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Schedule P (Form 1120-IC-DISC) (Rev. 9-2017) Page 2
Part II Transfer Price From Related Supplier to IC-DISC (See instructions.)
24 Gross receipts from transaction. Enter amount from line 1 or line 4, Part I . . . . . . . . . . 24
25 Less reductions:
a IC-DISC taxable income (but not to exceed amount determined in Part I) . . . 25a
b IC-DISC export promotion expenses allocable to gross income from transaction . 25b
c Other IC-DISC expenses allocable to gross income from transaction . . . . 25c
d Add lines 25a through 25c . . . . . . . . . . . . . . . . . . . . . . . . . 25d
26 Transfer price from related supplier to IC-DISC. Subtract line 25d from line 24 . . . . . . . 26
Part III IC-DISC Commission From Related Supplier (See instructions.)
27 IC-DISC taxable income (but not to exceed amount determined in Part I) . . . . . . . . . . 27
28 IC-DISC export promotion expenses allocable to gross receipts from transaction . . . . . . . 28
29 Other IC-DISC expenses allocable to gross receipts from transaction . . . . . . . . . . . 29
30 IC-DISC commission from related supplier. Add lines 27 through 29 . . . . . . . . . . 30
transaction to an amount that is no more than For purposes of line 2d, be sure to include
Instructions the sum of (1) 50% (0.50) of the IC-DISC’s the appropriate apportionment of deductions
Section references are to the Internal Revenue and related supplier’s combined taxable that are not directly allocable such as interest
Code unless otherwise noted. income attributable to the qualified export expenses and stewardship expenses. See
Purpose of schedule. Use Schedule P to receipts from the transaction and (2) 10% Temporary Regulations sections 1.861-11T(f)
show the computation of taxable income used (0.10) of the IC-DISC’s export promotion and 1.861-14T(f) for an explanation of
in computing (1) the transfer price from a expenses (as defined in Regulations section appropriate apportionment.
related supplier to an IC-DISC (Part II), or (2) 1.994-1(f)) attributable to the qualified export Complete Section A-2 if marginal costing is
the IC-DISC commission from a related receipts. Do not include in combined taxable used. The marginal costing rules may be used
supplier (Part III). income (line 13) the discount amount reflected only for sales, or commissions on sales, of
in receivables (on the sale of export property) property if the 50-50 method is used.
Complete and attach a separate that a related supplier transferred to the
Schedule P to Form 1120-IC-DISC for each IC-DISC. See Regulations sections Marginal costing cannot be used for
transaction or group of transactions to which 1.994-1(c)(3) and (6)(v). (1) leasing of property; (2) performance of
the intercompany pricing rules of sections services; or (3) sales of export property that
994(a)(1) and (2) are applied. If marginal costing rules apply, see Part I, (in the hands of a purchaser related under
Section A instructions below.
IC-DISC taxable income. Generally, the section 954(d)(3) to the seller) give rise to
intercompany pricing determinations are to be 4% gross receipts method. The transfer foreign base company sales income as
made on a transaction-by-transaction basis. price charged by the related supplier to the described in section 954(d) unless, for the
However, the IC-DISC may make an annual IC-DISC or IC-DISC commission from the purchaser’s year in which it resells the
election to determine intercompany pricing on related supplier is the amount that ensures property, section 954(b)(3)(A) applies or the
the basis of groups consisting of products or that the taxable income derived by the income is under the exceptions in section
product lines. If the group basis is elected, IC-DISC from the transaction does not 954(b)(4).
then all transactions for that product or exceed the sum of (1) 4% (0.04) of the Line 10. The overall profit percentage may
product line must be grouped. Each group is qualified export receipts of the IC-DISC be computed under an optional method. See
limited to one type of transaction (for derived from the transaction and (2) 10% Regulations section 1.994-2(c)(2) for details.
example, sales, leases, or commissions). (0.10) of the export promotion expenses (as
defined in Regulations section 1.994-1(f)) of Part I, Section B and Section C. Complete
A product or product line determination will the IC-DISC attributable to the qualified Section B or Section C. If marginal costing is
be accepted if it conforms to either of the export receipts. used, you must complete Section B.
following standards: (1) a recognized industry Line 22. If IC-DISC taxable income on a
or trade usage, or (2) major product groups Section 482 method. The transfer price the
(or any subclassifications within a major related supplier charged the IC-DISC, or sale is computed under the 4% method and
product group) (see Schedule P (Form 1120- IC-DISC commission from the related the IC-DISC chooses to apply the special rule
IC-DISC) Codes for Principal Business Activity supplier, is the amount actually charged, but for transfer prices or commissions, check the
in the Instructions for Form 1120-IC-DISC). is subject to the arm’s length standard of box in line 22 and attach a separate
The corporation may choose a product section 482. Do not complete Schedule P if statement showing the computation of the
grouping for one product and use the the section 482 method is used. limitation on IC-DISC taxable income
determined under the special rule and enter
transaction-by-transaction method for Incomplete transactions. For the 50-50 the amount on line 22. Under the special rule,
another product within the same tax year. and 4% methods, if the related supplier sells a transfer price or commission will not be
Generally, the computation of taxable property to the IC-DISC during the year but considered to cause a loss for a related
income under the intercompany pricing rules the IC-DISC does not resell it during the year, supplier if the IC-DISC’s net profit on the sale
will not be permitted to the extent that their the related supplier’s transfer price to the does not exceed the IC-DISC’s and related
application would result in a loss to the IC-DISC must equal the related supplier’s supplier’s net profit percentage on all their
related supplier. cost of goods sold. Do not complete sales of the product or product line. See
Schedule P for incomplete transactions. The Regulations section 1.994-1(e)(1)(ii) for details.
Each of the following methods may be related supplier’s transfer price to the
applied for sales, leases, and services. See IC-DISC must be recomputed for the year in Reporting Part II and Part III amounts on
the regulations under section 994. which the IC-DISC resells the property and Form 1120-IC-DISC. If the computed
50-50 combined taxable income method. the transaction must then be reported on transfer price for sales, leases, or services
The transfer price the related supplier charges Schedule P for that year. (Part II) or IC-DISC commission (Part III) is
entered on more than one line of Form
the IC-DISC, or the related supplier’s IC-DISC Part I, Section A—Combined Taxable 1120-IC-DISC, attach an explanation
commission, is the amount that lowers the Income. Complete Section A-1 only if indicating the portion of the total that is
taxable income the IC-DISC derives from the marginal costing is not used. applied to each line.
Schedule P (Form 1120-IC-DISC) (Rev. 9-2017)
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