1118 Ohjeet J-aikatauluun
Ohjeet aikatauluun J (lomake 1118)
Rev joulukuu 2020
Liittyvät lomakkeet
- Muoto 1118 Aikataulu J - Erilliset rajoitustulot (Loss) -luokat Rajoituksen murto-osatekijöiden määrittämiseksi, vuositason vähennystasapainojen ja ulkomaisten ja kotitalouksien tappiotaseiden määrittämiseksi
Department of the Treasury
Internal Revenue Service
Instructions for Schedule J
(Form 1118)
(Rev. December 2020)
Section references are to the Internal Revenue
Code unless otherwise noted.
If the corporation has more than
one separate category of "other
income," expand Schedule J as
among other applicable separate
categories.
To determine each pro rata share:
1. Add all of the separate limitation
loss amounts entered across line 1. Then
add all of the separate limitation income
amounts entered across line 1.
2. If the combined separate limitation
losses for the tax year do not exceed the
combined separate limitation income for
the tax year, the pro rata share of each
separate limitation loss to allocate to each
category with positive income is as
follows:
!
CAUTION
Future Developments
explained below to properly complete
Parts I, II, III, and IV of the schedule.
For the latest information about
developments related to Schedule J
(Form 1118) and instructions, such as
legislation enacted after they were
A corporation has more than one
separate category of "other income" if it
has more than one of the following:
Income from a sanctioned country to
•
which section 901(j) applies (each
sanctioned country is a separate category
of income).
What’s New
On Schedule J (Form 1118), the column
headings and lines used to report "other
income" have been revised to require
taxpayers to identify each item of other
income. In these instructions, the
Computer-Generated Schedule section,
below, has been revised to indicate how
each item of other income is to be
identified.
An item of income resourced under a
•
tax treaty (see Regulations section
1.904-4(k) for rules regarding grouping of
items of treaty resourced income into
separate categories).
(Separate limitation income /
Combined separate limitation income from
all categories with positive income) x
Separate limitation loss being allocated
If the corporation has more than one
separate category of “other income,” add
a column (and, in some cases, a line, if
completing Part l, line 2; Part I, line 9;
and/or Part II) for each additional separate
category of other income. Each column
and line must be identified as follows. With
respect to the 901(j) category of income,
the category must be identified as “901(j) -
name of sanctioned country.” With respect
to the resourced by treaty category of
income, the category must be identified as
“RBT - name of treaty country and
3. If the combined separate limitation
losses for the tax year exceed the
combined separate limitation income for
the tax year, the pro rata share of each
separate limitation loss to allocate to each
category with positive income is as
follows:
(Separate limitation loss being
allocated / Combined separate limitation
losses from all categories with losses) x
Separate limitation income in a given
category
If separate limitation losses can be
allocated, enter the total amounts
allocated in the bold-outlined boxes as
positive numbers. Enter each separate
amount allocated to a given category
across the same line under the
appropriate column heading to which it
was allocated.
General Instructions
Purpose of Schedule
Use Part I to show adjustments to
•
separate limitation income or (losses) in
determining the numerator of the limitation
fraction for each separate category.
Use Part II to show the year-end
•
balances of future separate limitation
income that must be recharacterized as
income in other separate categories (as
the result of current year or prior year
separate limitation losses that were
allocated to reduce income in those other
separate categories).
separate category of items of income. For
example, if you are filing a Form 1118 for
separate category code RBT-PAS with
respect to treaty Country X, you would
enter “RBT - Country X, Passive.”
Furthermore, for each new line, the
amounts going across the line must equal
zero.
Use Part III to show: (a) the balances in
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the corporation's overall foreign loss
accounts at the beginning of the tax year,
(b) any current year adjustments, and (c)
the balances in the overall foreign loss
accounts at the end of the tax year.
Note. The numbers entered across any
given line should equal zero.
Specific Instructions
If a separate limitation loss in one
category offsets income in a second
category and the second category has a
separate limitation loss account balance
that has not been recaptured with respect
to the first category, then the two offsetting
separate limitation loss account balances
are netted for purposes of determining the
amount of income in the second category
that is subject to recharacterization on
line 9, Part I, if any, and for purposes of
determining the year-end balances in both
categories reported in Part II.
