Foreign Tax Credit Corporations

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Instructions for Form 1118

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Instructions for Form 1118

Department of the Treasury
Internal Revenue Service

(Rev. December 2008)
Foreign Tax Credit—Corporations
Section references are to the Internal
Revenue Code unless otherwise noted.

What’s New for 2008
• The filing instructions for this form have

changed. In some cases, Form 1118
must be filed even when the corporation
is not claiming a current year credit. See
Who Must File below for details.
• Schedule B, line 4 is new. This line
was added to streamline the reporting of
the tax adjustment for high-tax kickouts
under Regulations section 1.904-4(c).

General Instructions
Purpose of Form
Use Form 1118 to compute a
corporation’s foreign tax credit for certain
taxes paid or accrued to foreign countries
or U.S. possessions. See Taxes Eligible
for a Credit on page 3.

Who Must File
Any corporation that elects the benefits of
the foreign tax credit under section 901
must complete and attach Form 1118 to
its income tax return. Furthermore, if the
corporation is required to report overall
foreign loss balances as required by
Regulations section 1.904(f)-1(b), the
corporation must complete and attach
Form 1118 and Schedule J (Form 1118),
regardless of whether the corporation is
electing the benefits of the foreign tax
credit under section 901 or is claiming a
deduction in lieu of a credit. Also, if the
corporation is claiming a deduction in lieu
of a credit and is completing Form 1118
only to report overall foreign loss
balances, enter “Reg. 1.904(f)-1(c)” in the
top margin of page 1 of Form 1118.

When to Make the Election
The election to claim the foreign tax credit
(or a deduction in lieu of a credit) for any
tax year may be made or changed at any
time before the end of a special 10-year
period described in section 6511(d)(3) (or
section 6511(c) if the period is extended
by agreement).

Computer-Generated
Form 1118
The corporation may submit a
computer-generated Form 1118 and
schedules if they conform to the IRS
version. However, if a software program
is used, it must be approved by the IRS
for use in filing substitute forms. This
ensures the proper placement of each

item appearing on the IRS version. For
more information, see Pub. 1167, General
Rules and Specifications for Substitute
Forms and Schedules.

How To Complete
Form 1118
Important. Complete a separate
Schedule A; Schedule B, Parts I & II;
Schedules C through G; and Schedule I
for each applicable separate category of
income. See Categories of Income below.
Complete Schedule B, Part III; Schedule
H; and Schedule J only once.
• Use Schedule A to compute the
corporation’s income or loss before
adjustments for each applicable category
of income.
• Use Schedule B to determine the total
foreign tax credit after certain limitations.
• Use Schedule C to compute taxes
deemed paid by the domestic corporation
filing the return.
• Use Schedules D and E to compute
taxes deemed paid by lower-tier foreign
corporations.
• Use Schedule F to report gross
income and definitely allocable
deductions from foreign branches.
• Use Schedule G to report required
reductions of tax paid, accrued, or
deemed paid.
• Use Schedule H to apportion
deductions that cannot be definitely
allocated to some item or class of income.
• Use Schedule I (a separate schedule)
to compute reductions of taxes paid,
accrued, or deemed paid on foreign oil
and gas extraction income.
• Use Schedule J (a separate schedule)
to compute adjustments to separate
limitation income or losses in determining
the numerators of limitation fractions,
year-end recharacterization balances,
and overall foreign and domestic loss
account balances.

Categories of Income
Compute a separate foreign tax credit for
each applicable separate category
described below.

Passive Category Income
Passive category income includes
passive income and specified passive
category income.
Passive income. Generally, passive
income is:
• Any income received or accrued that
would be foreign personal holding
company income (defined in section
954(c)) if the corporation were a
controlled foreign corporation (CFC)
(defined in section 957). This includes
Cat. No. 10905I

any gain on the sale or exchange of stock
that is more than the amount treated as a
dividend under section 1248. However, in
determining if any income would be
foreign personal holding company
income, the rules of section 864(d)(6) will
apply only for income of a CFC.
• Any amount includible in gross income
under section 1293 (which relates to
certain passive foreign investment
companies).
Passive income does not include:
• Any financial services income that is
general category income (see General
Category Income on page 2),
• Any export financing interest unless it is
also related person factoring income (see
section 904(d)(2)(G) and Temporary
Regulations section 1.904-4T(h)(3)),
• Any high-taxed income (see General
Category Income on page 2 and the
instructions for Schedule A, on page 5),
or
• Any active rents or royalties received
from an unrelated person and active rents
or royalties received from a related
person that were paid or accrued after
September 20, 2004. See Temporary
Regulations section 1.904-4T(b)(2)(iii) for
definitions and exceptions.
Note. Certain income received from a
CFC and certain dividends from a 10/50
corporation that would otherwise be
passive income may be assigned to
another separate category under the
look-through rules. See Look-Through
Rules on page 2.
Specified passive category income.
This term includes:
• Dividends from a DISC or former DISC
(as defined in section 992(a) to the extent
such dividends are treated as foreign
source income, and
• Distributions from a former FSC out of
earnings and profits attributable to foreign
trade income or interest or carrying
charges (as defined in section 927(d)(1),
before its repeal) derived from a
transaction which results in foreign trade
income (as defined in section 932(b),
before its repeal).

Section 901(j) Income
No credit is allowed for foreign taxes
imposed by and paid or accrued to certain
sanctioned countries. However, income
derived from each such country is subject
to a separate foreign tax credit limitation.
Therefore, the corporation must use a
separate Form 1118 for income derived
from each such country. On each Form
1118, check the box for section 901(j)
income at the top of page 1 and identify
the applicable country in the space
provided.

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Instructions for Form 1118

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Sanctioned countries are those
designated by the Secretary of State as
countries that repeatedly provide support
for acts of international terrorism,
countries with which the United States
does not have diplomatic relations, or
countries whose governments are not
recognized by the United States. As of
the date these instructions were revised,
section 901(j) applied to income derived
from Cuba, Iran, North Korea, Sudan, and
Syria. For more information, see section
901(j).
Note. The President of the United States
has the authority to waive the application
of section 901(j) with respect to a foreign
country if it is (a) in the national interest of
the United States and will expand trade
and investment opportunities for U.S.
companies in such foreign country and (b)
the President reports to the Congress, not
less than 30 days before the waiver is
granted, the intention to grant such a
waiver and the reason for such waiver.
Note. Effective December 10, 2004, the
President waived the application of
section 901(j) with respect to Libya.
If the corporation paid taxes to a
country that ceased to be a sanctioned
country during the tax year, see Rev. Rul.
92-62, 1992-2 C.B. 193, for details on
how to figure the foreign tax credit for the
period that begins after the end of the
sanctioned period.

Income Re-sourced by Treaty
If a sourcing rule in an applicable income
tax treaty treats any of the income
described below as foreign source, and
the corporation elects to apply the treaty,
the income will be treated as foreign
source.
• Dividends eligible for the dividends
received deduction (section 245(a)(10)).
• Certain gains (section 865(h)).
• Certain income from a U.S.-owned
foreign corporation (section 904(h)(10)).
See Regulations section 1.904-5(m)(7) for
an example.
Important. The corporation must
compute a separate foreign tax credit
limitation for any such income for which it
claims benefits under a treaty, using a
separate Form 1118 for each amount of
re-sourced income from a treaty country.
On each Form 1118, check the box for
income re-sourced by treaty at the top of
page 1 and identify the applicable country
in the space provided.

General Category Income
This category includes all income not
described above. This includes
high-taxed income that would otherwise
be passive category income. Usually,
income is high-taxed if the total foreign
income taxes paid, accrued, or deemed
paid by the corporation for that income
exceed the highest rate of tax specified in
section 11 (and with reference to section
15, if applicable), multiplied by the
amount of such income (including the
amount treated as a dividend under
section 78). For more information, see

Regulations section 1.904-4(c). Also see
the instructions for Schedule A on page 5
for additional reporting requirements.
This category also includes financial
services income (defined below) if the
corporation is a member of a financial
services group (as defined in section
904(d)(2)(C)(ii)) or is predominantly
engaged in the active conduct of a
banking, insurance, financing, or similar
business.
Financial services income. Financial
services income is income received or
accrued by any corporation predominantly
engaged in the active conduct of a
banking, insurance, financing, or similar
business, if the income is:
• Described in section 904(d)(2)(D)(ii),
• Passive income (determined without
regard to section 904(d)(2)(B)(iii)(II), or
• Incidental income described in
Regulations section 1.904-4(e)(4).

Special Rules
Source Rules for Income
Determine income or (loss) for each
separate category on Schedule A using
the general source rules of sections 861
through 865 and related regulations; the
special source rules of section 904(h)
described below; and any applicable
source rules contained in any applicable
tax treaties.
Special source rules of section 904(h).
Usually, the following income from a
U.S.-owned foreign corporation,
otherwise treated as foreign source
income, must be treated as U.S. source
income under section 904(h):
• Any subpart F income, foreign personal
holding company income, or income from
a qualified electing fund that a U.S.
shareholder is required to include in its
gross income, if such amount is
attributable to the U.S.-owned foreign
corporation’s U.S. source income;
• Interest that is properly allocable to the
U.S.-owned foreign corporation’s U.S.
source income; and
• Dividends equal to the U.S. source
ratio (defined in section 904(h)(4)(B)).
The rules regarding interest and
dividends described above do not apply
to a U.S.-owned foreign corporation if less
than 10% of its E&P for the tax year is
from U.S. sources.

Amounts That Do Not
Constitute Income Under U.S.
Tax Principles
For tax years beginning after December
31, 2006, creditable foreign taxes that are
imposed on amounts that do not
constitute income under U.S. tax
principles are treated as imposed on
general category income. See section
904(d)(2)(H).

