Form 8404 Interest Charge on DISC-Related Deferred Tax Liability

Form

8404

Interest Charge on DISC-Related
Deferred Tax Liability

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Department of the Treasury
Internal Revenue Service

A Check applicable box to
show type of taxpayer:

Corporation
Individual
Trust or
Decedent’s estate

OMB No. 1545-0123

2018

File Form 8404 separately from your income tax return. See Where to file below.
▶ Go to www.irs.gov/Form8404 for the latest information.

B Shareholder’s identifying
number

Name of shareholder
Address (number, street, room, suite, or P.O. box number)

C IC-DISC’s identifying
number

City or town, state or province, country, and ZIP or foreign postal code

D Shareholder’s tax year for which interest charge is required to be paid (see instructions) E Name of IC-DISC

Note: See Line-by-Line Instructions, later.
1
Taxable income or loss on tax return (actual or estimated) . . . . . . . . . .
2
Deferred DISC income from line 10, Part III, Schedule K (Form 1120-IC-DISC) . . .
3
Section 995(f)(2) adjustments to line 1 income or loss . . . . . . . . . . .
4
Combine lines 1, 2, and 3. If zero or less, don’t file this form . . . . . . . . .
5
Tax liability on line 4 amount . . . . . . . . . . . . . . . . . . .
6
Tax liability per return (actual or estimated) . . . . . . . . . . . . . . .
7
DISC-related deferred tax liability. Subtract line 6 from line 5 . . . . . . . . .
8
Base period T-bill rate factor . . . . . . . . . . . . . . . . . . .
9
Interest charge due. Multiply line 7 by line 8. (See Paying the interest charge below.)

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Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge
and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
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Sign
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Signature and title (if any)

Print/Type preparer’s name

Preparer’s signature

Date

Date

Check
if
self-employed

Firm’s name

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Firm’s EIN

Firm’s address

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Phone no.

Future Developments
For the latest information about developments
related to Form 8404 and its instructions,
such as legislation enacted after they were
published, go to www.irs.gov/Form8404.

General Instructions
Section references are to the Internal Revenue
Code unless otherwise noted.
Purpose of form. Shareholders of Interest
Charge Domestic International Sales
Corporations (IC-DISCs) use Form 8404 to
figure and report their interest owed on
DISC-related deferred tax liability.
Who must file. You must file Form 8404 if (a)
you are a shareholder of an IC-DISC, (b) the
IC-DISC reports deferred DISC income to you
on line 10, Part III of Schedule K (Form
1120-IC-DISC), and (c) the addition of this
income would result in increased taxable
income if it were included on your tax return
for the tax year.
When to file. File Form 8404 by the due date
of your federal income tax return (excluding
extensions) for your tax year that ends with or
includes the IC-DISC’s tax year end.
For example, you are a fiscal year
corporation with an August 1, 2018, to July
31, 2019, tax year and you are a shareholder
in an IC-DISC with an August 1, 2018, to July
31, 2019, tax year that reports deferred DISC
income to you for its tax year ending July 31,
2019. Because your tax year ends with the
IC-DISC’s tax year, you are required to file
Form 8404 on or before November 15, 2019
(31/2 months after your tax year ends).

Where to file. File Form 8404 at the following
address.
Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999
Paying the interest charge. You must pay
the interest charge shown on line 9 by the
date your federal income tax for the tax year
is required to be paid. For individuals and
corporations, the interest is generally due on
the 15th day of the 4th month following the
close of the tax year. Corporations with a tax
year ending on June 30, see section
2006(a)(3)(B) of P.L. 114-41.
Attach a check or money order made
payable to “United States Treasury” for the
full amount of the interest charge. Don’t
combine the interest charge with any other
tax or interest due. Write your identification
number and “Form 8404—Interest Due” on
your payment.
If the interest charge isn’t paid by the due
date, interest, compounded daily, at the rate
specified under section 6621, will be imposed
on the amount of unpaid interest from the due
date until the date the interest is paid.
Payment of estimated tax isn’t required for
the interest charge. See Proposed
Regulations section 1.995(f)-1(j)(3) for other
details.
For corporations (other than
S corporations), the annual interest charge is
deductible as an interest expense for the tax
year it is paid or accrued. See Proposed
Regulations section 1.995(f)-1(j)(2) for details
on the tax year of deductibility. For other
filers, this interest isn’t deductible.