Part I
Use Part IV to show: (a) the balances in
•
Note. See Regulations section 1.904(g)-3
for detailed information on the ordering of
adjustments in Part I.
the corporation's overall domestic loss
accounts at the beginning of the tax year,
(b) any current year adjustments, and (c)
the balances in the overall domestic loss
accounts at the end of the tax year.
Line 1. For columns (i) through (v), enter
in each applicable column, the income or
(loss) from column 18 of the
Important. Complete Schedule J only
once. Include adjustments for each
applicable separate category.
corresponding Schedule A for that
separate category. In column (vi), enter an
amount equal to the income or (loss) from
Schedule B, Part II, line 8c, minus the
aggregate income or (loss) entered in the
other columns of this line 1.
Computer-Generated Schedule
A computer-generated Schedule J can be
filed if it conforms to the IRS version of the
schedule.
The combined separate limitation
losses for the tax year that are more than
the combined separate limitation income
for the tax year reduce the U.S. source
Line 2. This allocation grid must be
completed to show the pro rata share of
each separate limitation loss to allocate
Jan 28, 2021
Cat. No. 50277F
income (if any) for the tax year. If the
categories with income on line 3 for the
loss account by attaching a statement to
Form 1118 indicating:
1. The percentage and dollar amount
of the separate limitation income that is
treated as U.S. source income, and
2. The percentage and dollar amount
of the balance (both before and after
recapture) in the overall foreign loss
account is recaptured.
corporation has no U.S. source income for current tax year. In column (vi), enter the
the tax year, or if the excess of its
combined separate limitation losses for
the tax year over combined separate
limitation income for the tax year exceeds
its U.S. source income for the tax year, the
excess is treated as a net operating loss.
This loss may be carried over or back to
other tax years according to the rules of
section 172.
Example 1. Corporation X has a
separate limitation loss of $2,000 in its
general category (line 1, column (iv)) and
separate limitation income of $4,000 in its
passive category (line 1, column (iii)). In
addition, the corporation has separate
limitation income of $1,000 in its treaty
resourced general category income
(line 1, column (v)).
total amount of U.S. losses allocated to
the separate categories as a positive
number. Use the following formula:
U.S. source loss x (Line 3 income in a
given category / Combined line 3 income
of all separate categories with income on
line 3)
U.S. source losses in excess of the
combined line 3 income for a tax year is
treated as a net operating loss that may be
carried back or forward to other tax years
using the rules of section 172.
If the corporation disposes of property
that was used predominantly in a foreign
trade or business and that generated
foreign source income in the same
separate category as the applicable
overall foreign loss account, and there is a
balance in the account after amounts are
recaptured under section 904(f)(1), the
corporation may be required to recapture
an additional amount of the overall foreign
loss account, whether or not gain would
otherwise be recognized on the
Note. The numbers entered across this
line should equal zero.
Line 7. Recapture overall foreign losses
that reduced U.S. source income in prior
tax years (section 904(f)(1)). To do this,
treat a portion of the current year separate
limitation income that is of the same
Since the corporation's combined
separate limitation losses for the tax year
($2,000) do not exceed its combined
separate limitation income for the tax year
($5,000), the entire $2,000 loss may be
allocated to other separate categories.
Therefore, Corporation X enters a positive
$2,000 in the bold-outlined box on line 2d,
column (iv).
disposition. See section 904(f)(3) and
Regulations section 1.904(f)-2(d) for more
details.
category as the loss that resulted in the
prior year overall foreign loss as U.S.
source income. Recapture continues until
the applicable overall foreign loss account
balance (Part III) is reduced to zero. Enter
the recapture amount for each category of
separate limitation income in the
If, under these rules, the corporation is
required to recognize gain it would not
have otherwise recognized, special
ordering rules apply that impact the steps
necessary to complete Schedule J (Form
1118), including special rules for
appropriate column as a negative number.
