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Formulir 1120-FSC Instruksi

Instruksi Instruksi untuk Formulir 1120-FSC, Pajak Penghasilan AS Kembali dari Perusahaan Penjualan Asing

Rev. Januari 2024

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Department of the Treasury  
Internal Revenue Service  
Instructions for Form  
1120-FSC  
(Rev. January 2024)  
U.S. Income Tax Return of a Foreign Sales Corporation  
Section references are to the Internal Revenue Code  
unless otherwise noted.  
calculate CAMT if applicable. See the  
instructions for Schedule J, line 4.  
FSC Repeal and  
Extraterritorial Income  
Exclusion  
Contents  
Page  
Photographs of Missing  
Children  
General Instructions . . . . . . . . . . . . . 1  
Purpose of Form . . . . . . . . . . . . 1  
In general, the FSC Repeal and  
Extraterritorial Income Exclusion Act of 2000:  
The Internal Revenue Service is a proud  
FSC Repeal and  
Repealed the FSC rules;  
Extraterritorial Income  
Provided taxpayers with an exclusion,  
Exclusion . . . . . . . . . . . . . . 1  
which is figured on Form 8873,  
Photographs of missing children selected by  
the Center may appear on pages that would  
otherwise be blank. You can help bring these  
children home by looking at the photographs  
and calling 1-800-THE-LOST  
Pre-Repeal FSC Rules . . . . . . . . 2  
Who Must File . . . . . . . . . . . . . 3  
When To File . . . . . . . . . . . . . . 3  
Where To File . . . . . . . . . . . . . . 4  
Who Must Sign . . . . . . . . . . . . . 4  
Paid Preparer Authorization . . . . . 4  
Extraterritorial Income Exclusion; and  
Provided transition rules for existing  
FSCs. These rules are included in Rules for  
Existing FSCs below.  
(1-800-843-5678) if you recognize a child.  
Note. The American Jobs Creation Act of  
2004 repealed the extraterritorial income  
exclusion provisions generally for  
Other Forms That May Be  
The Taxpayer Advocate  
Service  
Required . . . . . . . . . . . . . . . 4  
transactions after 2004, subject to a  
transition rule. See the Instructions for Form  
8873 for more information.  
Assembling the Return . . . . . . . . 4  
Accounting Methods . . . . . . . . . 4  
Accounting Period . . . . . . . . . . . 5  
Recordkeeping . . . . . . . . . . . . . 5  
Tax Payments . . . . . . . . . . . . . . 5  
Estimated Tax Payments . . . . . . . 6  
Interest and Penalties . . . . . . . . . 6  
Rounding Off to Whole Dollars . . . . . . 5  
Specific Instructions . . . . . . . . . . . . . 6  
FSC Information . . . . . . . . . . . . 6  
Tax and Payments . . . . . . . . . . . 7  
Schedule A . . . . . . . . . . . . . . . 7  
The Taxpayer Advocate Service (TAS) is an  
independent organization within the IRS  
that helps taxpayers and protects taxpayer  
rights. TAS’s job is to ensure that every  
taxpayer is treated fairly and knows and  
understands their rights under the Taxpayer  
The Tax Increase Prevention and  
Reconciliation Act of 2005 repealed the FSC  
binding contract exception. See Binding  
contract exception below for details.  
Rules for Existing FSCs  
As a taxpayer, the corporation has rights  
that the IRS must abide by in its dealings  
with the corporation. TAS can help the  
corporation if:  
In general, a FSC that was in existence on  
September 30, 2000, and at all times  
thereafter may continue to use the FSC rules  
for any transaction in the ordinary course of  
business that is (a) before January 1, 2002,  
or (b) after December 31, 2001, if such  
transaction is pursuant to a binding contract  
that meets the requirements described in  
Binding contract exception below.  
A problem is causing financial difficulty for  
Additional Information . . . . . . . . 8 the business.  
The business is facing an immediate  
Schedule B . . . . . . . . . . . . . . . 8  
Schedule E . . . . . . . . . . . . . . . 9  
Schedule F . . . . . . . . . . . . . . . 9  
Schedule G . . . . . . . . . . . . . . 10  
Schedule J . . . . . . . . . . . . . . 11  
Schedule L . . . . . . . . . . . . . . 12  
Schedule M-1 . . . . . . . . . . . . . 12  
threat of adverse action, or  
The corporation has tried repeatedly to  
contact the IRS but no one has responded,  
or the IRS hasn't responded by the date  
promised.  
Binding contract exception. The binding  
contract exception has been repealed for tax  
years beginning after May 17, 2006. For tax  
years beginning before May 18, 2006, the  
following rules apply: The transaction must  
be pursuant to a binding contract between  
the FSC (or a person related to the FSC) and  
a person other than a related person if that  
binding contract was in effect on September  
30, 2000, and has remained in effect. A  
binding contract includes a purchase,  
TAS has offices in every state, the District  
of Columbia, and Puerto Rico. Local  
advocates' numbers are in their local  
directories and at  
Future Developments  
TaxpayerAdvocate.IRS.gov. The corporation  
can also call TAS at 1-877-777-4778.  
For the latest information about  
developments related to Form 1120-FSC  
and its instructions, such as legislation  
enacted after they were published, go to  
TAS also works to resolve large-scale or  
systemic problems that affect many  
renewal, or replacement option that is  
enforceable against a lessor or seller  
taxpayers. If the corporation knows of one of  
these broad issues, please report it to TAS  
through the Systemic Advocacy  
(provided the option is part of a contract that  
is binding and in effect on September 30,  
2000, and has remained in effect).  
What's New  
Management System at IRS.gov/SAMS.  