Look-Through Rules
CFCs. Generally, dividends, interest,
rents, and royalties received or accrued
by the taxpayer are passive category

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income. However, if these items are
received or accrued by a 10% U.S.
shareholder from a CFC, they may be
assigned to other separate categories
under the look-through rules of section
904(d)(3). This includes:
• Interest, rents, and royalties based on
the amount allocable to E&P of the CFC
in a separate category and
• Dividends paid out of the E&P of a CFC
in proportion to the ratio of the CFC’s
E&P in a separate category to its total
E&P. Dividends include any amount
included in gross income under section
951(a)(1)(B).
Look-through rules also apply to
subpart F inclusions under section
951(a)(1)(A) to the extent attributable to
E&P of the CFC in a separate category.
For more information and examples,
see section 904(d)(3) and Regulations
section 1.904-5.
10/50 corporations. Generally,
dividends received or accrued by the
taxpayer are passive category income.
However, dividends received or accrued
from a 10/50 corporation may be
assigned to other separate categories
under the look-through rules of section
904(d)(4). A 10/50 corporation is any
foreign corporation in which the taxpayer
(domestic corporation) meets the stock
ownership requirements of section 902.
See Temporary Regulations section
1.904-5T(c)(4)(iii).
Certain amounts paid by a U.S.
corporation to a related corporation.
Look-through rules also apply to foreign
source interest, rents, and royalties paid
by a U.S. corporation to a related
corporation. See Regulations section
1.904-5(g).

Other Rules
Certain transfers of intangible
property. See section 367(d)(2)(C) for a
rule that clarifies the treatment of certain
transfers of intangible property.

Reporting Foreign Tax
Information From Partnerships
If you received a Schedule K-1 from a
partnership that includes foreign tax
information, use the rules below to report
that information on Form 1118.
Gross income sourced at partner level.
This includes income from the sale of
most personal property other than
inventory, depreciable property, and
certain intangible property sourced under
section 865. This gross income will
generally be U.S.-source and therefore
will not be reported on Form 1118.
The remaining lines of the foreign tax
section of the Schedule K-1 are reported
on Form 1118 as follows:
Foreign gross income sourced at
partnership level. Report on Schedule
A.
Deductions allocated and apportioned
at partner level and partnership level.
Report on Schedule A or Schedule H.

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Instructions for Form 1118

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Total foreign taxes paid or accrued.
Report on Schedule B.
Reduction in taxes available for credit.
Report on Schedule G.

Capital Gains
Foreign source taxable income or (loss)
before adjustments in all separate
categories in the aggregate should
include gain from the sale or exchange of
capital assets only up to the amount of
foreign source capital gain net income
(which is the smaller of capital gain net
income from sources outside the United
States or capital gain net income).
Therefore, if the corporation has capital
gain net income from sources outside the
United States in excess of the capital gain
net income reported on its tax return,
enter a pro rata portion of the net U.S.
source capital loss as a negative number
on Schedule A, column 9(d) for each
separate category with capital gain net
income from sources outside the United
States. To figure the pro rata portion of
the net U.S. source capital loss
attributable to a separate category,
multiply the net U.S. source capital loss
by the amount of capital gain net income
from sources outside the United States in
the separate category divided by the
aggregate amount of capital gain net
income from sources outside the United
States in all separate categories with
capital gain net income from sources
outside the United States.
See section 904(b)(2)(B) for special
rules regarding adjustments to account
for capital gain rate differentials (as
defined in section 904(b)(3)(D)) for any
tax year. At the time these instructions
went to print, there was no capital gain
rate differential for corporations.

Credit Limitations
Taxes Eligible for a Credit
Domestic corporations. Generally, a
domestic corporation may claim a foreign
tax credit (subject to the limitation of
section 904) for the following taxes:
• Income, war profits, and excess profits
taxes (defined in Regulations section
1.901-2(a)) paid or accrued during the tax
year to any foreign country or U.S.
possession;
• Taxes deemed paid under sections 902
and 960; and
• Taxes paid in lieu of income taxes as
described in section 903 and Regulations
section 1.903-1.
Some foreign taxes that are otherwise
eligible for the foreign tax credit must be
reduced. These reductions are reported
on Schedule G.
Note. A corporation may not claim a
foreign tax credit for foreign taxes paid to
a foreign country that the corporation
does not legally owe, including amounts
eligible for refund by the foreign country.
If the corporation does not exercise its
available remedies to reduce the amount
of foreign tax to what it legally owes, a

credit is not allowed for the excess
amount.
Foreign corporations. Foreign
corporations are allowed (under section
906) a foreign tax credit for income, war
profits, and excess profits taxes paid or
accrued (or deemed paid under section
902) to any foreign country or U.S.
possession for income effectively
connected with the conduct of a trade or
business within the United States. The
credit is not applicable, however, if a
foreign country or U.S. possession
imposes the tax on income from U.S.
sources solely because the foreign
corporation was created or organized
under the law of the foreign country or
U.S. possession or is domiciled there for
tax purposes.
The credit may not be taken against
any tax imposed on income not effectively
connected with a U.S. business.
In computing the foreign tax credit
limitation, the foreign corporation’s
taxable income includes only the taxable
income that is effectively connected with
the conduct of a trade or business within
the United States.
A foreign corporation claiming a
foreign tax credit will be treated as a
domestic corporation in computing tax
deemed paid (section 902(a)) and
dividend gross-up (section 78).
Definition of foreign corporation for
purposes of the deemed paid credit.
In computing the deemed paid credit on
Schedules C, D, and E, the term “foreign
corporation” includes:
• A DISC or former DISC, but only for
dividends from the DISC or former DISC
that are treated as income from sources
outside the United States and
• A contiguous country life insurance
branch that has made an election to be
treated as a foreign corporation under
section 814(g).

Credit or Deduction
A corporation may choose to take either a
credit or a deduction for eligible foreign
taxes paid or accrued. The choice is
made annually. Generally, if a corporation
elects the benefits of the foreign tax credit
for any tax year, no portion of the foreign
taxes will be allowed as a deduction in
that year or any subsequent tax year.
Exceptions. However, a corporation
that elects the credit for eligible foreign
taxes may be allowed a deduction for
certain taxes for which a credit was not
allowed. These include:
• Taxes for which the credit was denied
because of the boycott provisions of
section 908.
• Certain taxes on foreign oil related
income under section 907(b).
• Certain taxes on the purchase or sale
of oil or gas (section 901(f)).
• Certain taxes used to provide subsidies
(section 901(i)).
• Taxes paid to certain foreign countries
for which a credit was denied under
section 901(j).

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• Certain taxes paid on dividends if the

minimum holding period is not met with
respect to the underlying stock, or if the
corporation is obligated to make related
payments with respect to positions in
similar or related property (section
901(k)).
• Certain taxes paid on gain and income
other than dividends if the minimum
holding period is not met with respect to
the underlying property, or if the
corporation is obligated to make related
payments with respect to positions in
similar or related property (see section
901(l)).

No Credit or Deduction
No foreign tax credit (or deduction) is
allowed for certain taxes including:
• Taxes on mineral income that were
reduced under section 901(e).
• Certain taxes paid on distributions from
possessions corporations (section
901(g)).
• Taxes on foreign oil and gas extraction
income that were reduced under section
907(a).
• Taxes attributable to income excluded
under section 814(a) (relating to
contiguous country branches of domestic
life insurance companies).
• Taxes paid or accrued to a foreign
country or U.S. possession with respect
to income excluded from gross income on
Form 8873, Extraterritorial Income
Exclusion. However, see section 943(d)
for an exception for certain withholding
taxes.

Carryback and Carryforward of
Excess Foreign Taxes
If the allowable foreign taxes paid,
accrued, or deemed paid in a tax year in
a separate category exceed the foreign
tax credit limitation for the tax year for that
separate category, the excess may be:
• Carried back 1 year to offset taxes
imposed in the same category. (For
excess foreign taxes arising in tax years
beginning before October 23, 2004, the
excess may be carried back 2 years.)
• Carried forward 10 years to offset taxes
imposed in the same category (5 years
for excess foreign taxes which may be
carried only to tax years ending before
October 23, 2004).
The excess is applied first to the
earliest of the years to which it may be
carried, then to the next earliest year, etc.
The corporation may not carry a credit to
a tax year for which it claimed a
deduction, rather than a credit, for foreign
taxes paid or accrued. Furthermore, the
corporation must reduce the amount of
any carryback or carryforward by the
amount it would have used if it had
chosen to claim a credit rather than a
deduction in that tax year. See section
904(c) and Regulations section 1.904-2
for more details.
How to claim the excess credit. If the
corporation is carrying back the excess
credit to an earlier year, file an amended
tax return with a revised Form 1118.
Attach the statement described in

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Instructions for Form 1118

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Regulations section 1.904-2(f) for each
tax year to which the corporation is
carrying back or carrying forward the
excess credit.
Special rules apply to:

• The carryback and carryover of foreign

taxes paid or accrued on foreign oil and
gas extractions or related taxes (see
section 907(f)) and
• An excess foreign tax credit for which
an excess limitation account was
established under section 960(b)(2).

Special rules for carryforwards and
carrybacks of pre-2007 and post-2006
unused foreign taxes. The foreign
taxes carried forward generally are
allocated to the post-2006 separate
categories to which those taxes would
have been allocated if the taxes were
paid or accrued in a tax year beginning
after 2006. Alternatively, the corporation
can allocate unused foreign taxes in its
pre-2007 passive income category to the
post-2006 separate category for passive
category income, and can allocate all
other unused foreign taxes in the
eliminated categories to the post-2006
separate category for general category
income.

Treaty-Based Return
Positions
Corporations that adopt a return position
that any U.S. treaty overrides or modifies
any provision of the Internal Revenue
Code, and causes (or potentially causes)
a reduction of any tax incurred at any
time, generally must disclose this
position. Complete Form 8833,
Treaty-Based Return Position Disclosure
Under Section 6114 or Section 7701(b),
and attach it to Form 1118. See section
6114 and Regulations section 301.6114-1
for details.
Failure to make such a report may
result in a $10,000 penalty.