For Privacy Act and Paperwork Reduction Act Notice, see instructions.

PTIN

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Amended Form 8404. You are required to file
an amended Form 8404 only if the amount of
the DISC-related deferred tax liability (line 7)
changes as a result of audit adjustments,
changes you make by the filing of an
amended return, or if estimates were used on
your original Form 8404 and changes were
made to these estimates when you filed your
tax return. See Proposed Regulations section
1.995(f)-1(j)(4) for details.

Specific Instructions
Name and address. Enter the name and
address as shown on your tax return from
which the income or loss on line 1 of Form
8404 is obtained. If the return is a joint return,
also enter your spouse’s name as shown on
Form 1040.
Item A—Type of taxpayer. Check the
applicable box to indicate your status as a
taxpayer.
Partnerships and S corporations distribute
their share of deferred DISC income to
partners and shareholders, and the partners
and shareholders complete Form 8404.
Item B—Shareholder’s identifying number.
Individuals must enter their social security
number. Other filers must enter their employer
identification number.
Item C—IC-DISC’s identifying number.
Enter the identifying number of the IC-DISC
from the Schedule K (Form 1120-IC-DISC) on
which the deferred DISC income was reported
to you. If income is reported to you from more
than one IC-DISC, enter each IC-DISC’s
identifying number in item C, each IC-DISC’s

Cat. No. 62423Z

Form 8404 (2018)

Page 2

Form 8404 (2018)

name in item E, and report the combined
income on line 2.
Item D—Tax year. Enter in item D the
calendar year or the beginning and ending
dates of the tax year shown on your tax return
for which the interest charge is figured.

Special Computation Rules
Carrybacks. The determination of the
shareholder’s DISC-related deferred tax
liability on lines 1 through 7 shall be made
without taking into account any capital loss
carryback or credit carryback to the tax year.
Carryovers. The determination of the
shareholder’s tax liability (line 5) for the tax
year is made by disregarding any loss,
deduction, or credit to the extent that such
loss, deduction, or credit may be carried
forward by the shareholder to any other tax
year.
Note: If the tax year is the last tax year to
which the amount of carryforward (of loss,
deduction, or credit) may be carried, the line 3
adjustments and line 5 tax shall be figured
with regard to the full amount of such
carryforward.
For example, a shareholder had an NOL
carryover to 2019 of $12,000; $10,000 income
to which $10,000 of the NOL can be applied;
$2,000 allowable NOL carryover to 2020; and
$5,000 deferred DISC income for 2019. In this
case, for purposes of figuring line 5, the
allowed NOL is $10,000. Note: If 2019 were
the last tax year to which the $12,000 NOL
could be carried, the full $12,000 NOL would
be allowed for purposes of figuring line 5 tax
liability. The additional $2,000 loss would be
entered on line 3.
Other adjustments. In figuring line 3
adjustments, take into account any income
and expense adjustments that don’t result in
amounts that may be carried back or forward
to other tax years. For example, in the case of
an IC-DISC shareholder who is an individual,
the amount of medical expenses allowable as
a deduction under section 213 must be
redetermined for purposes of line 3
adjustments. However, the amount allowable
as a charitable deduction under section 170
isn’t redetermined because this adjustment
could result in a carryback or carryover.
See Proposed Regulations section
1.995(f)-1(d) for other details regarding these
and other special computation rules.

Line-by-Line Instructions
Line 1. Enter on line 1 the taxable income or
loss from your federal income tax return for
your tax year that ends with or includes the
IC-DISC’s tax year end. If you haven’t yet filed
your tax return, estimate your income or loss
based on all information available to you. See
Amended Form 8404, earlier.
Line 2. Enter the deferred DISC income from
line 10, Part III of Schedule K (Form
1120-IC-DISC), for the IC-DISC tax year that
ends with or within your tax year.