Increase in penalty for failure to file. For  
tax returns required to be filed in 2024, the  
minimum penalty for failure to file a return  
that is more than 60 days late has increased  
to the smaller of the tax due or $485. See  
Penalty for late filing of return, later.  
For more information, go to IRS.gov/  
The mere entering into of a single  
transaction, such as a lease, would not, in  
and of itself, prevent the transaction from  
being in the ordinary course of business.  
General Instructions  
Corporate alternative minimum tax  
(CAMT). For tax years beginning after 2022,  
certain corporations must determine whether  
they are subject to the new CAMT and  
Election To Apply Exclusion Rules  
Purpose of Form  
Use Form 1120-FSC to report the income,  
gains, losses, deductions, credits, and to  
figure the income tax liability of a FSC.  
Taxpayers may elect to apply the  
extraterritorial income exclusion rules instead  
Jan 24, 2024  
Cat. No. 11532V  
       
of the FSC rules for transactions occurring  
during the transition period. The election is:  
A small FSC is exempt from the foreign  
management and foreign economic process  
requirements outlined on this page.  
Pre-Repeal FSC Rules  
Made by checking the box on line 2 of  
Definition of a Foreign Sales  
Form 8873,  
Made on a transaction-by-transaction  
Corporation (FSC)  
$5 million limit. Generally, any foreign  
trading gross receipts of a small FSC for the  
tax year that exceed $5 million are not to be  
considered in determining its exempt foreign  
trade income. The $5 million limit is reduced  
if the small FSC has a short tax year. It may  
also be reduced if the small FSC is a  
Under section 922(a), a FSC is defined as a  
corporation that has met all of the following  
rules:  
basis,  
Effective for the tax year for which it is  
made and for all subsequent tax years, and  
Revocable only with the consent of the  
1. It must be a corporation created or  
organized under the laws of a qualifying  
foreign country or any U.S. possession other  
than Puerto Rico.  
IRS.  
member of a controlled group that contains  
other small FSCs. See Regulations section  
1.921-2(b) for more information.  
Taxpayers use Form 8873 to determine  
their extraterritorial income exclusion.  
Qualifying U.S. possessions include  
Guam, American Samoa, the  
Election To Be Treated as a  
Domestic Corporation  
Tax Treatment of a FSC  
Commonwealth of the Northern Mariana  
Islands, and the U.S. Virgin Islands.  
A FSC is not taxed on its exempt foreign  
trade income. Section 923 defines foreign  
trade income as the gross income of a FSC  
attributable to foreign trading gross receipts  
(defined below).  
A FSC that was in existence on September  
30, 2000, and at all times thereafter may  
elect to be treated as a domestic corporation  
if substantially all of its gross receipts are  
foreign trading gross receipts. A FSC that  
elects to be treated as a domestic  
A qualifying foreign country is a foreign  
country that meets the exchange of  
information rules of section 927(e)(3)(A) or  
(B). All U.S. possessions other than Puerto  
Rico are also certified to have met these  
rules.  
The following countries are qualifying  
foreign countries that have met the exchange  
of information rules of section 927(e)(3)(A) or  
927(e)(3)(B): Australia, Austria, Barbados,  
Belgium, Bermuda, Canada, Costa Rica,  
Cyprus, Denmark, Dominica, the Dominican  
Republic, Egypt, Finland, France, Germany,  
Grenada, Guyana, Honduras, Iceland,  
Ireland, Jamaica, Korea, Malta, the Marshall  
Islands, Mexico, Morocco, the Netherlands,  
New Zealand, Norway, Pakistan, Peru, the  
Philippines, St. Lucia, Sweden, and Trinidad  
and Tobago.  
The percentage of foreign trade income  
exempt from tax is figured differently for  
income determined under the administrative  
pricing rules (for details, see the Instructions  
for Schedule P (Form 1120-FSC)) and  
income determined without regard to the  
administrative pricing rules. These  
corporation ceases to be a FSC for any tax  
year for which the election applies (and for  
any subsequent tax year).  
The election is made by checking the box  
on line 3 of Form 8873. An electing  
corporation files Form 1120, U.S.  
percentages are computed on Schedule E,  
page 4, Form 1120-FSC, and carried over to  
lines 9a and 9b of Schedule B, page 3, Form  
1120-FSC, to figure taxable income or (loss).  
Corporation Income Tax Return. Once made,  
the election applies to the tax year for which  
it is made and remains in effect for all  
subsequent years unless the election is  
revoked or terminated. If the election is  
revoked or terminated, the corporation would  
be a foreign corporation that files Form  
1120-F, U.S. Income Tax Return of a Foreign  
Corporation. Furthermore, the foreign  
corporation would not be eligible to reelect to  
be treated as a domestic corporation for 5  
tax years beginning with the first tax year for  
which the original election is not in effect as a  
result of the revocation or termination.  
See section 923(a)(4) for a special rule  
for foreign trade income allocable to a  
cooperative. See section 923(a)(5) for a  
special rule for military property.  
2. It had no more than 25 shareholders  
at any time during the tax year.  
Tax treaty benefits. A FSC may not claim  
any benefits under any income tax treaty  
between the United States and any foreign  
country.  
3. It had no preferred stock outstanding  
at any time during the tax year.  
4. During the tax year, the FSC must  
maintain:  
Foreign Trading Gross Receipts  
An office in one of the qualifying foreign  
Effect of election. For purposes of section  
367, a foreign corporation that has elected to  
be a domestic corporation is generally  
treated as transferring, as of the first day of  
the first tax year to which the election  
applies, all of its assets to a domestic  
corporation in an exchange under section  
354.  