Proof of Credits
Form 1118 must be carefully filled in with
all the information called for and with the
calculations of credits indicated.
Important. Documentation (that is,
receipts of payments or a foreign tax
return for accrued taxes) is not required to
be attached to Form 1118. However,
proof must be presented upon request by
the IRS to substantiate the credit. See
Regulations section 1.905-2.
If the corporation claims a foreign tax
credit for tax accrued but not paid, the
IRS may require a bond to be furnished
on Form 1117, Income Tax Surety Bond,
before the credit is allowed. See
Regulations section 1.905-2(c).

Foreign Tax Credit
Redeterminations
The corporation’s foreign tax credit and
U.S. tax liability generally must be
redetermined if:

• Accrued foreign taxes when paid differ
from the amounts claimed as credits;
• Accrued foreign taxes are not paid
within 2 years after the close of the tax
year to which they relate; or
• Any foreign tax paid is fully or partially
refunded.
Except as provided in Temporary
Regulations section 1.905-3T(d)(3), a
redetermination of U.S. tax liability is not
required to account for the effect of a
redetermination of foreign tax paid or
accrued by a foreign corporation on the
amount of foreign taxes deemed paid
under section 902 or 960. Instead, the
foreign corporation’s pools of E&P and
foreign taxes are adjusted in the year of
the foreign tax redetermination.

Reporting Requirements
If the corporation must redetermine its
U.S. tax liability, the corporation must:
• File an amended return and Form 1118
with the Service Center where it filed the
tax return on which it claimed the affected
foreign tax credit and
• Provide identifying information such as
the corporation’s name, address,
employer identification number (EIN), and
the tax year or years that are affected by
the redetermination.
Additional information required. If the
redetermination was because of one of
the following, the corporation must
provide the additional information as
indicated.
• Refund of foreign taxes paid —
1. The date or dates on which the
foreign taxes were accrued, paid, and
refunded;
2. The amount of foreign taxes
accrued, paid, and refunded on each date
(in foreign currency); and
3. The exchange rates used to
translate such amounts.
• Foreign taxes that when paid differ
from the accrued amounts claimed as
credits for a year beginning before
1998 —
1. The date on which the foreign taxes
were accrued;
2. The dates on which the foreign
taxes were paid;
3. The exchange rate for each date
the foreign taxes were accrued and paid;
and
4. The amount of foreign taxes
accrued or paid on each such date (in
foreign currency).
• Foreign taxes that when paid differ
from accrued amounts claimed as
credits for a tax year beginning after
1997 because the corporation paid
more or less foreign tax than was
originally accrued or failed to pay
accrued taxes within 2 years —
1. The date on which the foreign taxes
were accrued;
2. The dates on which the foreign
taxes were paid;
3. The average exchange rate for the
year for which the foreign taxes were
accrued;

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4. For taxes paid more than 2 years
after the year to which they relate, the
exchange rate at the time of payment;
and
5. The amount of tax accrued or paid
for each such date, and the amount of
accrued tax that was not paid within 2
years (in foreign currency).
• Foreign taxes deemed paid under
section 902 or 960 — If the corporation is
required to make a redetermination under
Temporary Regulations section
1.905-3T(d)(3), include the following basic
information as an attachment to the tax
return for the year for which the
redetermination applies:
1. The dates and amounts of any
dividend distributions or other inclusions
from E&P for the affected year or years;
2. The amount of E&P from which
such dividends were paid for the affected
year or years;
3. The current balances of the pools
of E&P and foreign taxes before and after
the foreign tax adjustment; and
4. The information described above
for foreign taxes paid or accrued, as
applicable.
If foreign taxes deemed paid under
sections 902 or 960 are adjusted and the
corporation is not required to redetermine
its U.S. tax liability, adjust the appropriate
pools of foreign taxes and E&P using the
rules outlined in Temporary Regulations
sections 1.905-3T(d)(2)(ii) and
1.905-4T(b)(2).
Amended returns for all years affected
by foreign tax redeterminations that result
in U.S. tax deficiencies and that occurred
in the three tax years immediately
preceding the corporation’s first tax year
beginning on or after November 7, 2007
(and tax years of foreign subsidiaries
ending with or within such tax years of
their domestic corporate shareholders)
are due no later than the due date (with
extensions) of the corporation’s return for
its second tax year beginning on or after
November 7, 2007. Amended returns for
all years affected by foreign tax
redeterminations that result in U.S. tax
deficiencies and that occur in tax years
beginning after November 7, 2007 (and
tax years of foreign subsidiaries ending
with or within such tax years of their
domestic corporate shareholders), are
due no later than the due date (with
extensions) of the corporation’s return for
its tax year in which the foreign tax
redetermination occurs. For special rules
relating to corporations under the
jurisdiction of the Large and Mid-Size
Business Division, see Temporary
Regulations sections 1.905-4T(b)(3) and
1.905-4T(f)(2)(iii).

Interest and Penalties
In most cases, interest is computed on
the deficiency or overpayment that
resulted from the foreign tax adjustment
(sections 6601 and 6611 and the related
regulations). See Temporary Regulations
section 1.905-4T(e) for additional
information.

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If the corporation does not comply with
the requirements discussed above within
the time for filing specified, the penalty
provisions of section 6689 (and the
related regulations) will apply.

Specific Instructions
Report all amounts in U.S. dollars unless
otherwise specified. If it is necessary to
convert from a foreign currency, attach a
statement explaining how the conversion
rate was determined.

Separate Category of Income
Boxes.
The corporation must complete a
separate Form 1118 for each applicable
category of income. See Categories of
Income beginning on page 1.

Schedule A
Report gross income or (loss) from
sources outside the United States for the
applicable separate category in columns
2 through 7. Gross income equals gross
receipts reduced by cost of goods sold.
Report the applicable deductions to this
gross income in columns 9 and 10.
Report any net operating loss carryover in
column 11. Be sure to include in all
columns the gross income and
deductions that pertain to foreign
branches.
Section 863(b) gross income and
deductions. Aggregate all section
863(b) gross income and deductions and
report the totals on a single line. It may be
necessary to enter amounts in multiple
columns on that single line, depending
upon the nature of the section 863(b)
gross income and deductions. For
example, enter “863(b)” in column 1 and
enter (as a positive number) all section
863(b) gross income (in columns 2
through 8) and all section 863(b)
deductions (in columns 9a through 12).
Also enter the net amount in column 13.
Note that the totals are being reported on
a single line because it is not necessary
to report section 863(b) gross income and
deductions on a per-country basis.
RIC pass-through amounts. Aggregate
all income passed through from regulated
investment companies (RICs) and report
the total on a single line. Enter “RIC” in
column 1 and report the total in column
13. Note that the totals are being reported
on a single line because it is not
necessary to report the RIC pass-through
amounts on a per-country basis.
Net operating losses. Report any net
operating loss carryover on a single line.
Enter “NOL” in column 1 and report the
total in column 11. Note that the totals are
being reported on a single line because it
is not necessary to report the NOL on a
per-country basis.

Reclassifications of high-taxed
income. Aggregate all reclassifications
of high-taxed income and report the total
on a single line. With respect to passive
category income, for items of income that
have been included on Schedule A and
that must be reclassified under the rules
of Regulations section 1.904-4(c), enter
“HTKO” in column 1 and enter (as a
negative number) in column 13 the net
amount of income that is being
reclassified from passive category
income. With respect to general category
income, enter “HTKO” in column 1 and
enter (as a positive number) in column 13
the net amount of income that is being
reclassified to general category income.
Note that the reclassifications are being
reported on a single line because it is not
necessary to report them on a per-country
basis. Also note that tax reclassifications
are needed on Schedule B. See those
instructions for more information. Also
see General Category Income on page 2
for general additional information about
high-taxed income.
Column 1. Enter the two-letter codes
(from the list beginning on page 11) of all
foreign countries and U.S. possessions
within which income is sourced and/or to
which taxes were paid, accrued, or
deemed paid.
For section 863(b) income, enter
“863(b)” instead of a two-letter code.
For income passed through from a
RIC, enter “RIC” instead of a two-letter
code.
For a net operating loss, enter “NOL”
instead of a two-letter code.
For income adjustments for high-taxed
income, enter “HTKO” instead of a
two-letter code.
Column 2(a). If the corporation is a U.S.
shareholder in a CFC, report all income
deemed received under section
951(a)(1)(A) (before gross-up). See
section 904(d)(3) and Look-Through
Rules on page 2 for more information. If
the corporation is a U.S. shareholder in a
passive foreign investment company
(PFIC) and receives distributions from
stock in that PFIC, report all income
deemed received (before gross-up) under
section 1291.
Column 3(a). Report all other dividends
(before gross-up) not included in column
2(a) from sources outside the United
States for the applicable separate
category. Other dividends include
amounts included in gross income under
section 951(a)(1)(B).
Note. All dividends from a domestic
corporation are of U.S. source, including
dividends from a domestic corporation
which has 80% or more of its gross
income from sources outside the United
States.
Columns 2(b) and 3(b). Include taxes
deemed paid by a domestic corporation
under section 902 or section 960 on
distributions by a foreign corporation in