Enter the total amount of recapture for all
categories of separate limitation income
as a positive number in column (vi).
To compute the portion of the $2,000
separate limitation loss that is allocable to
passive category income, Corporation X
divides the $4,000 of income by $5,000
(the combined separate limitation income
from all separate categories with positive
income). The result of 80% is multiplied by
the separate limitation loss of $2,000.
Corporation X enters the product of
dispositions of property that require
additional recognition of income under
branch loss recapture and dual
consolidated loss recapture rules. See
Regulations sections 1.904(f)-2(d)(4) and
1.904(g)-3(i) and (j).
Note. The numbers entered across this
line should equal zero.
The total amount of current year
separate limitation income subject to
recapture is the smaller of the aggregate
amount of maximum potential recapture in
all overall foreign loss accounts, or 50% of
all amounts entered on Part I, line 6,
columns (i) through (v). The maximum
potential recapture amount for the overall
foreign loss account in any given category
is the smaller of the current year separate
limitation income in that category (the
applicable amount entered in Part I,
line 6), or the balance in the applicable
overall foreign loss account (the
Note. For dispositions after October 22,
2004, the previous paragraph applies to
certain dispositions of stock in a controlled
foreign corporation (CFC). See section
904(f)(3)(D) for details.
$1,600 on line 2d, column (iii).
To compute the portion of the $2,000
separate limitation loss that is allocable to
treaty resourced general category income,
Corporation X divides the $1,000 of
separate limitation income by $5,000. The
result of 20% is multiplied by the separate
limitation loss of $2,000. Corporation X
enters the product of $400 on line 2d,
column (v).
Example 2. Corporation Y has $1,400
of current year separate limitation income,
$1,000 in its general category (Part I,
line 6, column (iv)) and $400 in its passive
category (Part I, line 6, column (iii)). The
corporation has overall foreign loss
accounts of $600 in its general category
and $800 in its passive category (Part III,
line 1, columns (iv) and (iii)). The
applicable line 1 amount in Part III). If the
aggregate amount of maximum potential
recapture in all overall foreign loss
Corporation X enters $0 (negative
$2,000 plus positive $2,000) on line 3,
column (iv); $2,400 ($4,000 minus $1,600)
on line 3, column (iii); and $600 ($1,000
minus $400) on line 3, column (v).
maximum potential recapture for the
overall foreign loss account in the general
category is $600 (the smaller of current
year income of $1,000 in that category or
the overall foreign loss account balance of
$600). The maximum potential recapture
for the overall foreign loss account in the
passive category is $400 (the smaller of
current year income of $400 in that
accounts exceeds 50% of all amounts
entered on Part I, line 6, columns (i)
through (v), then the amount of current
year separate limitation income in each
separate category subject to recapture is
computed using the following formula:
Line 4. In columns (i) through (v), enter
the overall foreign losses for the tax year
(from line 3) as positive numbers if they
have reduced U.S. source income for the
tax year. In column (vi), enter the total
amount of overall foreign losses that have
reduced U.S. source income for the tax
year as a negative number.
Total recapture amount x (Maximum
potential recapture amount for the overall
foreign loss account in the separate
category / Aggregate amount of maximum
potential recapture in all overall foreign
loss accounts)
The corporation can make an annual,
revocable election to recapture a greater
portion of the balance in an overall foreign
category or the overall foreign loss
account balance of $800). The aggregate
amount of maximum potential recapture in
all overall foreign loss accounts is
Note. The numbers entered across this
therefore $1,000 ($600 + $400).
line should equal zero.
The total amount of current year
income subject to recharacterization is
$700 (the smaller of the aggregate amount
Line 5. In columns (i) through (v), enter
U.S. source losses allocated to separate
Instructions for Schedule J (Form 1118) (Rev. Dec. 2020)
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of maximum potential recapture, $1,000,
or 50% of total current year separate
limitation income entered on line 6, Part I
(50% x $1,400, or $700)). To compute the
amount of current year separate limitation
income in the general category that is
treated as U.S. source income,
same separate category) must be entered
into the grid in Part II.
line d, column (iii), and $100 ($400 minus
$300) on line d, column (v).
