Schedule V - List of Vessels or Aircraft, Operations, and Owners

2009

Department of the Treasury
Internal Revenue Service

Instructions for Schedule V
(Form 1120-F)
List of Vessels or Aircraft, Operators, and Owners
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
What’s New
Lines 11 and 12 are new. Line 11 was
added to require foreign corporations to
indicate the amount of their U.S. source
gross transportation income which is
exempt by treaty. Line 12 is the new total
line.

Purpose of Schedule
Use this schedule to report required
information for each vessel or aircraft with
respect to which the corporation is subject
to the 4% rate of tax on U.S. source gross
transportation income (USSGTI) under
section 887.

Who Must File
Foreign corporations that are subject to
the 4% tax on their USSGTI under section
887 must complete Schedule V (Form
1120-F).

When and Where to File
Attach Schedule V (Form 1120-F) to the
foreign corporation’s Form 1120-F income
tax return. See the instructions for Form
1120-F for the time, place, and manner
for filing the corporation’s income tax
return.

Definitions
The term United States source gross
transportation income means any gross
income (without reduction by any
deductions or losses) that is
transportation income (as defined in
section 863(c)(3)) to the extent such
income is treated as from sources within
the United States under section
863(c)(2)(A).
The term does not include
transportation income which is:
• Not sourced under section 863(c)(2);
• Taxable as effectively connected with
the corporation’s trade or business in the
United States pursuant to section
887(b)(4); or
• Taxable in a possession of the United
States under a provision of the Code, as
made applicable in such possession.
Note. Foreign corporations may derive
USSGTI directly, from participation in a
pool, joint venture, joint service

arrangement, as a partner in a
partnership, or as the beneficiary of a
trust or estate.
The term transportation income (as
defined in section 863(c)(3)) means any
income derived from, or in connection
with:
• The use (or hiring or leasing for use) of
any vessel or aircraft, or
• The performance of services directly
related to the use of any vessel or aircraft.
The term vessel or aircraft includes
any container used in connection with a
vessel or aircraft. However, the term
transportation income does not include
income from the disposition of vessels,
containers, or aircraft.
The term income derived from or in
connection with, the use (or hiring or
leasing for use) of any vessel or
aircraft means:
• Income derived from transporting
passengers or property by vessel or
aircraft;
• Income derived from hiring or leasing a
vessel or aircraft for use in the
transportation of passengers or property
on the vessel or aircraft; and
• Income derived by an operator of
vessels or aircraft from the rental or use
of containers and related equipment
(container related income) in connection
with, or incidental to, the transportation of
cargo on such vessels or aircraft by the
operator. Persons other than an operator
of a vessel or aircraft do not derive
container related income. Such income is
treated as rental income, not
transportation income.
The term income derived from or in
connection with the performance of
services directly related to the use of a
vessel or aircraft includes the following
categories of income.
1. On board services. Income in this
category is derived from services
performed on board a vessel or aircraft in
the course of the actual transportation of
passengers or property aboard vessels or
aircraft. Examples of income in this
category include income from renting
staterooms, berths, or living
accommodations; furnishing meals and
entertainment; operating shops and
casinos; providing excess baggage
storage; and income from the
performance of personal services by
individuals. The term also includes
Cat. No. 51664Q

income derived from demurrage,
dispatch, and dead freight.
2. Off board services. Income in this
category is derived from services
performed off board any vessel or aircraft
by an operator of a vessel or aircraft,
provided such services are incidental to
the operation of vessels or aircraft by
such operator. The term does not include
income from services performed by
persons other than an operator.
Examples of off board services include:
terminal services such as dockage,
wharfage, storage, lights, water,
refrigeration, refueling and similar
services; stevedoring and other cargo
handling services; maintenance and
repairs; and services performed as a
travel or booking agent.
The term operator includes the actual
operator of a vessel or aircraft, as well as
a time or voyage charterer of such vessel
or aircraft.

