of $15, on
Cat. No. 52009v

the Schedule K for the 2010 tax year,
Corporation A enters the $5 excess ($20 $15) on line 2a as a positive number.
Assuming no other adjustments are
needed, the total carryover amount from
2009 entered on line 3, column (xii) will
be $85 ($80 + $5).
Line 2b. Adjustments for section
905(c) redeterminations. Enter on line
2b any adjustments needed for section
905(c) redeterminations. See Foreign
Tax Credit Redeterminations in the
instructions for Form 1118 for additional
information.
Lines 2c, 2d, 2e, etc. Include on these
additional lines the following types of
adjustments needed to reflect:
• Carryovers gained or lost due to
reorganizations of the corporation’s
controlled/consolidated group.
• Domestic audit adjustments.
• Any other adjustments needed to
properly reflect the total carryover amount
from the prior tax year that is available for
credit in the current tax year.
Note. Be sure to enter a brief description
of each applicable adjustment item
immediately after the lower case letter in
the first column of the schedule.
Line 3. Adjusted foreign tax carryover
from prior tax year. Combine lines 1
and 2. Include the line 3, column (xiv)
total on Form 1118, Schedule B, Part II,
line 5. This total amount is the adjusted
carryover amount from the prior tax year.
It is the combined on Schedule B, Part II,
line 5 with carrybacks into the current tax
year to determine the total amount of
foreign taxes that are available for credit
in the current tax year.
Line 4. Foreign tax carryover utilized in
current tax year. With respect to a
given separate limitation, line 4 is
completed only if the corporation has a
current year excess limitation (defined
above).
Enter in each column the foreign tax
carryover utilized in the current tax year.
Starting with column (i), the amount to be
entered on line 4 of a given column will be
the amount on line 1 of that column, but
only to the extent that it does not exceed:
• The amount of the current year excess
limitation (i.e., the amount by which Form
1118, Schedule B, line 11 exceeds the
sum of lines 1 through 4 of Form 1118,
Schedule B, Part II), less
• The sum of all amounts entered in all
previous columns of line 4.
Example. For the current tax year,
Corporation A has an excess limitation of
$250 (i.e., Form 1118, Schedule B, Part
II, line 11 exceeds the sum of lines 1
(defined above)

through 4 of Form 1118, Schedule B, Part
II by $250). The amount on line 1, column
(i) is $80. The amount on line 1, column
(ii) is $60. The amount on line 1, column
(iii) is $130. The amount on line 1 of all
subsequent columns is irrelevant for
purposes of this example. Corporation A
enters $80 on line 4, column (i); $60 on
line 4, column (ii), $110 on line 4, column
(iii), the $250 subtotal on the line 4,
column (vii), the $250 subtotal on line 4,
column (viii), and the $250 total on line 4,
column (xiv).

!

CAUTION

The line 4, column (xiv) total
cannot exceed the amount of the
current year excess limitation.

Line 5. Foreign tax carryover expired
unused in current tax year. Line 5 is
completed only with respect to the 10th
preceding tax year (and the “Subtotal”
and “Totals” columns). For the 10th
preceding tax year (column (i)), subtract
line 4 from line 3 and enter the result on
line 5, column (i).

Note. With respect to a given separate
limitation, line 5 is generally completed
only if the corporation has current year
excess foreign taxes (defined above).
Line 6. Foreign tax carryover
generated in current tax year. With
respect to a given separate limitation, line
6 is completed only if the corporation has
current year excess foreign taxes (defined
above). Enter in column (xiii) (the current
tax year column) the amount of the
corporation’s unused foreign tax for the
current tax year (i.e., the amount by which
the sum of lines 1 through 4 of Form
1118, Schedule B, Part II, exceeds the
amount on Form 1118, Schedule B, Part
II, line 11). Also enter the same amount in
the “Totals” column (column (xiv)).
Line 7. Actual or estimated amount of
line 6 carried back to the prior tax year.
Enter the amount of line 6 carried back to
the first preceding tax year. If, at the time
the corporation files its 2009 income tax
return, the actual amount is not available,

an estimated or tentative amount may be
entered on line 7. If an estimated amount
is entered on line 7 and this amount
differs from the actual carryback amount,
the difference will be entered on line 2a of
the subsequent year Schedule K (Form
1118).
Note. In order to carry back amounts to
the first preceding tax year, that first
preceding tax year must be an excess
limitation year (as defined on page 1).
Note. When this line 7 carryback amount
is subtracted from line 6, the difference is
the amount of the foreign tax carryover
generated in the current tax year which
will be carried forward to the subsequent
tax year.

Additional Information
For more information, see section 904(c)
and Regulations section 1.904-2 and
Temporary Regulations section 1.904-2T.

5.

Line 1. Reconciliation Worksheet
Caution: This worksheet is to be completed only for purposes of computing the amounts to be entered on line 1 of the corporation’s Schedule K
(Form 1118) for its tax year beginning in 2009.
(i)
Tax year
beginning
in 1998

1

For each column, enter the
applicable portion of the amount
from Schedule B, Part II, line 5 of
the corporation’s Form 1118 for
its tax year beginning in 2008.