Line 10. Recapture overall domestic
losses that reduced separate limitation
income in prior tax years (section 904(g)
(1)). To do this, treat a portion of the
current year U.S. source income as
separate limitation income in the same
category(ies) as the separate limitation
income that was reduced by the prior year
overall domestic loss. Recapture
Note. Recharacterization of separate
limitation income does not result in
recharacterizing any tax. The rules of
Regulations section 1.904-6 apply on an
annual basis for allocating taxes to
separate categories before any income is
recharacterized.
Corporation Y multiplies the total
recapture amount of $700 by the
maximum recapture amount for the
general category of $600, divided by the
aggregate amount of maximum potential
recapture of $1,000. Corporation Y enters
the result of $420 on line 7, column (iv). To
compute the amount of current year
separate limitation income in the passive
category that is treated as U.S. source
income, Corporation Y multiplies the total
recapture amount of $700 by the
If prior year separate limitation losses
can be recaptured, the total amounts
recharacterized should be entered into the
bold-outlined boxes as negative numbers.
Each prior-year separate limitation loss
recaptured should be entered as a
continues until the applicable overall
domestic loss account balance (Part IV) is
reduced to zero. Enter the total overall
domestic loss recapture amount as a
negative number in column (vi). Enter the
amount recharacterized as separate
limitation income in each category, as
appropriate, as positive numbers in
columns (i) through (v).
positive number on the same line under
the appropriate column heading to which
income was recharacterized.
maximum recapture amount for the
passive category of $400, divided by the
aggregate amount of maximum potential
recapture of $1,000. Corporation Y enters
the result of $280 on line 7, column (iii).
Corporation Y enters the total recapture
amount of $700 as a positive number on
line 7, column (vi). Note that the total
amounts entered across line 7 equal zero.
Note. The numbers entered across any
given line should equal zero.
Note. The numbers entered across this
line should equal zero.
Example 3. Assume the same facts as
in Example 1 on page 1. Also assume
that, in a subsequent tax year, Corporation
X has $1,500 of income in its general
category (on line 8, column (iv), of its
Schedule J).
The total amount of any current year
U.S. income subject to recapture is the
smaller of the total balance in the
applicable overall domestic loss accounts
(the applicable column(s) in Part IV, line 1)
or 50% of the amount entered on Part I,
line 6.
Line 9. If a separate limitation loss was
allocated in a prior tax year and the
corporation has income during the current
tax year in the separate category from
which the loss was allocated, that current
year income (if it was not previously
recharacterized) must be recharacterized
as income of the separate category(ies) to
which the loss was allocated in the prior
year(s) (section 904(f)(5)).
Since there is not enough general
category income to recapture the entire
$2,000 prior-year balance remaining to be
recaptured, Corporation X will prorate the
$1,500 of general category income in that
subsequent year as follows.
Note. Under the Tax Cuts and Jobs Act,
section 904(g)(5) allows for an election to
recapture up to 100% of any pre-2018
unused overall domestic loss from a prior
year, as opposed to the 50% stated in the
previous paragraph. This election is
applicable for any taxable year beginning
after December 31, 2017, and before
January 1, 2028.
To compute the portion to be
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recharacterized as passive category
income, Corporation X should:
1. Divide the $1,600 remaining to be
recharacterized from general category
income to passive category income by the
$2,000 remaining to be recharacterized
from general category income to all
separate categories;
Note. The amount of current year income
in a category subject to recharacterization
is limited to the year-end balance in Part II
for that category as reported on the prior
tax year Schedule J, reduced by any
netting of offsetting separate limitation
loss accounts as provided for in the
instructions for Part I, line 2.
If a prior year separate limitation loss
was allocated to more than one separate
category and there is not enough current
year income in the separate category from
which the loss was allocated to
If a prior year overall domestic loss or
losses were allocated to more than one
separate category and there is not
enough income in the current year subject
to recharacterization to recapture all
remaining overall domestic loss account
balances, then the current year U.S.
source income subject to
2. Multiply the result (80%) by the
$1,500 of general category income; and
3. Enter $1,200 as a positive number
on line 9d, column (iii).