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income as dividend gross-up. See
Regulations section 1.960-3(b) for
exceptions.
Column 4. Enter all interest received
from foreign sources. See section 861(c)
for the treatment of interest from a
domestic corporation that meets the
foreign business requirement.
Column 6. Include gross income,
including compensation, commissions,
fees, etc., for technical, managerial,
engineering, construction, scientific, or
similar services outside the United States.
Be sure to include gross income from
services performed through a foreign
branch.
Column 7. Include all other gross
income from sources outside the United
States for the applicable separate
category, including all other gross income
of foreign branches and pass-through
entities and any exchange gain or loss
recognized under sections 986(c) or
987(3) on a distribution or remittance of
previously taxed amounts. Attach a
schedule identifying the gross income by
type and by the foreign country or U.S.
possession from which it was sourced.
Column 9(d). Include all other
deductions definitely allocable to income
from sources outside the United States
(dividends, interest, etc.) for the
applicable separate category. Include
deductions allocable to income of foreign
branches.
Include any reduction of foreign source
capital gain net income. If foreign source
capital gain net income from all separate
categories is more than the capital gain
net income reported on the corporation’s
tax return, enter a pro rata portion of the
excess as a negative number in each
separate category. See Capital Gains on
page 3.
Column 10. Enter only the apportioned
share from Schedule H, Part II, column
(d) that relates to gross income reported
in columns 2 through 7.
Note. If the corporation qualified as a
financial services entity because it treated
certain amounts as active financing
income that are not listed in Regulations
sections 1.904-4(e)(2)(i)(A) through (X),
but that are described as similar items in
Regulations section 1.904-4(e)(2)(i)(Y),
attach a statement to Form 1118 showing
the types and amounts of the similar
items.
Column 11. Enter the corporation’s net
operating loss as defined in section 172
that is attributable to foreign source
income in the separate limitation
category. If the net operating loss is part
of an overall foreign loss, see Temporary
Regulations section 1.904(g)-3T for
allocation rules that apply in determining
the amount to enter in column 11.
It is not necessary to report the NOL
adjustment on a per-country basis. See
the instructions for Schedule A on page 5.
above.

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Schedule B
Part I—Foreign Taxes Paid,
Accrued, and Deemed Paid
Report only foreign taxes paid, accrued,
or deemed paid for the separate category
for which this Form 1118 is being
completed. Report all amounts in U.S.
dollars. If the corporation must convert
from foreign currency, attach a schedule
showing the amounts in foreign currency
and the exchange rate used.
For corporations claiming the credit on
the accrual basis, the exchange rate for
translating foreign taxes into U.S. dollars
will generally be an average exchange
rate for the tax year to which the taxes
relate. However, the exchange rate on the
date of payment must be used if the
foreign taxes (a) are paid more than 2
years after the close of the tax year to
which they relate or (b) are paid in a tax
year prior to which they relate. In addition,
for tax years beginning after December
31, 2004, taxpayers may elect to use the
exchange rate on the date of payment.
Taxpayers may elect to use the payment
date exchange rates for all creditable
foreign income taxes or only those taxes
that are attributable to qualified business
units with U.S. dollar functional
currencies. The election is made by
attaching a statement to a timely-filed
(including extensions) Form 1118 that
indicates the corporation is making the
election under section 986(a)(1)(D). Once
made, the election applies for all
subsequent tax years and is revocable
only with the consent of the IRS. See
section 986(a).
Column 1. Claim the foreign tax credit
for the tax year in which the taxes were
paid or accrued, depending on the
method of accounting used. If a credit for
taxes accrued is claimed, show both the
date accrued and the date paid (if paid).
If the cash method of accounting is
used, an election under section 905(a)
may be made to claim the credit based on
accrued taxes. If this election is made,
figure the foreign tax credit for all
subsequent tax years on the same basis.
Also, the credits are subject to the
redetermination provisions of section
905(c). See page 4 for details.
Column 2(d). Include foreign taxes paid
or accrued on foreign branch taxable
income to which the rules of section
863(b) apply.
Note. Do not include these overlapping
amounts in column 2(e).

Part II—Separate Foreign Tax
Credit
Line 4. If the corporation is reclassifying
high-taxed income from passive category
income to general category income, enter
the related tax adjustment on line 4.
Indicate whether adjustment is positive or
(negative). See General Category Income
on page 2 for additional information.

Line 5. Enter the total amount of foreign
taxes carried forward or back to the
current year (see page 3 for general
rules). Include all taxes carried forward,
whether or not such taxes are used.
Attach a schedule reconciling the prior
year’s carryover with this year’s
carryover, identifying carrybacks and any
other adjustments.
Line 7. If the corporation has a current
year overall domestic loss or, in any of its
separate categories, a current year
separate limitation loss, an overall
domestic loss or an overall foreign loss,
recapture of an overall foreign loss, or
current year separate limitation income in
a category in which it has a beginning
balance of income that must be
recharacterized, adjustments must be
made. See the separate instructions for
Schedule J to determine if that schedule
must be filed.
Line 8b. Enter taxable income that
should not be taken into account in
computing the foreign tax credit limitation.
Line 9. Divide line 7 by line 8c to
determine the limitation fraction. Enter the
fraction on line 9 as a decimal with the
same number of places as the number of
digits to the left of the decimal in adjusted
taxable income on line 8c. For example, if
adjusted taxable income on line 8c is
$100,000, compute the limitation fraction
to 6 decimal places.
Line 11. The limitation may be increased
under section 960(b) for any tax year that
the corporation receives a distribution of
previously taxed E&P. See section
960(b).

Part III—Summary of Separate
Credits
Complete Part III only once. Enter on
lines 1 through 3 the separate foreign tax
credits from Part II, line 12, for each
applicable separate category.
Note. Complete Part III only on the Form
1118 with the largest amount entered on
Part II, line 12.
Line 5. If the corporation participates in
or cooperates with an international
boycott, the foreign tax credit may be
reduced. Complete Form 5713,
International Boycott Report. If the
corporation chooses to apply the
international boycott factor to calculate
the reduction in the credit, enter the
amount from line 2a(3) of Schedule C
(Form 5713) on line 5.

Schedules C, D, and E
If the corporation is a partner in a
partnership, for taxes of foreign
corporations for tax years beginning after
October 22, 2004, stock owned directly or
indirectly, by or for a partnership shall be
considered as being owned
proportionately by its partners. See
section 902(c)(7).

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Schedule C
Part I—Dividends and Deemed
Inclusions From Post-1986
Undistributed Earnings
Column 1. Enter the name of the foreign
corporation (or DISC or former DISC)
whose earnings were distributed to, or
included in income by, the domestic
corporation filing the return.
Column 2. Enter the year and month in
which the foreign corporation’s U.S. tax
year ended.
Example. When figuring foreign taxes
deemed paid in 2008 by a calendar year
domestic corporation with respect to
dividends and inclusions out of post-1986
undistributed earnings for the foreign
corporation’s tax year that ended June
30, 2008, enter “0806.”
Column 4. Enter the distributing
corporation’s post-1986 undistributed
earnings pool for the separate category
for which the schedule is being
completed. Generally, this amount is the
corporation’s E&P (computed in the
corporation’s functional currency
according to sections 964(a) and 986)
accumulated in tax years beginning after
1986, determined as of the close of the
corporation’s tax year without reduction
for any earnings distributed or otherwise
included in income (that is, under section
304, 367(b), 951(a), 1248, or 1293)
during the current tax year.
Post-1986 undistributed earnings are
reduced to account for distributions or
deemed distributions that reduced E&P
and inclusions that resulted in previously
taxed amounts described in section
959(c)(1) and (2) or section 1293(c) in
prior tax years beginning after 1986. See
Regulations section 1.902-1(a)(9). Also,
see section 902(c)(3) and Regulations
section 1.902-1(a)(13) for special rules
treating earnings accumulated in
post-1986 years as pre-1987
accumulated profits when no U.S.
shareholder was eligible to claim a
section 902 credit with respect to taxes
paid by the foreign corporation.
Column 5. Enter the opening balance in
the distributing corporation’s post-1986
foreign income taxes pool for the tax year
indicated. This amount is the foreign
income taxes paid, accrued, or deemed
paid (in U.S. dollars) by the foreign
corporation for prior tax years beginning
after 1986, reduced by foreign taxes
attributable to distributions or deemed
inclusions of earnings in prior tax years.
See Regulations section 1.902-1(a)(8)(i).
Column 6(a). Enter the foreign income
taxes paid or accrued by the foreign
corporation for the tax year indicated,
translated into U.S. dollars using the
exchange rate specified in section 986(a).
Column 6(b). Enter the foreign income
taxes deemed paid (under section 902(b))
by the corporation for the tax year
indicated (from Schedule D, Part I,

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Section A, column 10, and Section B,
column 8(b)).
Column 8(a). Report the sum (in the
foreign corporation’s functional currency)
of all dividends paid and deemed
inclusions out of post-1986 undistributed
earnings for the tax year indicated.
Column 8(b). Report the column 8(a)
amounts, translated into U.S. dollars at
the appropriate exchange rates (as
defined in section 989(b)). If the foreign
corporation’s functional currency is the
U.S. dollar, do not complete column 8(b).

Part II—Dividends Paid Out of
Pre-1987 Accumulated Profits
Use a separate line for each dividend
paid. If a dividend is paid out of the
accumulated profits of more than one
pre-1987 tax year, figure and show the
tax deemed paid on a separate line for
each tax year. In applying section 902,
the IRS may determine from which tax
year’s accumulated profits the dividends
were paid. See Regulations section
1.902-3(g)(4).
Important. The formula for calculating
foreign taxes deemed paid under section
902 with respect to dividends paid in a
post-1986 year out of pre-1987
accumulated profits requires that all
components (dividends, accumulated
profits, and taxes) be maintained in the
foreign corporation’s functional currency
and translated into U.S. dollars at the
exchange rate in effect on the date of the
dividend distribution. See Regulations
section 1.902-1(a)(10)(ii) and (iii).
Column 1. Enter the name of the
first-tier foreign corporation (or DISC or
former DISC) that paid a dividend out of
pre-1987 profits to the domestic
corporation filing the return.
Column 2. Enter the year and month in
which the foreign corporation’s pre-1987
tax year ended.
Column 4. For each line, enter the
pre-1987 accumulated profits for the tax
year indicated in column 2, computed in
functional currency under section 902.
See Regulations section 1.902-1(a)(10)(i)
and (ii).
Column 5. Enter the foreign taxes paid
and deemed paid (in functional currency)
with respect to the pre-1987 accumulated
profits entered in column 4 for the tax
year indicated in column 2. See the
instructions for Schedule G on page 8 for
information on reduction of foreign taxes
for failure to furnish information required
under section 6038.
Column 6(a). Enter the amount of each
dividend paid by the first-tier foreign
corporation (or DISC or former DISC) to
the domestic corporation (in functional
currency) out of the accumulated profits
of the pre-1987 tax year indicated in
column 2.
Column 6(b). Enter the amount from
column 6(a) translated into U.S. dollars
using the spot exchange rate in effect on
the date of distribution. See Regulations

sections 1.902-1(a)(10)(ii) and
1.902-3(g)(1).
Column 8(a). Multiply column 5 by
column 7. Enter this amount in column
8(a) in functional currency.
Column 8(b). Enter the amount from
column 8(a) translated into U.S. dollars at
the spot exchange rate in effect on the
date of distribution. See Regulations
section 1.902-1(a)(10)(iii).