Specific Instructions
Important. All information reported on
Schedule V must be in English. All
amounts must be stated in U.S. dollars.
Throughout these instructions, when
the pronouns “you” and “your” are used,
they are used in reference to the foreign
corporation filing Form 1120-F.
Columns A through D. Complete a
separate column for each vessel or
aircraft with respect to which you are
subject to a 4% rate of tax under section
887. For example:
• If you were a bareboat lessor of
vessels or aircraft during the tax year,
complete a separate column for each
vessel or aircraft you leased out during
the tax year for which you derived
USSGTI.
• If you earned income during the tax
year from the operation of vessels or
aircraft, including time or voyage charter
hire, complete a separate column for
each vessel or aircraft operated by you
during the tax year for which you derived
USSGTI.
• If you earned income during the tax
year from providing services directly
related to the use of vessels or aircraft,
complete a separate column for each
vessel or aircraft for which such services
were performed and for which you
derived USSGTI.

If you derive USSGTI subject to a 4%
rate of tax under section 887 from more
than 4 vessels or aircraft, attach separate
sheets using the same size and format as
this Schedule V (Form 1120-F).
Line 1. Enter the name of the vessel or
type of aircraft.
Line 2. For each column, if you are
completing the column for a vessel, enter
the Lloyd’s register number on line 2. If
you are completing the column for an
aircraft, enter the registration number on
line 2.
Line 3. For each column, if the answer
to the question on line 3 is “Yes” and you
operate the vessel or aircraft which is
under a bareboat lease or sublease to
you, attach to Schedule V (Form 1120-F)
the following items:
1. The name and address of the
lessor of the vessel or aircraft; and
2. The term of the bareboat lease or
charter and the method for calculating the
rental portion of the payment.
Line 4. For each column, if the answer
to the question on line 4 is “Yes” and you
are the bareboat lessor of the vessel or
aircraft, attach to Schedule V (Form
1120-F) the following items:
1. The country of registration of the
vessel or aircraft,
2. Name and address of each lessee
or person chartering the vessel or aircraft
from you,
3. The term of the lease,
4. The number of days during the tax
year the vessel or aircraft was under
lease, and
5. A description of the method used to
determine the USSGTI from the leases

for the vessel or aircraft, and the
calculations used to apply this method
(see the Note in the instructions for line 9
for examples of reasonable methods that
may be used).
Line 5. Enter the name of the registered
owner. If you are the registered owner,
enter “Same as filer name above” on line
5.
Line 6. Enter the employer identification
number (EIN) or social security number
(SSN) of the registered owner if known. If
you are the registered owner, enter
“Same as filer EIN or SSN above” on line
6. If you are not the registered owner and
you do not know the EIN or SSN of the
registered owner, enter ‘‘Not known.’’
Line 7. Enter the name of the operator if
known. If you are the operator, enter
“Same as filer name above” on line 7. If
you are not the operator and you do not
know the name of the operator, enter
‘‘Not known.’’
Line 8. Enter the EIN or SSN of the
operator if known. If you are the operator,
enter “Same as filer EIN or SSN above”
on line 8. If you are not the operator and
you do not know the EIN or SSN of the
operator, enter ‘‘Not known.’’
Line 9. For each column, enter the
USSGTI the corporation derived with
respect to the vessel or aircraft. See
Definitions on page 1 for additional
information.
Note. In determining the amount of
USSGTI, the foreign corporation must
establish the actual amount of USSGTI
derived from a charter under a
reasonable method. For example, where

-2-

a vessel or aircraft is under charter, one
reasonable method of determining the
portion of such charter income which is
USSGTI is to apply to such charter
income the ratio of (a) the number of
days of uninterrupted travel on voyages
or flights between the United States and
the farthest point(s) where cargo or
passengers are loaded en route to, or
discharged en route from, the United
States, to (b) the number of days in the
smaller of the tax year or the particular
charter period. When determining
USSGTI, the number of days the vessel is
located in United States waters for repairs
or maintenance should not be included in
either the numerator or in the
denominator of the ratio.
Another reasonable method would be
to use a ratio based on the USSGTI
earned from the operation of the vessel or
aircraft by the lessee-operator, compared
with the total gross income of the
lessee-operator from the operation of the
vessel or aircraft during the smaller of the
tax year or the term of the charter.
However, an allocation based on the net
income of the lessee-operator will not be
considered reasonable for this purpose.
Important: A description of the
method used to determine the USSGTI
from the vessel or aircraft must be
attached to this Schedule V (Form
1120-F).
Line 11. If the foreign corporation is
claiming a treaty exemption on its
USSGTI, enter the amount on line 11 and
attach Form 8833, Treaty-Based Return
Position Disclosure Under Section 6114
or 7701(b).