A FSC is treated as having foreign trading  
gross receipts (defined in section 924) only if  
it has met certain foreign management and  
foreign economic process requirements.  
countries or U.S. possessions listed above;  
A set of permanent books of account  
(including invoices) at that office; and  
The books and records required under  
section 6001 at a U.S. location to sufficiently  
establish the amount of gross income,  
deductions, credits, or other matters required  
to be shown on its tax return.  
Foreign trading gross receipts do not  
include:  
Certain excluded receipts (defined in  
section 924(f)).  
Receipts attributable to property excluded  
FSC Election  
5. It must have at least one director, at  
all times during the tax year, who is not a  
resident of the United States.  
6. It must not be a member, at any time  
during the tax year, of a controlled group of  
which a DISC is a member.  
7. It must have elected to be a FSC or  
small FSC, and the election must have been  
in effect for the tax year.  
from export property under section 927(a)(2).  
Investment income (defined in section  
No corporation may elect to be a FSC or a  
small FSC (defined below) after September  
30, 2000.  
927(c)).  
Carrying charges (defined in section  
Termination of Inactive FSCs  
927(d)(1)).  
If a FSC has no foreign trade income (see  
definition under Tax Treatment of a FSC,  
later) for any 5 consecutive tax years  
Note. Computer software licensed for  
reproduction abroad is not excluded from  
export property under section 927(a)(2).  
Therefore, receipts attributable to the sale,  
lease, or rental of computer software and  
services related and subsidiary to such  
transactions qualify as foreign trading gross  
receipts.  
beginning after December 31, 2001, the FSC  
will no longer be treated as a FSC for any tax  
year beginning after that 5-year period.  
Small FSC. Section 922(b) defines a small  
FSC as a corporation that:  
Elected small FSC status and has kept the  
Additional Information  
election in effect for the tax year; and  
For additional information regarding the rules  
discussed above, see Rev. Proc. 2001-37,  
2001-1 C.B. 1327.  
Is not a member, at any time during the  
tax year, of a controlled group that includes a  
FSC (unless that other FSC is also a  
small FSC).  
Foreign Management Rules  
A FSC (other than a small FSC) is treated as  
having foreign trading gross receipts for the  
tax year only if the management of the FSC  
2
Instructions for Form 1120-FSC (Rev. 1-2024)  
         
during the year takes place outside the  
United States. These management activities  
include:  
terms of a transaction, including, but not  
attributable to activities performed outside  
limited to, price, credit terms, quantity, or time the United States. For purposes of the 50%  
or manner of delivery.  
test, foreign direct costs are based on the  
direct costs of all activities described in all  
paragraphs of section 924(e). For purposes  
of the 85% test, however, foreign direct costs  
are determined separately for each  
Meetings of the board of directors and  
3. Making a contract refers to  
performance by the FSC of any of the  
elements necessary to complete a sale, such  
as making or accepting an offer.  
meetings of the shareholders.  
Disbursing cash, dividends, legal and  
accounting fees, salaries of officers, and  
salaries or fees of directors from the principal  
bank account (see below).  
paragraph of section 924(e).  
Grouping transactions. Generally, the  
sales activities described above are to be  
applied on a transaction-by-transaction  
basis. However, a FSC may make an annual  
election to apply any of the sales activities on  
the basis of a group. To make the election,  
check the applicable box on line 10a,  
Additional Information, on page 2 of Form  
1120-FSC. See Regulations section  
For more details, see Regulations section  
Maintaining the principal bank account at  
1.924(d)-1(d).  
all times during the tax year.  
Check the applicable box(es) on line 10b,  
Additional Information, on page 2 of the form,  
to indicate how the FSC met the foreign  
direct costs requirement.  
Meetings of directors and meetings of  
the shareholders. All meetings of the  
board of directors of the FSC and all  
meetings of the shareholders of the FSC that  
take place during the tax year must take  
place outside the United States.  
In addition, all such meetings must  
comply with the local laws of the foreign  
country or U.S. possession in which the FSC  
was created or organized. The local laws  
determine whether a meeting must be held,  
when and where it must be held (if it is held  
at all), who must be present, quorum  
requirements, use of proxies, etc.  
Grouping transactions. Generally, the  
foreign direct cost tests under Regulations  
section 1.924(d)-1(d) are applied on a  
transaction-by-transaction basis. However,  
the FSC may make an annual election (on  
line 10d, Additional Information, on page 2 of  
the form) to apply the foreign direct cost tests  
on a customer, contract, or product or  
product line grouping basis. Any grouping  
used must be supported by adequate  
documentation of performance of activities  
and costs of activities relating to the grouping  
used. See Regulations section 1.924(d)-1(e)  
for details.  
1.924(d)-1(c)(5) for details.  
Satisfaction of either the 50% or 85% for-  
eign direct cost test. To qualify as foreign  
trading gross receipts, the foreign direct  
costs incurred by the FSC attributable to the  
transaction must equal or exceed 50% of the  
total direct costs incurred by the FSC  
attributable to the transaction.  
Instead of satisfying the 50% foreign  
direct cost test, the FSC may incur foreign  
direct costs attributable to activities  
Principal bank accounts. See Regulations  
section 1.924(c)-1(c) for information  
regarding principal bank accounts.  
described in each of two of the section  
924(e) categories. The costs must equal or  
exceed 85% of the total direct costs incurred  
by the FSC attributable to the activity  
described in each of the two categories. If no  
direct costs are incurred by the FSC in a  
particular category, that category is not taken  
into account for purposes of determining  
whether the FSC has met either the 50% or  
85% foreign direct cost test.  
Exception for foreign military property.  
The economic process rules do not apply to  
any activities performed in connection with  
foreign military sales except those activities  
described in section 924(e). See Regulations  
section 1.924(d)-1(f) for details.  