Part III—Deemed Inclusions
From Pre-1987 Earnings and
Profits
Important. The formula for calculating
foreign taxes deemed paid under section
960 with respect to deemed inclusions
(that is, under section 956 or 1248) in a
post-1986 year out of pre-1987 E&P
requires that earnings and profits and
foreign taxes be calculated in U.S. dollars
under the rules of Regulations section
1.964-1(a) through (e), and then
translated into the foreign corporation’s
functional currency at the exchange rate
in effect on the first day of the foreign
corporation’s first post-1986 tax year. See
Notice 88-70, 1988-2 C.B. 369. The
deemed inclusion is then translated into
U.S. dollars at the appropriate exchange
rate specified in section 989(b). Foreign
income taxes paid in pre-1987 tax years
are translated into U.S. dollars for
purposes of section 960 at the exchange
rate in effect when the foreign taxes were
paid. See Regulations section 1.964-1(d)
and Temporary Regulations section
1.905-5T(b)(1).
Column 1. Enter the name of the first- or
lower-tier foreign corporation whose
earnings were deemed included in the
income of the domestic corporation filing
the return.
Column 2. Enter the year and month in
which the corporation’s pre-1987 tax year
ended. If the deemed inclusion is from the
accumulated E&P of more than 1 tax
year, figure and show the tax deemed
paid on a separate line for each year.
Column 4. For each line, enter the E&P
calculated in U.S. dollars under
Regulations sections 1.964-1(a) through
(e), translated into functional currency
under Notice 88-70 for the tax year
indicated in column 2.
Column 5. Enter foreign taxes paid and
deemed paid (in U.S. dollars) with respect
to the E&P entered in column 4. See the
instructions for Schedule G on page 8 for
information on reduction of foreign taxes
for failure to furnish information required
under section 6038.
Column 6(b). Enter the amount from
column 6(a) translated into U.S. dollars at
the appropriate exchange rate specified in
section 989(b).

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Schedule D
Part I—Tax Deemed Paid by
First-Tier Foreign Corporations
Section A —Dividends Paid Out of
Post-1986 Undistributed Earnings
Column 1. Enter the name of the
second-tier foreign corporation and the
name of the first-tier foreign corporation to
which it paid a dividend out of post-1986
undistributed earnings.
Example. The U.S. corporation filing
the return owns all of the stock of CFC1
and CFC2. CFC1 and CFC2 each own
50% of the stock of CFC3. In 2008, CFC3
pays a dividend to CFC1 and CFC2. Use
one line to report dividends from CFC3 to
CFC1 and another line to report dividends
from CFC3 to CFC2.
Column 2. Enter the year and month in
which the distributing second-tier foreign
corporation’s tax year ended.
Example. If a first-tier foreign
corporation that uses the calendar year
2008 as its tax year receives dividends
out of post-1986 undistributed earnings of
a second-tier foreign corporation for a tax
year that ended June 30, 2008, enter
“0806.”
Column 3. Enter the second-tier foreign
corporation’s applicable two-digit foreign
country or U.S. possession code from the
list beginning on page 11.
Column 4. Enter the second-tier foreign
corporation’s post-1986 undistributed
earnings pool (in functional currency) for
the separate category for which the
schedule is being completed. See the
instructions for Schedule C, Part I,
column 4.
Column 5. Enter the opening balance in
the second-tier foreign corporation’s
post-1986 foreign income taxes pool for
the tax year indicated. See the
instructions for Schedule C, Part I,
column 5.
Column 6(a). Enter the foreign income
taxes paid or accrued by the second-tier
foreign corporation for the tax year
indicated, translated from foreign
currency into U.S. dollars using the
exchange rate specified in section 986(a).
Column 6(b). Enter the foreign income
taxes deemed paid (under section 902(b))
by the second-tier foreign corporation for
the tax year indicated (from Schedule D,
Part II, Section A, column 10, and Part II,
Section B, column 8(b).
Column 8(a). Report the sum (in the
second-tier foreign corporation’s
functional currency) of all dividends paid
out of its post-1986 undistributed earnings
for the tax year indicated.
Column 8(b). Report the sum of the
column 8(a) amounts translated into the
functional currency of the first-tier foreign
corporation at the spot rate in effect on
the date of each distribution.

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Section B —Dividends Paid Out of
Pre-1987 Accumulated Profits
Use a separate line for each dividend
paid. If a dividend is paid out of the
accumulated profits of more than one
pre-1987 tax year, figure and show the
tax deemed paid on a separate line for
each tax year. In applying section 902,
the IRS may determine from which tax
year’s accumulated profits the dividends
were paid. See Regulations section
1.902-3(g)(4).
Important. The formula for calculating
foreign taxes deemed paid by a first-tier
foreign corporation under section 902(b)
with respect to dividends paid by a
second-tier foreign corporation in a
post-1986 year out of pre-1987
accumulated profits requires that all
components (dividends, accumulated
profits, and taxes) be maintained in the
second-tier foreign corporation’s
functional currency. Dividends are
translated into the first-tier foreign
corporation’s functional currency and
added to its post-1986 undistributed
earnings at the exchange rate in effect on
the date of the dividend distribution. See
Regulations section 1.902-1(a)(9)(ii).
Foreign taxes are translated into U.S.
dollars, and added to the first-tier foreign
corporation’s post-1986 foreign income
taxes, at the exchange rate in effect on
the date of the dividend distribution. See
Regulations section 1.902-1(a)(8)(ii).
Column 1. Enter the name of the
second-tier foreign corporation and the
name of the first-tier foreign corporation to
which it paid a dividend out of pre-1987
accumulated profits.
Column 2. For each pre-1987 tax year,
enter the year and month in which the
second-tier foreign corporation’s tax year
ended.
Column 4. For each line, enter the
pre-1987 accumulated profits for the tax
year indicated in column 2, computed in
the second-tier corporation’s functional
currency under section 902. See
Regulations sections 1.902-1(a)(10)(i)
and (ii).
Column 5. Enter the foreign taxes paid
and deemed paid under section 902(b) (in
functional currency) with respect to the
accumulated profits entered in column 4
for the pre-1987 tax year indicated in
column 2. See the instructions for
Schedule G below for information on
reduction of foreign taxes for failure to
furnish information required under section
6038.
Column 6(a). Enter each dividend paid
by the second-tier foreign corporation (in
functional currency) to the first-tier foreign
corporation out of the accumulated profits
of the pre-1987 tax year indicated in
column 2.
Column 6(b). Enter the amount from
column 6(a), translated into the first-tier
foreign corporation’s functional currency
using the spot exchange rate in effect on
the date of distribution. See Regulations

sections 1.902-1(a)(10)(ii) and
1.902-3(g)(1).
Column 8(a). Multiply column 5 by
column 7. Enter the result in column 8(a).
Column 8(b). Enter the amount from
column 8(a), translated in U.S. dollars at
the spot exchange rate in effect on the
date of distribution. See Regulations
section 1.902-1(a)(10)(iii).

Part II—Tax Deemed Paid by
Second-Tier Foreign
Corporations
Follow the instructions for the
corresponding columns of Schedule D,
Part I, substituting “second-tier foreign
corporation” for references to the “first-tier
foreign corporation” and “third-tier foreign
corporation” for references to the
“second-tier foreign corporation.”
Note. In completing Section A, column 5,
note that section 902(b) as in effect prior
to the Taxpayer Relief Act of 1997 did not
treat any foreign taxes as deemed paid by
a third- or lower-tier foreign corporation
with respect to dividends received from
lower-tier foreign corporations.

Schedule E
Use Schedule E to report foreign taxes
deemed paid with respect to dividends
from certain fourth-, fifth-, and sixth-tier
controlled foreign corporations out of
earnings accumulated in tax years
beginning after August 5, 1997. Follow
the instructions for the corresponding
columns of Schedule D, Part I, Section A,
substituting references to the next
lower-tier foreign corporation as
appropriate.
The post-1986 undistributed earnings
and taxes pools for the eligible CFCs
begin on the first day of the CFC’s first tax
year beginning after August 5, 1997.
Earnings accumulated in tax years
beginning before August 6, 1997, will be
treated as pre-1987 accumulated profits
for section 902 purposes. See section
902(c)(6) and Regulations section
1.902-1(a)(10)(i). Foreign income taxes
attributable to these pre-pooling profits
must be reduced when the associated
earnings are distributed. However, such
taxes are generally not eligible for the
deemed paid credit. See Regulations
section 1.902-1(a)(10)(iii) and Temporary
Regulations section 1.902-1T(c)(8).
Note. In completing Part III, column 5,
note that, under section 902(b) as
amended by the Taxpayer Relief Act of
1997, no taxes are deemed paid by a
sixth- or lower-tier foreign corporation with
respect to dividends received from
lower-tier foreign corporations.

of U.S. Persons With Respect To Foreign
Disregarded Entities, is not filed, attach
an income statement, balance sheet, and
schedule of remittances.

