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Format of tabular schedules. If a supplier’s cost of goods sold, and the same controlled group and the related
tabular schedule is attached to Schedule supplier’s and the FSC’s supplier) for any other sale, or group of
P, the schedule must: noninventoriable costs that relate to the sales, during the tax year that falls within
• Be in spreadsheet or similar format; foreign trading gross receipts. See the same NAICS code (or, if applicable,
Regulations section 1.471-11(c)(2)(ii). SIC code) as the subject sale.
• List the taxpayer’s name and EIN on Also see Temporary Regulations section
each numbered page; 1.925(a)-1T(c)(6)(iii) for special rules Section B—23% of Combined
regarding gross receipts and total costs. Taxable Income Method
• Be formatted in columns that
correspond to items A, C, and each line Line 2b. Include an apportionment of Under this method, the related supplier
item in Parts I, II, and III of Schedule P; deductions that are not definitely figures an allowable transfer price to
and allocable, such as interest expense and charge the FSC (or an allowable
• Show totals in each column. stewardship expenses. See Temporary commission to pay to the FSC) so that
Regulations sections 1.861-11T(f) and the FSC will profit on the sale.
Item C—Principal Business Activity 1.861-14T(f) for details on the
Code. If applicable, use the list of The profit is limited to 23% of the
apportionment. FSC’s and the supplier’s combined
Principal Business Activity codes on the
last page of the Instructions for Form Marginal Costing taxable income attributable to the foreign
1120-FSC to group activities. Enter the trading gross receipts from the sale. Also
Under the marginal costing rules, the see item 3 (regarding incomplete
six-digit number that relates to the combined taxable income of the FSC
corresponding product or product line transactions) under When Not To File on
and its related supplier is figured by page 2.
reported in item A. subtracting from foreign trading gross
Note: If the FSC used the SIC codes for receipts the direct material and direct Section C—1.83% of Foreign
Schedule P in prior tax years, it may labor costs of producing a particular Trading Gross Receipts Method
continue using the SIC codes for the item, product, or product line. See
Regulations section 1.471-11(b)(2)(ii). Under this method, the related supplier
current tax year. figures an allowable transfer price to
The combined taxable income also may
charge the FSC (or an allowable
Part I be limited to the overall profit percentage
commission to pay to the FSC) so that
(line 10) multiplied by the line 4 foreign
Section A—Combined Taxable trading gross receipts. the FSC will profit on the sale.
Income See Temporary Regulations section The profit is limited to 1.83% of the
Under the administrative pricing rules, 1.925(b)-1T for more information on the FSC’s foreign trading gross receipts. It is
the methods discussed below may be marginal costing rules. Also see section further limited to twice the profit
used in the same tax year of the FSC for 1.925(a)-1T for information on the determined under either (a) the 23% of
separate transactions (or separate transfer pricing rules. combined taxable income method, or
groups of transactions). (b) the marginal costing rules (described
Limit on FSC Income (No-Loss Rules) above). Also see item 3 (regarding
Full Costing If there is a combined loss on a incomplete transactions) under When
Foreign trading gross receipts are the transaction or group of transactions, the Not To File on page 2.
gross receipts of an FSC (other than a FSC may not earn a profit under either
small FSC) that has met the foreign the 23% method or the 1.83% method. Part II
management and foreign economic Under the 1.83% method, the FSC’s Line 20. If the transfer price from the
process rules. The receipts must be from profit on line 17 may not exceed the full related supplier to the FSC is entered on
the sale, lease, or rental of export costing combined taxable income more than one line on Form 1120-FSC,
property for use outside the United reported on line 3. The related supplier attach an explanation indicating the
States or for engineering or architectural may, however, set a transfer price or portion of line 20 that applies to each
services for a construction project rental payment or pay a commission in line.
located outside the United States. For an amount that will enable the FSC to
details, see section 924 and Foreign recover its costs, if any, even if the result Part III
Trading Gross Receipts in the is a loss for the related supplier. Line 23. If the FSC commission from the
Instructions for Form 1120-FSC. If the FSC recognizes income while related supplier is entered on more than
If the FSC is the principal in the sale of the related supplier recognizes a loss on one line on Form 1120-FSC, attach an
export property, the combined taxable a sale under the section 482 method, explanation indicating the portion of line
income of the FSC and its related neither the 23% method nor the 1.83% 23 that applies to each line.
supplier is the excess of the FSC’s method may be used by the FSC and the
foreign trading gross receipts from the related supplier (or by an FSC in the
sale over the total costs of the FSC and
related supplier. These costs include the