Foreign Economic Process Rules  
A FSC (other than a small FSC) has foreign  
trading gross receipts from any transaction  
only if certain economic processes for the  
transaction take place outside the United  
States. Section 924(d) and Regulations  
section 1.924(d)-1 set forth the rules for  
determining whether a sufficient amount of  
the economic processes of a transaction  
takes place outside the United States.  
Section 925(c) Rule  
To use the administrative pricing rules to  
determine the FSC's (or small FSC's) profit  
on a transaction or group of transactions, the  
FSC must perform (or contract with another  
person to perform) all of the economic  
Direct costs are costs that:  
Are incident to and necessary for the  
performance of any activity described in  
section 924(e);  
process activities relating to the transaction  
or group of transactions. All of the direct and  
indirect expenses relating to the performance  
of those activities must be reflected on the  
books of the FSC and on Form 1120-FSC.  
Include the cost of materials consumed in  
Generally, a transaction will qualify if the  
FSC satisfies two requirements:  
the performance of the activity and the cost  
of labor that can be identified or associated  
directly with the performance of the activity  
(but only to the extent of wages, salaries,  
fees for professional services, and other  
amounts paid for services actually rendered,  
such as bonuses or compensation paid for  
services on the basis of a percentage of  
profits); and  
Participation outside the United States in  
the sales portion of the transaction and  
Satisfaction of either the 50% or the 85%  
foreign direct cost test.  
Under Temporary Regulations section  
1.925(a)-1T(b)(2)(ii), an election may be  
made to include on the FSC's books all  
expenses, other than cost of goods sold, that  
are necessary to figure combined taxable  
income for the transaction or group of  
transactions. The expenses must be  
identified on Schedule G on the applicable  
line.  
The activities comprising these economic  
processes may be performed by the FSC or  
by any other person acting under contract  
with the FSC.  
Include the allowable depreciation  
deduction for equipment or facilities (or the  
rental cost for its use) that can be specifically  
identified or associated with the activity, as  
well as the contract price of an activity  
performed on behalf of the FSC by a  
contractor.  
Participation outside the United States in  
the sales portion of the transaction.  
Generally, the requirement of section 924(d)  
(1)(A) is met for the gross receipts of a FSC  
derived from any transaction if the FSC has  
participated outside the United States in the  
following sales activities relating to the  
transaction: (1) solicitation (other than  
advertising), (2) negotiation, and (3) making  
a contract.  
1. Solicitation (other than advertising) is  
any communication (including, but not limited  
to, telephone, telegraph, mail, or in person)  
by the FSC, to a specific, targeted customer  
or potential customer.  
Who Must File  
File Form 1120-FSC if the corporation  
elected to be treated as a FSC or small FSC,  
and the election is still in effect.  
Total direct costs means all of the direct  
costs of any transaction attributable to  
activities described in any paragraph of  
section 924(e). For purposes of the 50% test  
of section 924(d)(1)(B), total direct costs are  
based on the direct costs of all activities  
described in all paragraphs of section  
924(e). For purposes of the 85% test of  
section 924(d)(2), however, the total direct  
costs are determined separately for each  
paragraph of section 924(e).  
Note. A FSC that elects to be treated as a  
domestic corporation under section 943(e)  
(1) does not file Form 1120-FSC. Instead, it  
files Form 1120.  
When To File  
Generally, a corporation must file Form  
1120-FSC by the 15th day of the 4th month  
after the end of its tax year. A FSC that has  
2. Negotiation is any communication by  
the FSC to a customer or potential customer  
aimed at an agreement on one or more of the  
Foreign direct costs means the portion  
of the total direct costs of any transaction  
Instructions for Form 1120-FSC (Rev. 1-2024)  
3
     
dissolved must generally file by the 15th day  
of the 4th month after the date it dissolved.  
Include their Preparer Tax Identification  
See the Instructions for Form 5471 for  
more information.  
Number (PTIN), and  
Give a copy of the return to the taxpayer.  
Form 5472, Information Return of a 25%  
However, a FSC with a fiscal tax year  
ending June 30 must file by the 15th day of  
the 3rd month after the end of its tax year. A  
FSC with a short tax year ending anytime in  
June will be treated as if the short year  
ended on June 30, and must file by the 15th  
day of the 3rd month after the end of its tax  
year.  
Foreign-Owned U.S. Corporation or a  
Foreign Corporation Engaged in a U.S. Trade  
or Business. This form is filed by or for a  
foreign corporation engaged in a U.S. trade  
or business that had reportable transactions  
with a related party. See the Instructions for  
Form 5472 for filing instructions and  
Note. A paid preparer may sign original or  
amended returns by rubber stamp,  
mechanical device, or computer software  
program.  
Paid Preparer  
Authorization  
information about penalties.  
If the due date falls on a Saturday,  
Sunday, or legal holiday, the corporation can  
file on the next business day.  
Form 5713, International Boycott Report.  
If the FSC wants to allow the IRS to discuss  
its tax return with the paid preparer who  
signed it, check the “Yes” box in the signature  
area of the return. This authorization applies  
only to the individual whose signature  
appears in the “Paid Preparer Use Only”  
section of the return. It does not apply to the  
firm, if any, shown in that section.  
FSCs that had operations in, or related to,  
certain “boycotting” countries file  
Form 5713.  
Private delivery services. FSCs can use  
certain private delivery services (PDS)  
designated by the IRS to meet the “timely  
mailing as timely filing” rule for tax returns.  
Go to IRS.gov/PDS. The PDS can tell you  
how to get written proof of the mailing date.  