Line 3. Enter the net amount of all section
995(f)(2) adjustments to taxable income. See
Special Computation Rules, earlier, for details
on the income (loss) and expense
adjustments to be made. If more than one
adjustment is involved, attach a statement
listing each item and show the computation of
the net amount.
Lines 5 and 6. “Tax liability” on lines 5 and 6
(with and without the deferred DISC income)
means the amount of tax imposed on the
IC-DISC shareholder for the tax year by
chapter 1 of the Internal Revenue Code (other
than taxes listed below) reduced by credits
allowable against such tax (other than credits
listed below).
See Special Computation Rules, earlier, for
rules for carrybacks and carryovers. These
rules may affect the line 5 computation.
The following taxes aren’t taken into
account.
• Alternative minimum tax (individuals only).
• Any other provisions described in section
26(b)(2) (relating to certain other taxes treated
as not imposed by chapter 1).
The following credits aren’t taken into
account.
• Section 31 (taxes withheld on wages).
• Section 32 (earned income credit).
• Section 34 (fuels credit).
For 2018, a Form 1040 filer or a Form 1120
filer using the above rules will generally figure
their line 6 tax liability using the following
items shown on the following lines of those
forms. All other filers should use the
corresponding lines of other income tax
returns. If you haven’t yet filed your return,
estimate the line 6 tax liability based on all
information available to you.
2018
2018
Form 1040 Form 1120
Line
Line
Tax less nonrefundable
credits . . . . .
Plus: (1) Recapture taxes

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13

7, Sch. J

*

*

(2) Prior year minimum
tax credit . . . 54b, Sch. 3 5d, Sch. J
Less: (1) Alternative minimum
tax . . . . . 45, Sch. 2
(2) Additional child tax
credit . . . .
17b
(3) American
opportunity credit .
17c
(4) Premium tax credit
(Form 8962) . . 70, Sch. 5
(5) Credit for tax paid
on undistributed
capital gains (Form
2439) . . . . 74a, Sch. 5 20a, Sch. J
(6) Health insurance
credit for eligible
recipients (Form
8885) . . . . 74c, Sch. 5

* Caution: Only use the portion of Form 1040,
line 15, or Form 1120, Schedule J, line 10,
attributable to recapture of credits allowable
against taxes treated as imposed under
chapter 1 (for example, recapture of
investment tax and low-income housing
credits). See section 26(b)(2) for a list of
recapture taxes to exclude.

Line 8. The base period T-bill rate is defined
in section 995(f)(4). The base period T-bill rate
is compounded daily based on the number of
days in the shareholder’s tax year to
determine the base period T-bill rate factor.
The base period T-bill rate factor for 2018 is
0.020813051 for a 365-day tax year. Enter the
appropriate factor on line 8 of Form 8404. See
Rev. Rul. 2018-31, 2018-50 I.R.B. 848, for a
short tax year or a 52-53-week tax year.
Privacy Act and Paperwork Reduction Act
Notice. We ask for the information on this
form to carry out the Internal Revenue laws of
the United States. We need it to figure and
collect the right amount of tax. Section 995(f)
requires taxpayers to pay over to the IRS
interest on DISC-Related Deferred Tax
Liability. This form is used to determine the
amount of tax that you owe. Sections 6001
and 6011 require you to provide the
requested information if the tax applies to
you. Section 6109 requires you to provide
your identifying number. Routine uses of this
information include disclosing it to the
Department of Justice for civil and criminal
litigation and to other federal agencies, as
provided by law. We may disclose the
information to cities, states, the District of
Columbia, and U.S. Commonwealths or
possessions to administer their tax laws. We
may also disclose this information to other
countries under a tax treaty, to federal and
state agencies to enforce federal nontax
criminal laws, or to federal law enforcement
and intelligence agencies to combat terrorism.
If you don’t provide this information or provide
incomplete or fraudulent information, you may
be subject to penalties.
You aren’t 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 will vary depending on individual
circumstances. The estimated burden for
business taxpayers filing this form is
approved under OMB control number
1545-0123.
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler, we
would be happy to hear from you. You can
send us comments from
www.irs.gov/FormComments. Or you can
write to the Internal Revenue Service, Tax
Forms and Publications, 1111 Constitution
Ave. NW, IR-6526, Washington, DC 20224.
Don’t send the form to this office. Instead,
see Where to file, earlier.