Schedule G
Line A. If the corporation claims a
deduction for percentage depletion under
section 613 with respect to any part of its
foreign mineral income (as defined in
section 901(e)(2)) for the tax year, any
foreign taxes on that income must be
reduced by the smaller of:
1. The foreign taxes minus the tax on
that income or
2. The tax on that income determined
without regard to the deduction for
percentage depletion minus the tax on
that income.
The reduction must be made on a
country-by-country basis (Regulations
section 1.901-3(a)(1)). Attach a separate
schedule showing the reduction.
Line C. If the corporation chooses to
calculate the reduction in the foreign tax
by identifying taxes specifically
attributable to participation in or
cooperation with an international boycott,
enter the amount from Form 5713,
Schedule C, line 2b. See Form 5713 and
its separate Schedule C and instructions.
Line D. If the corporation controls a
foreign corporation or partnership and
fails to furnish any return or any
information in any return required under
section 6038(a) by the due date, reduce
the foreign taxes available for credit under
sections 901, 902, and 960 by 10%. If the
failure continues for 90 days or more after
the date of written notice by the IRS,
reduce the tax by an additional 5% for
each 3-month period or fraction thereof
during which the failure continues after
the 90-day period has expired. See
section 6038(c) for limitations and special
rules.
In addition, a $10,000 penalty is
imposed under section 6038(b) for failure
to supply the information required under
section 6038(a) for each entity within the
time prescribed. If the required
information is not submitted within 90
days after the IRS has mailed notice to
the U.S. person, additional penalties
apply.
Note. The reduction in foreign taxes
available for credit is reduced by any
dollar penalty imposed under section
6038(b).
Line E. Include the reduction for foreign
taxes on foreign oil related income under
section 907(b).

Schedule H

Schedule F
Enter the gross income and definitely
allocable deductions for each foreign
branch (including a disregarded entity) as
indicated. For each such foreign branch
for which Form 8858, Information Return

-8-

Computer-Generated
Schedule H
A computer-generated Schedule H may
be filed if it conforms to the IRS version.
In some cases, Schedule H can be

Page 9 of 12

Instructions for Form 1118

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expanded to properly apportion
deductions. This applies in cases such as
when the corporation:
• Has more than two product lines (under
the sales method of apportioning R&D
deductions),
• Has section 901(j) income from more
than one sanctioned country, or
• Has income re-sourced by treaty for
more than one country.

Part I—Research and
Development Deductions
Use Part I to apportion the research and
development (R&D) deductions that
cannot be definitely allocated to some
item or class of gross income. Use either
the sales method or one of the gross
income methods described in Regulations
section 1.861-17.
Note. The line 4 totals will generally be
less than the totals on lines 1 and 2
because the line 4 totals do not include
the gross income and deductions that are
implicitly apportioned to the residual
grouping.

Column (a) Sales Method
Complete these columns only if the
corporation elects the sales method of
apportioning R&D deductions described
in Regulations section 1.861-17(c). Enter
in the spaces provided the SIC Code
numbers (based upon the Standard
Industrial Classification System) of the
product lines to which the R&D
deductions relate. See Regulations
section 1.861-17(a)(2)(ii) and (iii) for
details on choosing SIC codes and
changing a product category.
Note. If the corporation has more than
two product lines, see
Computer-Generated Schedule H above.

Columns (a)(i) and (a)(iii)

on page 8.

Line 1. Enter the worldwide gross sales
for the product lines.
Lines 3a through 3d. Enter the gross
sales that resulted in gross income for
each statutory grouping.

Columns (a)(ii) and (a)(iv)
Line 1. Enter the total R&D deductions
connected with the product lines.
Line 2. Reduce the line 1 totals by
legally mandated R&D (Regulations
section 1.861-17(a)(4)), and a 50%
exclusive apportionment amount
(Regulations section 1.861-17(b)(1)(i)).
The legally mandated R&D rules apply
to R&D undertaken solely to meet legal
requirements imposed by a particular
political entity for improvement or
marketing of specific products or
processes if the corporation does not
reasonably expect the results of that
research to generate gross income
(beyond de minimis amounts) outside a
single geographic source.
Under the exclusive apportionment
rules, 50% of the R&D deductions are
apportioned exclusively to the statutory
grouping of gross income, or the residual
grouping of gross income, as the case

may be, from the geographic source
where the R&D activities which account
for more than 50% of the amount of such
deduction were performed. If the 50% test
is not met, then no part of the deduction
is apportioned under these rules.
Lines 3a through 3d. To figure the
amount of R&D deductions to apportion to
each statutory grouping, divide the gross
sales apportioned to the statutory
grouping by the worldwide gross sales for
the product line. Multiply the result by the
R&D deductions to be apportioned.
Note. If the corporation had section
901(j) income from more than one
sanctioned country or had income
re-sourced by treaty for more than one
country, see Computer-Generated
Schedule H above.
on page 8.
Example 1. To determine the amount
to enter on line 3a, column (a)(ii):
1. Divide the amount on line 3a,
column (a)(i) by the amount on line 1,
column (a)(i).
2. Multiply the result by the amount on
line 2, column (a)(ii).
Example 2. To determine the amount
to enter on line 3b, column (a)(iv):
1. Divide the amount on line 3b,
column (a)(iii) by the amount on line 1,
column (a)(iii).
2. Multiply the result by the amount on
line 2, column (a)(iv).

Column (b) Gross Income Methods
Complete these columns only if the
corporation elects one of the gross
income methods of apportioning R&D
deductions described in Regulations
section 1.861-17(d)(2) and (3). Check the
box for the option used. Use Option 1
only if certain conditions are met. See
Regulations section 1.861-17(d)(2).

Column (b)(vi)
Line 1. Enter the total gross income
(excluding exempt income according to
Temporary Regulations section
1.861-8T(d)(2)).
Lines 3a through 3d. Enter the gross
income within each statutory grouping.

Column (b)(vii)
Line 1. Enter the total R&D deductions.
Line 2. Reduce the line 1 totals by
legally mandated R&D (Regulations
section 1.861-17(a)(4)), and a 25%
exclusive apportionment amount
(Regulations section 1.861-17(b)(1)(ii)).
Lines 3a through 3d. If Option 1 is
checked, divide the gross income
apportioned to the statutory grouping by
the total gross income and multiply the
result by the R&D deductions to be
apportioned. If Option 2 is checked, enter
the appropriate amount as described in
Regulations section 1.861-17(d)(3).

-9-

Part II—Interest Deductions, All
Other Deductions, and Total
Deductions
Note. The line 4 totals will generally be
less than the totals on lines 1 and 2
because the line 4 totals do not include
the gross income and deductions that are
implicitly apportioned to the residual
grouping.

Columns (a)(i) through (b)(iv)
Use these columns to apportion interest
deductions. See Temporary Regulations
sections 1.861-8T through 1.861-13T for
rules on the apportionment of interest
deductions based on the fair market
value, tax book value, or adjusted tax
book value of assets.
If the corporation elected to use the
fair market value method to apportion
interest expense, see Temporary
Regulations section 1.861-9T(h). Also see
Rev. Proc. 2003-37, 2003-1 C.B. 950, for
procedures for supplying certain
documentation and information.
For tax years beginning on or after
March 26, 2004, a corporation may elect
to use the alternative tax book value
method. See Regulations section
1.861-9(i).
Columns (a) and (b) are subdivided
into “Nonfinancial Corporations” and
“Financial Corporations.” In allocating
interest deductions, members of an
affiliated group that are financial
corporations must be treated as a
separate affiliated group. Complete
columns (a)(ii) and (b)(iv) for members of
the corporation’s affiliated group that are
financial corporations and columns (a)(i)
and (b)(iii) for members that are
nonfinancial corporations.
See Regulations section 1.861-11 for
the definition of an affiliated group.

Columns (a)(i) and (a)(ii)
Line 1a. Enter the average of the total
assets of the affiliated group. See
Temporary Regulations section
1.861-9T(g)(2) for the definition of
average for these purposes.
Line 1b. Enter the assets included on
line 1a that are characterized as excess
related party indebtedness. See
Temporary Regulations section
1.861-10T(e) for an exception to the
general rule of fungibility for excess
related party indebtedness.
Line 1c. Enter all other assets that
attract specifically allocable interest
deductions. See Temporary Regulations
section 1.861-10T for other exceptions to
the general rule of fungibility (such as
qualified nonrecourse indebtedness and
integrated financial transactions).
Line 1d. Enter the total of the exempt
assets and assets without directly
identifiable yield that are to be excluded
from the interest apportionment formula
(Temporary Regulations sections
1.861-8T(d)(2) and 1.861-9T(g)(3)).

Page 10 of 12

Instructions for Form 1118

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Lines 3a through 3d. The assets on line
2 are characterized as assets in one of
the statutory groupings or as belonging to
the residual grouping. Enter the value of
the assets in each of the statutory
groupings on line 3a through 3d. See
Temporary Regulations sections
1.861-9T(g)(3), 1.861-12T(g)(2), and
1.861-12T(h)(2) for the rules for
characterizing the assets.