For the IRS mailing address to use if  
you’re using PDS, go to IRS.gov/  
Form 8275, Disclosure Statement, and  
Form 8275-R, Regulation Disclosure  
Statement. Use these forms to disclose  
items or positions taken on a tax return that  
are not otherwise adequately disclosed on a  
tax return or that are contrary to Treasury  
regulations (to avoid parts of the  
If the “Yes” box is checked, the FSC is  
authorizing the IRS to call the paid preparer  
to answer any questions that may arise  
during the processing of its return. The FSC  
is also authorizing the paid preparer to:  
accuracy-related penalty or certain preparer  
penalties).  
Form 8300, Report of Cash Payments  
Private delivery services cannot  
Over $10,000 Received in a Trade or  
Business. Use this form to report the receipt  
of more than $10,000 in cash or foreign  
currency in one transaction or a series of  
related transactions.  
Give the IRS any information that is  
deliver items to P.O. boxes. You must  
!
CAUTION  
missing from the return;  
use the U.S. Postal Service to mail  
Call the IRS for information about the  
any item to an IRS P.O. box address.  
processing of the return or the status of any  
related refund or payment(s); and  
Extension of time to file. A FSC must File  
Form 7004, Application for Automatic  
Extension of Time To File Certain Business  
Income Tax, Information, and Other Returns,  
by the return due date specified earlier, to  
request an extension of time to file. See the  
Instructions for Form 7004 for additional  
information.  
Respond to certain IRS notices about  
math errors, offsets, and return preparation.  
Assembling the Return  
To ensure that the FSC's tax return is  
correctly processed, attach all schedules  
and other forms after page 6 of Form  
1120-FSC, in the following order:  
The FSC is not authorizing the paid  
preparer to receive any refund check, bind  
the FSC to anything (including any additional  
tax liability), or otherwise represent the FSC  
before the IRS.  
1. Form 4136.  
The authorization will automatically end  
no later than the due date (excluding  
2. Additional schedules in alphabetical  
Where To File  
order.  
File Form 1120-FSC with the:  
Internal Revenue Service Center  
P.O. Box 409101  
extensions) for filing the FSC's tax return. If  
the FSC wants to expand the paid preparer's  
authorization or revoke the authorization  
before it ends, see Pub. 947, Practice Before  
the IRS and Power of Attorney.  
3. Additional forms in numerical order.  
4. Supporting statements and  
attachments.  
Ogden, UT 84409  
Who Must Sign  
Complete every applicable entry space  
on Form 1120-FSC. Do not enter “See  
Attached” or “Available Upon Request”  
instead of completing the entry spaces. If  
more space is needed on the forms or  
schedules, attach separate sheets using the  
same size and format as the printed forms.  
The return must be signed and dated by:  
Other Forms That May Be  
Required  
The president, vice president, treasurer,  
assistant treasurer, chief accounting officer;  
or  
The FSC may have to file some of the forms  
listed below. See the form for more  
information.  
Any other corporate officer (such as tax  
officer) authorized to sign.  
For a list of additional forms the FSC may  
need to file (most notably, forms pertaining to  
the reporting of various types of income, and  
any related withholding, to U.S. persons,  
foreign persons, and the IRS), see Pub. 542,  
Corporations.  
If a return is filed on behalf of a FSC by a  
receiver, trustee, or assignee, the fiduciary  
must sign the return, instead of the corporate  
officer. Returns and forms signed by a  
receiver or trustee in bankruptcy on behalf of  
a FSC must be accompanied by a copy of  
the order or instructions of the court  
If there are supporting statements and  
attachments, arrange them in the same order  
as the schedules or forms they support and  
attach them last. Show the totals on the  
printed forms. Enter the FSC's name and EIN  
on each supporting statement or attachment.  
Form 5471, Information Return of U.S.  
Persons With Respect to Certain Foreign  
Corporations. This form may have to be filed  
by certain U.S. officers, directors, or  
shareholders of a FSC to report changes in  
ownership (see sections 6046 and the  
related regulations).  
If a Form 1120-FSC is filed, Form 5471 is  
not required to be filed to satisfy the  
requirements of section 6038 (see  
Temporary Regulations section 1.921-1T(b)  
(3)). However, certain U.S. shareholders may  
be required to file Form 5471 and the  
applicable schedules to report subpart F  
income.  
authorizing signing of the return or form.  
Accounting Methods  
Paid Preparer Use Only section. If an  
employee of the FSC completes Form  
1120-FSC, the paid preparer section should  
remain blank. Anyone who prepares Form  
1120-FSC but does not charge the FSC  
should not complete that section. Generally,  
anyone who is paid to prepare the return  
must sign and complete the section.  
In general, figure taxable income using the  
method of accounting used in keeping the  
FSC's books and records. In all cases, the  
method used must clearly show taxable  
income. Permissible overall methods of  
accounting include cash, accrual, or any  
other method authorized by the Internal  
Revenue Code.  
The paid preparer must complete the  
required preparer information and:  
Generally, the following rules apply. For  
more information, see Pub. 538, Accounting  
Periods and Methods.  
Sign the return in the space provided for  
the preparer's signature.  
4
Instructions for Form 1120-FSC (Rev. 1-2024)  
           
A FSC cannot use the cash method of  
If the net section 481(a) adjustment is  
positive, report the ratable portion on Form  
1120-FSC, page 4, Schedule F, line 16, as  
other income. If the net section 481(a)  
adjustment is negative, report the ratable  
portion on Form 1120-FSC, page 4,  
FSCs that do not maintain an office or  
place of business in the United States can  
use the Electronic Federal Tax Payment  
System (EFTPS) to pay the tax due provided  
the FSC has a U.S. bank account. If the FSC  
does not have a U.S. bank account, it may  
arrange for a financial institution to initiate a  
same-day payment on its behalf or it can  
arrange for a qualified intermediary, tax  
professional, payroll service, or other trusted  
third party to make a deposit on its behalf  
using a master account. In addition, the FSC  
still has the option to pay by check or money  
order, payable to “United States Treasury.” To  
help ensure proper crediting, write the FSC's  
EIN, “Form 1120-FSC,and the tax period to  
which the payment applies on the check or  
money order. Enclose the payment when  
Form 1120-FSC is filed.  