2

Foreign tax carryover
utilized in the corporation’s
tax year beginning in 2008
(enter as a negative
number).

3

Foreign tax carryover
expired unused in the
corporation’s tax year
beginning in 2008 (enter
as a negative number).

4

Foreign tax carryover
generated in the
corporation’s tax year
beginning in 2008.

5

Amount of line 4 carried
back to the corporation’s
tax year beginning in 2007
(enter as a negative
number).

6

Combine lines 1 through 5
and enter the results here
and on line 1 of the
corporation’s Schedule K
(Form 1118).

Note: The line 6 amounts
above are to be entered on
the following
corresponding columns of
line 1 of corporation’s
Schedule K (Form 1118) for
its tax year beginning in
2009.

(ii)
Tax year
beginning
in 1999

(iii)
Tax year
beginning
in 2000

(iv)
Tax year
beginning
in 2001

(v)
Tax year
beginning
in 2002

(vi)
Tax year
beginning
in 2003

(vii)
Tax year
beginning
in 2004

(viii)
Tax year
beginning
in 2005

(ix)
Tax year
beginning
in 2006

(x)
Tax year
beginning
in 2007

(xi)
Tax year
beginning
in 2008

(i)
10th
preceding
tax year

(ii)
9th
preceding
tax year

(iii)
8th
preceding
tax year

(iv)
7th
preceding
tax year

(v)
6th
preceding
tax year

(vi)
5th
preceding
tax year

(ix)
4th
preceding
tax year

(x)
3rd
preceding
tax year

(xi)
2nd
preceding
tax year

(xii)
1st
preceding
tax year

-2-

(xii)
Totals (add
columns (i)
through (xi)

, or other tax year beginning

, 20

, and ending

䊳

䊳 Attach to Form 1118.

See separate instructions.

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For calendar year 20

Adjustments to line 1 (enter
description—see instructions):

2

Foreign tax carryover used in current
tax year (enter as a negative number)

Foreign tax carryover expired unused
in current tax year (enter as a negative
number)

Foreign tax carryover generated in
current tax year

Actual or estimated amount of line 6 to
be carried back to prior tax year (enter
as a negative number)

Foreign tax carryover to the following
tax year. Combine lines 3 through 7.

4

5

6

7

8
-0-

(i)
10th
Preceding
Tax Year

(ii)
9th
Preceding
Tax Year

For Paperwork Reduction Act Notice, see the instructions for Form 1118.

Adjusted foreign tax carryover from
prior tax year (combine lines 1 and 2).

3

c
d
e
f
g

redeterminations (see instructions)

b Adjustments for section 905(c)

(see instructions)

a Carryback adjustment

Foreign tax carryover from the prior tax
year (enter the amount from line 6 of
the worksheet in the instructions)

1

Foreign Tax Carryover
Reconciliation

(iii)
8th
Preceding
Tax Year

Cat. No. 51904R

(iv)
7th
Preceding
Tax Year
(v)
6th
Preceding
Tax Year

Foreign Tax Carryover Reconciliation Schedule

Use a separate Schedule K (Form 1118) for each category of income listed below. Check only one box on each schedule.
Passive Category Income
Section 901(j) Income: Name of Sanctioned Country 䊳
Income Re-sourced by Treaty: Name of Country 䊳
General Category Income

Name of corporation

Department of the Treasury
Internal Revenue Service

(December 2009)

SCHEDULE K
(Form 1118)
, 20

.

(vii)
Subtotal (add columns (i)
through (vi))

Schedule K (Form 1118) (12-2009)

(vi)
5th
Preceding
Tax Year

Employer identification number

OMB No. 1545-0122

Adjustments to line 1 (enter
description—see instructions):

2

Adjusted foreign tax carryover from
prior tax year (combine lines 1 and 2).
Enter the column (xiv) total on the
current year Form 1118, Schedule B,
Part II, line 5.

Foreign tax carryover used in current
tax year (enter as a negative number)

Foreign tax carryover expired unused
in current tax year (enter as a negative
number)

Foreign tax carryover generated in
current tax year

Actual or estimated amount of line 6 to
be carried back to prior tax year (enter
as a negative number)

Foreign tax carryover to the following
tax year. Combine lines 3 through 7.

3

4

5

6

7

8

c
d
e
f
g

redeterminations (see instructions)

b Adjustments for section 905(c)

(see instructions)

a Carryback adjustment

Foreign tax carryover from the prior tax
year (enter the amount from line 6 of
the worksheet in the instructions)

1

Foreign Tax Carryover
Reconciliation (continued)

Schedule K (Form 1118) (Rev. 12-2009)
(ix)
4th
Preceding
Tax Year

(x)
3rd
Preceding
Tax Year

(xi)
2nd
Preceding
Tax Year

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(viii)
Subtotal from page 1
(enter the amounts from
column (vii) on page 1)
(xii)
1st
Preceding
Tax Year

Page
(xiv)
Totals (add
columns (viii)
through (xiii))

2

Schedule K (Form 1118) (12-2009)

Current
Tax Year

(xiii)