Columns (b)(iii) and (b)(iv)
Line 1a. Enter the total interest
deductions for the members of the
corporation’s affiliated group. These
include any expense that is currently
deductible under section 163 (including
original issue discount), and interest
equivalents. See Temporary Regulations
section 1.861-9T for the definition of
interest equivalents and a list of the
sections that disallow or suspend interest
deductions or require the capitalization of
interest deductions.
Line 1b. Enter the interest deductions
associated with the assets on line 1b of
columns (a)(i) and (a)(ii), respectively,
that attract specifically allocable interest
deductions under Temporary Regulations
section 1.861-10T(e).
Note. These interest deductions will be
divided among the statutory groupings

and will appear as a definitely allocable
deduction in Schedule A, column 9(d).
Line 1c. Enter the interest deductions
associated with the assets on line 1c of
columns (a)(i) and (a)(ii), respectively,
that attract specifically allocable interest
deductions.
Lines 3a through 3d. To figure the
amount of interest deductions to
apportion to each statutory grouping,
divide the assets apportioned to the
grouping by the total assets apportioned
and multiply the result by the interest
deductions to be apportioned.
Example 1. To figure the amount to
enter on line 3a, column (b)(iii): (a) divide
the amount entered on line 3a, column
(a)(i), by the amount on line 2, column
(a)(i); and (b) multiply the result by the
amount on line 2, column (b)(iii).
Example 2. To figure the amount to
enter on line 3b, column (b)(iv): (a) divide
the amount on line 3b, column (a)(ii) by
the amount on line 2, column (a)(ii); and
(b) multiply the result by the amount on
line 2, column (b)(iv).

Column (c)
Complete this column to apportion all
other deductions not definitely allocable

-10-

(other than interest deductions and R&D
deductions). See Regulations sections
1.861-8 and 1.861-14 and Temporary
Regulations sections 1.861-8T and
1.861-14T.
Line 1a. Enter the total other deductions.
Examples include: stewardship expenses;
legal and accounting expenses; and other
expenses related to certain supportive
functions such as overhead, general and
administrative, advertising, and
marketing. Deductions for charitable
contributions made on or after July 28,
2004, generally are definitely related and
allocable to all gross income and
apportioned solely to domestic source
income.
Lines 3a through 3d. Enter the
amounts apportioned to each statutory
grouping.

Schedules I and J
See the separate instructions for
Schedule I and Schedule J to see if the
corporation must file these schedules.

Page 11 of 12

Instructions for Form 1118

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Foreign Country and U.S.
Possession Codes
Enter the following codes in the
appropriate columns as requested in
Schedule A, Schedule C, Schedule D,
and Schedule E.
Country
Afghanistan . . . . . . . . . . . . . . .
Akrotiri . . . . . . . . . . . . . . . . . .
Albania . . . . . . . . . . . . . . . . . .
Algeria . . . . . . . . . . . . . . . . . .
American Samoa . . . . . . . . . . .
Andorra . . . . . . . . . . . . . . . . . .
Angola . . . . . . . . . . . . . . . . . .
Anguilla . . . . . . . . . . . . . . . . . .
Antarctica . . . . . . . . . . . . . . . .
Antigua and Barbuda . . . . . . . .
Argentina . . . . . . . . . . . . . . . .
Armenia . . . . . . . . . . . . . . . . .
Aruba . . . . . . . . . . . . . . . . . . .
Ashmore and Cartier Islands . . .
Australia . . . . . . . . . . . . . . . . .
Austria . . . . . . . . . . . . . . . . . .
Azerbaijan . . . . . . . . . . . . . . . .
Azores . . . . . . . . . . . . . . . . . .
Bahamas, The . . . . . . . . . . . . .
Bahrain . . . . . . . . . . . . . . . . . .
Baker Island . . . . . . . . . . . . . .
Balearic Islands (Mallorca, etc.) .
Bangladesh . . . . . . . . . . . . . . .
Barbados . . . . . . . . . . . . . . . .
Bassas da India . . . . . . . . . . . .
Belarus . . . . . . . . . . . . . . . . . .
Belgium . . . . . . . . . . . . . . . . . .
Belize . . . . . . . . . . . . . . . . . . .
Benin (Dahomey) . . . . . . . . . . .
Bermuda . . . . . . . . . . . . . . . . .
Bhutan . . . . . . . . . . . . . . . . . .
Bolivia . . . . . . . . . . . . . . . . . . .
Bonaire . . . . . . . . . . . . . . . . . .
Bosnia-Herzegovina . . . . . . . . .
Botswana . . . . . . . . . . . . . . . .
Bouvet Island . . . . . . . . . . . . . .
Brazil . . . . . . . . . . . . . . . . . . .
British Indian Ocean Territory . .
Brunei . . . . . . . . . . . . . . . . . . .
Bulgaria . . . . . . . . . . . . . . . . . .
Burkina Faso (Upper Volta) . . . .
Burma . . . . . . . . . . . . . . . . . . .
Burundi . . . . . . . . . . . . . . . . . .
Cambodia (Kampuchea) . . . . . .
Cameroon . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . .
Canary Islands . . . . . . . . . . . . .
Cape Verde . . . . . . . . . . . . . . .
Cayman Islands . . . . . . . . . . . .
Central African Republic . . . . . .
Chad . . . . . . . . . . . . . . . . . . . .
Chile . . . . . . . . . . . . . . . . . . . .
China, People’s Republic of
(including Inner Mongolia, Tibet,
and Manchuria) . . . . . . . . . . . .
Christmas Island (Indian Ocean)
Clipperton Island . . . . . . . . . . .
Cocos (Keeling) Islands . . . . . .
Colombia . . . . . . . . . . . . . . . . .
Comoros . . . . . . . . . . . . . . . . .
Congo (Brazzaville) . . . . . . . . .

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Code
AF
AX
AL
AG
AQ
AN
AO
AV
AY
AC
AR
AM
AA
AT
AS
AU
AJ
PO
BF
BA
FQ
SP
BG
BB
BS
BO
BE
BH
BN
BD
BT
BL
NT
BK
BC
BV
BR
IO
BX
BU
UV
BM
BY
CB
CM
CA
SP
CV
CJ
CT
CD
CI

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.

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CH
KT
IP
CK
CO
CN
CF

Congo, Democratic Republic of
(Zaire) . . . . . . . . . . . . . . . . . . . . .
Cook Islands . . . . . . . . . . . . . . . .
Coral Sea Islands Territory . . . . . .
Corsica . . . . . . . . . . . . . . . . . . . .
Costa Rica . . . . . . . . . . . . . . . . .
Cote D’Ivoire (Ivory Coast) . . . . . .
Croatia . . . . . . . . . . . . . . . . . . . .
Cuba . . . . . . . . . . . . . . . . . . . . . .
Curacao . . . . . . . . . . . . . . . . . . .
Cyprus . . . . . . . . . . . . . . . . . . . .
Czech Republic . . . . . . . . . . . . . .
Denmark . . . . . . . . . . . . . . . . . . .
Dhekelia . . . . . . . . . . . . . . . . . . .
Djibouti . . . . . . . . . . . . . . . . . . . .
Dominica . . . . . . . . . . . . . . . . . . .
Dominican Republic . . . . . . . . . . .
Dubai . . . . . . . . . . . . . . . . . . . . .
Ecuador . . . . . . . . . . . . . . . . . . .
Egypt . . . . . . . . . . . . . . . . . . . . .
Eleuthera Island . . . . . . . . . . . . . .
El Salvador . . . . . . . . . . . . . . . . .
Equatorial Guinea . . . . . . . . . . . .
Eritrea . . . . . . . . . . . . . . . . . . . . .
Estonia . . . . . . . . . . . . . . . . . . . .
Ethiopia . . . . . . . . . . . . . . . . . . . .
Europa Island . . . . . . . . . . . . . . .
Falkland Islands (Islas Malvinas) . .
Faroe Islands . . . . . . . . . . . . . . . .
Fiji . . . . . . . . . . . . . . . . . . . . . . .
Finland . . . . . . . . . . . . . . . . . . . .
France . . . . . . . . . . . . . . . . . . . .
French Guiana . . . . . . . . . . . . . . .
French Polynesia (Tahiti) . . . . . . .
French Southern and Antarctic
Lands . . . . . . . . . . . . . . . . . . . . .
Gabon . . . . . . . . . . . . . . . . . . . . .
Gambia . . . . . . . . . . . . . . . . . . . .
Gaza Strip . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . .
Ghana . . . . . . . . . . . . . . . . . . . . .
Gibraltar . . . . . . . . . . . . . . . . . . .
Glorioso Islands . . . . . . . . . . . . . .
Great Britain (United Kingdom) . . .
Greece . . . . . . . . . . . . . . . . . . . .
Greenland . . . . . . . . . . . . . . . . . .
Grenada (Southern Grenadines) . .
Guadeloupe . . . . . . . . . . . . . . . . .
Guam . . . . . . . . . . . . . . . . . . . . .
Guatemala . . . . . . . . . . . . . . . . . .
Guernsey . . . . . . . . . . . . . . . . . .
Guinea . . . . . . . . . . . . . . . . . . . .
Guinea-Bissau . . . . . . . . . . . . . . .
Guyana . . . . . . . . . . . . . . . . . . . .
Haiti . . . . . . . . . . . . . . . . . . . . . .
Heard Island and McDonald Islands
Honduras . . . . . . . . . . . . . . . . . .
Hong Kong . . . . . . . . . . . . . . . . .
Howland Island . . . . . . . . . . . . . .
Hungary . . . . . . . . . . . . . . . . . . .
Iceland . . . . . . . . . . . . . . . . . . . .
India . . . . . . . . . . . . . . . . . . . . . .
Indonesia (including Bali, Belitung,
Flores, Java, Moluccas, Sumatra,
etc.) . . . . . . . . . . . . . . . . . . . . . .
Iran . . . . . . . . . . . . . . . . . . . . . . .
Iraq . . . . . . . . . . . . . . . . . . . . . . .
Ireland, Republic of (Eire) . . . . . . .
Isle of Man . . . . . . . . . . . . . . . . .