FSCs that do maintain an office or place  
of business in the United States must pay the  
tax due by electronic funds transfer. The FSC  
can pay the tax using EFTPS or it can  
arrange for its tax professional, financial  
institution, payroll service, or other trusted  
third party to make deposits on its behalf. In  
addition, the FSC also has the option to  
arrange for its financial institution to initiate a  
same-day payment.  
accounting unless it is a small business  
taxpayer (defined later). A tax shelter  
(defined in section 448(d)(3)) may never use  
the cash method. See sections 448(a)(1)  
through (a)(3). However, see Nonaccrual  
later.  
Schedule F, line 18, as a deduction.  
Unless it is a small business taxpayer  
Accounting Period  
(defined below), a FSC must use an accrual  
method for sales and purchases of inventory  
items. See the instructions for Form 1125-A.  
A FSC must figure its taxable income on the  
basis of a tax year. A tax year is the annual  
accounting period a FSC uses to keep its  
records and report its income and expenses.  
Generally, FSCs may use a calendar year or  
a fiscal year. Personal service corporations,  
however, must generally use a calendar year.  
A corporation engaged in farming must  
use an accrual method. For exceptions, see  
section 447 and Pub. 225.  
Special rules apply to long-term contracts.  
See section 460.  
Note. The tax year of a FSC must be the  
same as the tax year of the principal  
shareholder which, at the beginning of the  
FSC tax year, has the highest percentage of  
voting power. If two or more shareholders  
have the highest percentage of voting power,  
the FSC must have a tax year that conforms  
to the tax year of any such shareholder. See  
section 441(h).  
Small business taxpayer. For tax years  
beginning in 2023, a FSC qualifies as a small  
business taxpayer if (a) it has average annual  
gross receipts of $29 million or less for the 3  
prior tax years, and (b) is not a tax shelter (as  
defined in section 448(d)(3)).  
A small business taxpayer can account  
for inventory by (a) treating the inventory as  
non-incidental materials and supplies, or (b)  
conforming to its treatment of inventory in an  
applicable financial statement (as defined in  
section 451(b)(3)). If it does not have an  
applicable financial statement, it can use the  
method of accounting used in its books and  
records prepared according to its accounting  
procedures.  
Rounding Off to Whole  
Dollars  
The FSC may enter decimal points and cents Note. If the due date falls on a Saturday,  
when completing its return. However, the  
corporation should round off cents to whole  
dollars on its return, forms, and schedules to  
make completing its return easier. The  
Sunday, or legal holiday, the payment is due  
on the next day that isn't a Saturday, Sunday,  
or legal holiday.  
Change in accounting method. Generally,  
an FSC must get IRS consent to change  
either an overall method of accounting or the  
accounting treatment of any material item for  
income tax purposes. To obtain consent, the  
corporation must generally file Form 3115,  
Application for Change in Accounting  
Method, during the tax year for which the  
change is requested. See the Instructions for  
Form 3115 and Pub. 538 for more  
Electronic Deposit Requirement  
corporation must either round off all amounts  
on its return to whole dollars or use cents for  
all amounts. To round, drop amounts under  
50 cents and increase amounts from 50 to 99  
cents to the next dollar. For example, $8.40  
rounds to $8 and $8.50 rounds to $9.  
FSCs with an office or place of business in  
the United States must use electronic funds  
transfers to make all federal tax deposits  
(such as deposits of employment and  
corporate income tax). Generally, electronic  
funds transfers are made using EFTPS.  
However, if the corporation does not want to  
use EFTPS, it can arrange for its tax  
If two or more amounts must be added to  
figure the amount to enter on a line, include  
cents when adding the amounts and round  
off only the total.  
professional, financial institution, payroll  
service, or other trusted third party to make  
deposits on its behalf. Also, it can arrange for  
its financial institution to submit a same-day  
payment (discussed below) on its behalf.  
EFTPS is a free service provided by the  
Department of the Treasury. Services  
provided by a tax professional, financial  
institution, payroll service, or other third party  
may have a fee.  
information and exceptions. Also see the  
Instructions for Form 3115 for procedures  
that may apply for obtaining automatic  
consent to change certain methods of  
accounting, non-automatic change  
Recordkeeping  
Keep the FSC's records for as long as they  
may be needed for the administration of any  
provision of the Internal Revenue Code.  
Usually, records that support an item of  
income, deduction, or credit on the return  
must be kept for 3 years from the date the  
return is due or filed, whichever is later. Keep  
records that verify the FSC's basis in  
property for as long as they are needed to  
figure the basis of the original or replacement  
property.  
procedures, and reduced Form 3115 filing  
requirements.  
Section 481(a) adjustment. If the  
FSC’s taxable income for the current tax year  
is figured under a method of accounting  
different from the method used in the  
preceding tax year, the corporation may have  
to make an adjustment under section 481(a)  
to prevent amounts of income or expense  
from being duplicated or omitted. The  
section 481(a) adjustment period is generally  
1 year for a net negative adjustment and 4  
years for a net positive adjustment. See the  
Instructions for Form 3115.  
Exceptions to the general section 481(a)  
adjustment period may apply. Also, in some  
cases, a corporation can elect to modify the  
section 481(a) adjustment period. The  
corporation may have to complete the  
appropriate lines of Form 3115 to make an  
election. See the Instructions for Form 3115  
for more information and exceptions.  
