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Page 2 of 4 Fileid: … 120fschs/202212/a/xml/cycle02/source 16:01 - 22-Dec-2022
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Certain types of exemptions provided derived from the activities (specified on shares outstanding in that class during the
to corporations organized in the United these lines) that are incidental to the tax year multiplied by the number of days
States by foreign countries do not satisfy international operation of ships or aircraft in the short tax year, divided by 365).
the equivalent exemption requirements of (as defined in Regulations section
Regulations section 1.883-1(h). Examples 1.883-1(g)(1)). For types of activities that A class of stock that is traded during
of types of exemptions that do not qualify are not considered incidental to the the tax year on an established securities
as equivalent exemptions include: international operation of ships or aircraft, market located in the United States shall
• Reduced tax rate or time limited see Regulations section 1.883-1(g)(2). be considered to meet the trading
exemption, requirement described above under
Regularly traded if the stock is regularly
• Inbound or outbound freight tax, Part II—Stock Ownership quoted by dealers making a market in the
• Exemptions for limited types of cargo,
• Territorial tax systems, Test for Publicly-Traded stock.
• Countries that tax U.S. corporations Corporations A dealer makes a market in a stock
that are not managed and controlled in A foreign corporation satisfies the stock only if the dealer regularly and actively
that country on a residence basis, and ownership test of Regulations section offers to, and in fact does, purchase the
• Exemptions within categories of 1.883-1(c)(2) if it is considered a stock from, and sell the stock to,
income. publicly-traded corporation and satisfies customers who are not related persons
See Regulations section 1.883-1(h)(4) the substantiation and reporting (as defined in section 954(d)(3)) with
for additional information. requirements of Regulations sections respect to the dealer in the ordinary
1.883-2(e) and (f). To be considered a course of a trade or business.
publicly-traded corporation, the stock of
Specific Instructions the foreign corporation must be primarily Closely-held classes of stock. In
and regularly traded (as defined below) on general, a class of stock of a foreign
Part I—Qualified Foreign one or more established securities corporation that otherwise meets the
markets (as defined in Regulations section requirements of the “regularly traded”
Corporation 1.883-2(b)) in either the United States or rules described above shall not be treated
Line 1a. Enter the name of the qualified any qualified foreign country. as meeting such requirements for a tax
foreign country (defined earlier) in which year if, for more than half the number of
the foreign corporation was organized. Primarily traded. Stock of a days during the tax year, one or more 5%
corporation is primarily traded in a country shareholders (defined below) own, in the
Line 1b. Type of equivalent on one or more established securities aggregate, 50% or more of the vote and
exemption. Check one (and only one) of markets (as defined in Regulations section value of the outstanding shares of the
the boxes on line 1b to indicate the type of 1.883-2(b)) if, with respect to each class of class of stock. If one or more 5%
equivalent exemption granted by the stock described below under Regularly shareholders own, in the aggregate, 50%
foreign country listed on line 1a. For a traded (that is, the more than 50% or more of the vote and value of the
non-inclusive list of countries that grant requirement), the number of shares in outstanding shares of the class of stock,
equivalent exemptions, see Rev. Rul. each such class that are traded during the such shares held by the 5% shareholders
2008-17, 2008-12 I.R.B. 626, available at tax year on all established securities will constitute a closely-held block of
IRS.gov/irb/2008-12_IRB#RR-2008–17, markets in that country exceeds the stock.
as modified by Announcement 2008-57, number of shares in each such class that
2008-26 I.R.B. 1192, available at are traded during that year on established Note. If the general rule described in the
IRS.gov/irb/2008-26_IRB#Ann-2008-57. securities markets in any other single previous paragraph for closely-held
Line 1c. Applicable authority. Enter the country. classes of stock applies, the corporation
must check the “Yes” box on line 9, and
applicable authority of the equivalent Regularly traded. The stock of a must complete lines 10a and 10b, to
exemption. For example, enter a citation corporation is regularly traded on one or substantiate that the exception to this
of the statute in the country where the more established securities markets if: general rule (described next) applies. If
corporation is organized, a diplomatic note
between the United States and such 1. One or more classes of stock of the the general rule described in the previous
country, or an income tax convention corporation that, in the aggregate, paragraph does not apply, the corporation
between the United States and such represent more than 50% of the total checks the “No” box on line 9, and is not
country. combined voting power of all classes of required to complete lines 10a and 10b.
stock of such corporation entitled to vote Exception to the general rule for
Line 2a. Enter the gross income the and the total value of the stock of such closely-held classes of stock. The rules
foreign corporation derived from the corporation are listed on such market or discussed in the previous paragraph shall
carriage of passengers and cargo. markets during the tax year, and not apply to a class of stock if the foreign
Line 2b. Enter the gross income the 2. With respect to each class relied on corporation can establish that qualified
foreign corporation derived from time or to meet the more than 50% requirement shareholders (defined below in Part IV),
voyage (full) charter income of a ship or above (a) trades in each such class are applying the attribution rules of
wet lease income of an aircraft. See effected, other than in de minimis Regulations section 1.883-4(c), own
Regulations section 1.883-1(e)(5) for quantities, on such market or markets on sufficient shares in the closely-held block
definition of terms. at least 60 days during the tax year of stock to preclude nonqualified
(or 1/6 of the number of days in a short tax shareholders in the closely-held block of
Line 2c. Enter the gross income the
year); and (b) the aggregate number of stock from owning 50% or more of the
foreign corporation derived from the
shares in each such class that are traded total value of the class of stock of which
bareboat charter of a ship or dry lease
on such market or markets during the tax the closely-held block is a part for more
income of an aircraft. See Regulations
year are at least 10% of the average than half the number of days during the
section 1.883-1(e)(5) for definition of
number of shares outstanding in that class tax year. Any shares that are owned, after
terms.
during the tax year (or, in the case of a application of the attribution rules in
Lines 2d, 2e, and 2f. Enter on these short tax year, a percentage that equals at Regulations section 1.883-4(c), by a
lines the gross amount the corporation least 10% of the average number of qualified shareholder shall not also be
-2- Instructions for Schedule S (Form 1120-F) (Rev. 12-2022)
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