-11-

CG
CW
CR
FR
CS
IV
HR
CU
NT
CY
EZ
DA
DX
DJ
DO
DR
AE
EC
EG
BF
ES
EK
ER
EN
ET
EU
FK
FO
FJ
FI
FR
FG
FP
FS
GB
GA
GZ
GG
GM
GH
GI
GO
UK
GR
GL
GJ
GP
GQ
GT
GK
GV
PU
GY
HA
HM
HO
HK
HQ
HU
IC
IN
ID
IR
IZ
EI
IM

Israel . . . . . . . . . . . . . . . . . . . . .
Italy . . . . . . . . . . . . . . . . . . . . . .
Ivory Coast . . . . . . . . . . . . . . . .
Jamaica . . . . . . . . . . . . . . . . . .
Jan Mayen . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . .
Jarvis Island . . . . . . . . . . . . . . .
Jersey . . . . . . . . . . . . . . . . . . . .
Johnston Atoll . . . . . . . . . . . . . .
Jordan . . . . . . . . . . . . . . . . . . . .
Juan de Nova Island . . . . . . . . . .
Kazakhstan . . . . . . . . . . . . . . . .
Kenya . . . . . . . . . . . . . . . . . . . .
Kingman Reef . . . . . . . . . . . . . .
Kiribati (Gilbert Islands) . . . . . . .
Korea, Democratic People’s
Republic of (North) . . . . . . . . . . .
Korea, Republic of (South) . . . . .
Kurile Islands . . . . . . . . . . . . . . .
Kuwait . . . . . . . . . . . . . . . . . . . .
Kyrgyzstan . . . . . . . . . . . . . . . .
Laos . . . . . . . . . . . . . . . . . . . . .
Latvia . . . . . . . . . . . . . . . . . . . .
Lebanon . . . . . . . . . . . . . . . . . .
Lesotho . . . . . . . . . . . . . . . . . . .
Liberia . . . . . . . . . . . . . . . . . . . .
Libya . . . . . . . . . . . . . . . . . . . . .
Liechtenstein . . . . . . . . . . . . . . .
Lithuania . . . . . . . . . . . . . . . . . .
Luxembourg . . . . . . . . . . . . . . .
Macau . . . . . . . . . . . . . . . . . . . .
Macedonia . . . . . . . . . . . . . . . . .
Madagascar (Malagasy Republic)
Malawi . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . .
Maldives . . . . . . . . . . . . . . . . . .
Mali . . . . . . . . . . . . . . . . . . . . . .
Malta . . . . . . . . . . . . . . . . . . . . .
Marshall Islands . . . . . . . . . . . . .
Martinique . . . . . . . . . . . . . . . . .
Mauritania . . . . . . . . . . . . . . . . .
Mauritius . . . . . . . . . . . . . . . . . .
Mayotte . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . .
Micronesia, Federated States of .
Midway Islands . . . . . . . . . . . . .
Moldova . . . . . . . . . . . . . . . . . .
Monaco . . . . . . . . . . . . . . . . . . .
Mongolia . . . . . . . . . . . . . . . . . .
Montenegro . . . . . . . . . . . . . . . .
Montserrat . . . . . . . . . . . . . . . . .
Morocco . . . . . . . . . . . . . . . . . .
Mozambique . . . . . . . . . . . . . . .
Namibia . . . . . . . . . . . . . . . . . . .
Nauru . . . . . . . . . . . . . . . . . . . .
Navassa Island . . . . . . . . . . . . .
Nepal . . . . . . . . . . . . . . . . . . . .
Netherlands . . . . . . . . . . . . . . . .
Netherlands Antilles . . . . . . . . . .
New Caledonia . . . . . . . . . . . . .
New Zealand . . . . . . . . . . . . . . .
Nicaragua . . . . . . . . . . . . . . . . .
Niger . . . . . . . . . . . . . . . . . . . . .
Nigeria . . . . . . . . . . . . . . . . . . .
Niue . . . . . . . . . . . . . . . . . . . . .
Norfolk Island . . . . . . . . . . . . . . .
North Korea . . . . . . . . . . . . . . . .
Northern Ireland . . . . . . . . . . . . .
Northern Mariana Islands . . . . . .
Norway . . . . . . . . . . . . . . . . . . .

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RM
MB
MR
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FM
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MD
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MG
MJ
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Page 12 of 12

Instructions for Form 1118

11:19 - 15-OCT-2008

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Oman . . . . . . . . . . . . . . . . . . . . .
Pakistan . . . . . . . . . . . . . . . . . . .
Palau . . . . . . . . . . . . . . . . . . . . .
Palmyra Atoll . . . . . . . . . . . . . . . .
Panama . . . . . . . . . . . . . . . . . . .
Papua New Guinea . . . . . . . . . . .
Paracel Islands . . . . . . . . . . . . . .
Paraguay . . . . . . . . . . . . . . . . . .
Peru . . . . . . . . . . . . . . . . . . . . . .
Philippines . . . . . . . . . . . . . . . . . .
Pitcairn Island . . . . . . . . . . . . . . .
Poland . . . . . . . . . . . . . . . . . . . .
Portugal . . . . . . . . . . . . . . . . . . .
Puerto Rico . . . . . . . . . . . . . . . . .
Qatar (Katar) . . . . . . . . . . . . . . . .
Redonda . . . . . . . . . . . . . . . . . . .
Reunion . . . . . . . . . . . . . . . . . . .
Romania . . . . . . . . . . . . . . . . . . .
Russia . . . . . . . . . . . . . . . . . . . . .
Rwanda . . . . . . . . . . . . . . . . . . . .
Ryukyu Islands . . . . . . . . . . . . . .
St. Barthelemy . . . . . . . . . . . . . . .
St. Helena (Ascension Island and
Tristan de Cunha Island Group) . . .
St. Kitts (St. Christopher and Nevis)
St. Lucia . . . . . . . . . . . . . . . . . . .
St. Martin . . . . . . . . . . . . . . . . . .
St. Pierre and Miquelon . . . . . . . .
St. Vincent and the Grenadines
(Northern Grenadines) . . . . . . . . .
Samoa . . . . . . . . . . . . . . . . . . . .
San Marino . . . . . . . . . . . . . . . . .

MU
PK
PS
LQ
PM
PP
PF
PA
PE
RP
PC
PL
PO
RQ
QA
VI
RE
RO
RS
RW
JA
TB
SH
SC
ST
RN
SB
VC
WS
SM

Sao Tome and Principe . . . . . . .
Saudi Arabia . . . . . . . . . . . . . . .
Senegal . . . . . . . . . . . . . . . . . .
Serbia . . . . . . . . . . . . . . . . . . . .
Seychelles . . . . . . . . . . . . . . . . .
Sierra Leone . . . . . . . . . . . . . . .
Singapore . . . . . . . . . . . . . . . . .
Slovak Republic (Slovakia) . . . . .
Slovenia . . . . . . . . . . . . . . . . . .
Solomon Islands . . . . . . . . . . . .
Somalia . . . . . . . . . . . . . . . . . . .
South Africa . . . . . . . . . . . . . . . .
South Georgia and the South
Sandwich Islands . . . . . . . . . . . .
South Korea . . . . . . . . . . . . . . .
Spain . . . . . . . . . . . . . . . . . . . .
Spratly Islands . . . . . . . . . . . . . .
Sri Lanka . . . . . . . . . . . . . . . . . .
Sudan . . . . . . . . . . . . . . . . . . . .
Suriname . . . . . . . . . . . . . . . . . .
Svalbard (Spitsbergen) . . . . . . . .
Swaziland . . . . . . . . . . . . . . . . .
Sweden . . . . . . . . . . . . . . . . . . .
Switzerland . . . . . . . . . . . . . . . .
Syria . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . .
Tajikistan . . . . . . . . . . . . . . . . . .
Tanzania . . . . . . . . . . . . . . . . . .
Thailand . . . . . . . . . . . . . . . . . .
Timor-Leste (formerly East Timor)
Togo . . . . . . . . . . . . . . . . . . . . .

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Tokelau . . . . . . . . . . . . . . . . . . .
Tonga . . . . . . . . . . . . . . . . . . . .
Trinidad and Tobago . . . . . . . . .
Tromelin Island . . . . . . . . . . . . .
Tunisia . . . . . . . . . . . . . . . . . . .
Turkey . . . . . . . . . . . . . . . . . . . .
Turkmenistan . . . . . . . . . . . . . . .
Turks and Caicos Islands . . . . . .
Tuvalu . . . . . . . . . . . . . . . . . . . .
Uganda . . . . . . . . . . . . . . . . . . .
Ukraine . . . . . . . . . . . . . . . . . . .
United Arab Emirates . . . . . . . . .
United Kingdom (England, Wales,
Scotland, No. Ireland) . . . . . . . . .
Uruguay . . . . . . . . . . . . . . . . . .
Uzbekistan . . . . . . . . . . . . . . . .
Vanuatu . . . . . . . . . . . . . . . . . .
Vatican City . . . . . . . . . . . . . . . .
Venezuela . . . . . . . . . . . . . . . . .
Vietnam . . . . . . . . . . . . . . . . . . .
Virgin Islands (British) . . . . . . . . .
Virgin Islands (U.S.) . . . . . . . . . .
Wake Island . . . . . . . . . . . . . . .
Wallis and Futuna . . . . . . . . . . .
West Bank . . . . . . . . . . . . . . . . .
Western Sahara . . . . . . . . . . . . .
Windward Islands . . . . . . . . . . . .
Yemen (Aden) . . . . . . . . . . . . . .
Zambia . . . . . . . . . . . . . . . . . . .
Zimbabwe . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . .

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Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the
form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their
contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are
confidential, as required by section 6103.
The time needed to complete and file this form and related schedules will vary depending on individual circumstances. The
estimated average times are:
44
20

17

71
Form

Recordkeeping

1118

93 hr., 16 min.

Sch. I (Form 1118)

9 hr., 19 min.

Sch. J (Form 1118)

22 hr., 43 min.

Learning about the law
or the form
18 hr., 32 min.

Preparing and sending
the form to the IRS
22 hr., 4 min.

1 hr.

1 hr., 11 min.

1 hr., 23 min.

1 hr., 49 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related
schedules simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

-12-

53