For more information about EFTPS or to  
enroll in EFTPS, visit EFTPS.gov, or call  
1-800-555-4477 (TTY/TDD  
1-800-733-4829).  
Depositing on time. For any deposit made  
by EFTPS to be on time, the FSC must  
submit the deposit by 8 p.m. Eastern time the  
day before the date the deposit is due. If the  
FSC uses a third party to make deposits on  
its behalf, they may have different cutoff  
times.  
The FSC should keep copies of all filed  
returns. They help in preparing future and  
amended returns and in the calculation of  
earnings and profits.  
Tax Payments  
The FSC must pay any tax due in full no later  
than the due date for filing Form 1120-FSC  
(not including extensions). See When To  
File, earlier, for this due date. The method for  
payment of the tax due depends upon  
whether the FSC has an office or place of  
business in the United States.  
Same-day wire payment option. If the  
FSC fails to submit a deposit transaction on  
EFTPS by 8 p.m. Eastern time the day before  
the date a deposit is due, it can still make the  
deposit on time by using the Federal Tax  
Collection Service (FTCS). To use the  
same-day wire payment option, the FSC will  
Instructions for Form 1120-FSC (Rev. 1-2024)  
5
           
need to make arrangements with its financial  
institution ahead of time regarding  
show that the failure to file on time was due  
to reasonable cause.  
street address and the FSC has a P.O. box,  
show the box number instead.  
availability, deadlines, and costs. Financial  
institutions may charge a fee for payments  
made this way. To learn more about the  
information the FSC will need to provide to its  
financial institution to make a same-day wire  
payment, go to IRS.gov/SameDayWire.  
If the FSC receives its mail in care of a  
third party (such as an accountant or an  
attorney), enter “C/O” on the street address  
line followed by the third party's name and  
street address or P.O. box.  
If you believe that reasonable cause  
exists, do not attach an explanation  
!
CAUTION  
when you file Form 1120-FSC.  
Instead, if the FSC receives a penalty notice  
after the return is filed, send the IRS an  
explanation at that time and the IRS will  
determine if the FSC meets  
Item A. Foreign country or U.S. posses-  
sion of incorporation. See Definition of a  
Estimated Tax Payments  
reasonable-cause criteria.  
Generally, the following rules apply to the  
FSC's payments of estimated tax.  
Item E. Total assets. Enter the FSC's total  
assets (as determined by the accounting  
method regularly used in keeping the FSC's  
books and records) at the end of the tax year  
from Form 1120-FSC, page 6, Schedule L,  
column (d), line 15. If there are no assets at  
the end of the tax year, enter -0-.  
Penalty for late payment of tax. A FSC  
that does not pay the tax when due generally  
may be penalized 1/2 of 1% of the unpaid tax  
for each month or part of a month the tax is  
not paid, up to a maximum of 25% of the  
unpaid tax. The penalty will not be imposed if  
the FSC can show that the failure to pay on  
time was due to reasonable cause. See  
Caution, above.  
The FSC must make installment payments  
of estimated tax if it expects its total tax for  
the year (less applicable credits) to be $500  
or more.  
The installments are due by the 15th day  
of the 4th, 6th, 9th, and 12th months of the  
tax year. If any date falls on a Saturday,  
Sunday, or legal holiday, the installment is  
due on the next regular business day.  
Item F. Final return, name change, ad-  
dress change, or amended return.  
If this is the FSC's final return and it will no  
Trust fund recovery penalty. This penalty  
may apply if certain income, social security,  
and Medicare taxes that must be collected or  
withheld are not collected or withheld, or  
these taxes are not paid. These taxes are  
generally reported on Form 941, Employer's  
QUARTERLY Federal Tax Return, or Form  
945, Annual Return of Withheld Federal  
Income Tax.  
The trust fund recovery penalty may be  
imposed on all persons who are determined  
by the IRS to have been responsible for  
collecting, accounting for, or paying over  
these taxes, and who acted willfully in not  
doing so. The penalty is equal to the full  
amount of the unpaid trust fund tax. See Pub.  
15 (Circular E), Employer's Tax Guide, for  
details, including the definition of responsible  
persons.  
longer exist, check the “Final return” box.  
If the FSC changed its name since it last  
If the FSC maintains an office or place of  
business in the United States, it must use  
electronic funds transfer to make installment  
payments of estimated tax.  
filed a return, check the box for “Name  
change.Generally, a FSC must also have  
amended its articles of incorporation and  
filed the amendment with the jurisdiction in  
which it was incorporated.  
If the FSC does not maintain an office or  
place of business in the United States, it can  
pay the estimated tax by EFTPS, providing it  
has a U.S. bank account. The FSC can also  
arrange for its financial institution to submit a  
same-day payment on its behalf or can  
arrange for its qualified intermediary, tax  
professional, payroll service, or other trusted  
third party to make a deposit on its behalf  
using a master account. In addition, the FSC  
still has the option to pay the estimated tax  
due by check or money order.  
If the FSC has changed its address since  
it last filed a return (including a change to an  
“in care of” address), check the box for  
“Address change.”  
Note. If a change of address or responsible  
party occurs after the return is filed, use  
Form 8822-B, Change of Address or  
Responsible Party - Business, to notify the  
IRS. See the instructions for Form 8822-B for  
details.  
Penalties may apply if the corporation  
does not make required estimated tax  
payment deposits. See line 3, Estimated tax  
penalty, later.  
If the FSC is amending its return, check  
the box for “Amended return.”  
Other penalties. Other penalties may be  
imposed for negligence, substantial  
understatement of tax, reportable transaction  
understatements, and fraud. See sections  
6662, 6662A, and 6663.  
