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Page 2 of 4 Fileid: … i1120fschs/2021/a/xml/cycle07/source 14:41 - 21-Dec-2021
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
• Exchanges diplomatic notes with the income of an aircraft. See Regulations year are at least 10% of the average
United States, or enters into an agreement section 1.883-1(e)(5) for definition of number of shares outstanding in that class
with the United States, that provides for a terms. during the tax year (or, in the case of a
reciprocal exemption for purposes of short tax year, a percentage that equals at
Lines 2d, 2e, and 2f. Enter on these
section 883. least 10% of the average number of
lines the gross amount the corporation
shares outstanding in that class during the
Certain types of exemptions provided derived from the activities (specified on
tax year multiplied by the number of days
to corporations organized in the United these lines) that are incidental to the
in the short tax year, divided by 365).
States by foreign countries do not satisfy international operation of ships or aircraft
the equivalent exemption requirements of (as defined in Regulations section A class of stock that is traded during
Regulations section 1.883-1(h). Examples 1.883-1(g)(1)). For types of activities that the tax year on an established securities
of types of exemptions that do not qualify are not considered incidental to the market located in the United States shall
as equivalent exemptions include: international operation of ships or aircraft, be considered to meet the trading
• Reduced tax rate or time limited see Regulations section 1.883-1(g)(2). requirement described above under
exemption, 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, stock.
• Territorial tax systems, Test for Publicly-Traded
• 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 Closely-held classes of stock. In
Specific Instructions the foreign corporation must be primarily general, a class of stock of a foreign
and regularly traded (as defined below) on corporation that otherwise meets the
Part I—Qualified Foreign one or more established securities requirements of the “regularly traded”
markets (as defined in Regulations section rules described above shall not be treated
Corporation 1.883-2(b)) in either the United States or as meeting such requirements for a tax
Line 1a. Enter the name of the qualified any qualified foreign country. year if, for more than half the number of
foreign country (defined earlier) in which Primarily traded. Stock of a days during the tax year, one or more 5%
the foreign corporation was organized. 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
country. classes of stock applies, the corporation
Line 1c. Applicable authority. Enter the 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 1. One or more classes of stock of the the general rule described in the previous
between the United States and such corporation that, in the aggregate, paragraph does not apply, the corporation
country, or an income tax convention represent more than 50% of the total checks the “No” box on line 9, and is not
between the United States and such combined voting power of all classes of required to complete lines 10a and 10b.
country. 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
2. With respect to each class relied on corporation can establish that qualified
Line 2b. Enter the gross income the
to meet the more than 50% requirement shareholders (defined below in Part IV),
foreign corporation derived from time or
above (a) trades in each such class are applying the attribution rules of
voyage (full) charter income of a ship or
effected, other than in de minimis Regulations section 1.883-4(c), own
wet lease income of an aircraft. See
quantities, on such market or markets on sufficient shares in the closely-held block
Regulations section 1.883-1(e)(5) for
at least 60 days during the tax year of stock to preclude nonqualified
definition of terms.
(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
-2- Instructions for Schedule S (Form 1120-F) (2021)
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