To compute the portion to be
•
recharacterized as resourced treaty
recharacterization must be
income, Corporation X should:
recharacterized as income of the separate
categories on a pro rata basis in the
following manner:
1. Divide the $400 remaining to be
recharacterized from general category
income to resourced treaty income by
$2,000;
recharacterize all remaining balances,
then the current year income must be
recharacterized as income of the other
separate categories on a pro rata basis in
the following manner:
Current year income in separate
category from which losses were
previously allocated x (Amount remaining
to be recharacterized as income of a given
separate category / Amounts remaining to
be recharacterized as income of all
separate categories)
Current year U.S. source income
subject to recharacterization x (Amount
remaining to be recharacterized as
income of a given separate category /
Amounts remaining to be recharacterized
as income of all separate categories)
2. Multiply the result (20%) by the
$1,500 of general category income; and
3. Enter $300 as a positive number on
line 9d, column (v).
Corporation X enters the $1,500 of
general category income that was
recharacterized in the bold-outlined box
on line 9d, column (iv). Note that the total
amounts entered across line 9d equal
zero.
Finally, Corporation X completes the
Part II recharacterization balances grid by
entering $400 ($1,600 minus $1,200) on
Part II
If a separate limitation loss was allocated
in a prior tax year and the corporation has
income during the current tax year in the
separate category from which the loss was
allocated, that current year income (if it
was not previously recharacterized) must
be recharacterized as income of the
Any amount that is not recharacterized
during the tax year (i.e., the excess of
separate limitation losses previously
allocated over current year income in that
Instructions for Schedule J (Form 1118) (Rev. Dec. 2020)
-3-
category to which the loss was allocated in remaining balances from any prior
Part IV
the prior year(s) (section 904(f)(5)).
allocations of losses from its general
category to its passive category or its
resourced treaty income category. The
corporation should enter $1,600 on line d,
column (iii), and $400 on line d, column
(v).
Line 1. Enter the ending balances from
To determine the amounts to enter into
last year's schedule.
the grid:
Lines 2, 3, and 5. Show any adjustments
made to the overall domestic loss account
with respect to each separate category
during the tax year. See Regulations
section 1.904(g)-1(d) for a list of possible
additions to the accounts. See
1. Add the current year separate
limitation loss allocations (adjusted as
required by Regulations section
1.904(b)-1(h)(1) relating to capital gains)
Part III
to last year's year-end balances;
Line 1. Enter the ending balances from
2. Net any offsetting separate
limitation loss accounts as described in
the instructions for Part I, line 2;
3. Subtract the amounts
recharacterized during the current tax
year; and
Regulations section 1.904(g)-1(e) for a list
of possible reductions (including
recapture).
last year's schedule.
Lines 2, 3, and 4. Show any adjustments
made to the overall foreign loss accounts
for each separate category during the tax
year. See Regulations section
Note. A U.S. source loss that is carried
back as part of a net operating loss to
offset foreign income in a prior qualified
tax year will result in an increase to the
overall domestic loss account in the year
in which the loss arose, not the earlier year
to which the loss was carried back to
offset the foreign income.
1.904(f)-1(d) for a list of possible additions
to the accounts. See Regulations section
1.904(f)-1(e) for a list of possible
4. Enter the result on the line (line a,
b, c, d, or e) for the separate category
from which losses were previously
reductions (including recapture).
allocated, under the appropriate column
(column (i), (ii), (iii), (iv) or (v)) to which the
losses were previously allocated.
Line 5. Enter the year-end balances of
the overall foreign loss accounts for each
separate category.
Line 6. Enter the year-end balances of
the overall domestic loss account with
respect to each separate category.
Example 4. Assume the same facts as
in Example 1 on page 1. Also assume that
Corporation X does not have any
Instructions for Schedule J (Form 1118) (Rev. Dec. 2020)
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