If the FSC overpaid estimated tax, it may  
FSC Information  
be able to get a quick refund by filing Form  
4466, Corporation Application for Quick  
Refund of Overpayment of Estimated Tax.  
Line 1. Principal shareholder. Complete  
lines 1a through 1h for the shareholder  
(individual, corporation, partnership, trust, or  
estate) that was the principal shareholder at  
the beginning of the FSC's tax year. See the  
Note under Accounting Period, earlier.  
A FSC may also be subject to a penalty  
(under section 6686) of:  
See section 6655 for more information on  
how to figure estimated taxes.  
$100 for each failure to supply  
information, up to $25,000 during the  
calendar year.  
Interest and Penalties  
$1,000 for not filing a return.  
Foreign address. Enter the information  
in the following order: city or town, state or  
province, country, and foreign postal code.  
Follow the country's practice for entering the  
name of the state or province and postal  
code. Do not abbreviate the country name.  
Interest. Interest is charged on taxes paid  
late even if an extension of time to file is  
granted. Interest is also charged on penalties  
imposed for failure to file, negligence, fraud,  
substantial valuation misstatements,  
substantial understatements of tax, and  
reportable transaction understatements from  
the due date (including extensions) to the  
date of payment. The interest charge is  
figured at a rate determined under section  
6621.  
The section 6686 penalties will not apply  
if the FSC can show that the failure was due  
to reasonable cause. However, see Caution,  
above.  
Line 2. Parent-subsidiary controlled  
group. If the FSC is a subsidiary in a  
parent-subsidiary controlled group and the  
principal shareholder is not the common  
parent of the group, complete lines 2a  
through 2g for the common parent. Enter the  
consolidated total assets on line 2d for a  
group that files a consolidated return;  
otherwise, enter only the common parent's  
total assets.  
Specific Instructions  
Period covered. Enter the FSC ‘s tax year  
in the space provided at the top of the form.  
See Accounting Period, earlier.  
Name. Print or type the FSC's true name (as  
set forth in the charter or other legal  
document creating it).  
Penalty for late filing of return. A FSC  
that does not file its tax return by the due  
date, including extensions, may be penalized  
5% of the unpaid tax for each month or part  
of a month the return is late, up to a  
Address. Enter the U.S. address where the  
FSC maintains the records required under  
section 6001. Include the suite, room, or  
other unit number after the street address. If  
the post office does not deliver mail to the  
maximum of 25% of the unpaid tax. The  
minimum penalty for a tax return required to  
be filed in 2024 that is more than 60 days late  
is the smaller of the tax due or $485. The  
penalty will not be imposed if the FSC can  
Note. Check the “Yes” box on line 2 if the  
FSC is a subsidiary in a parent-subsidiary  
controlled group. This applies even if the  
6
Instructions for Form 1120-FSC (Rev. 1-2024)  
         
FSC is a subsidiary member of one group  
and the parent corporation of another.  
administrative pricing rules. For details on  
the administrative pricing rules, see the  
Instructions for Schedule P (Form  
1120-FSC).  
section 263A costs paid or incurred during  
the tax year not includible on lines 2, 3, and  
5.  
A “parent-subsidiary controlled group” is  
one or more chains of corporations  
Line 5. Other costs. Enter on line 5 any  
costs paid or incurred during the tax year not  
entered on lines 2 through 4. Attach a  
statement listing details of the costs.  
connected through stock ownership  
If the FSC acts as another person's  
commission agent on a sale, do not enter  
any amount on Schedule A for the sale.  
(sections 927(d)(4) and 1563(a)(1)). Both of  
the following requirements must be met:  
1. More than 50% of the total combined  
voting power of all classes of stock entitled to  
vote or more than 50% of the total value of all  
classes of stock of each corporation in the  
group (except the parent) must be owned by  
one or more of the other corporations in the  
group.  
2. The common parent must own more  
than 50% of the total combined voting power  
of all classes of stock entitled to vote or more  
than 50% of the total value of all classes of  
stock of at least one of the other corporations  
in the group.  
Line 7. Inventory at end of year. See  
Regulations sections 1.263A-1 through  
1.263A-3 for details on determining the  
amount of additional section 263A costs to  
be included in ending inventory.  
Small FSCs will have to make two  
separate computations for cost of goods sold  
if their foreign trading gross receipts exceed  
the limitation amount on line 6e of  
Schedule B. In this case, a deduction for cost  
of goods sold will be figured separately for  
the income on line 6h of Schedule B, and  
separately for the income on line 7 of  
Schedule F.  
Lines 9a through 9f. Inventory valuation  
methods. Inventories may be valued at:  
Cost,  
Cost or market value (whichever is lower),  
or  
Inventories  
Any other method approved by the IRS  
Generally, unless you are a small business  
taxpayer, inventories are required at the  
beginning and end of each tax year if the  
purchase or sale of merchandise is an  
income-producing factor. See Regulations  
section 1.471-1. Additionally, if inventories  
are required, you generally must use an  
overall accrual method of accounting.  
that conforms to the requirements of the  
applicable regulations.  
Stock owned directly by other members  
of the group is not counted when computing  
the voting power or value.  
See sections 927(d)(4) and 1563(d)(1) for  
the definition of “stock” for purposes of  
determining stock ownership above.  
FSCs that use erroneous valuation  
methods must change to a method permitted  
for federal income tax purposes. To make  
this change, use Form 3115. See the  
Instructions for Form 3115. Also see Pub.  
538.  
If a FSC is a small business taxpayer  
(defined below), it may adopt or change its  
accounting method to account for inventories  
in the same manner as materials and  
Line 9a. Method of valuing closing inven-  
tory. On line 9a, check the method(s) used  
for valuing inventories. Under lower of cost or  
market, the term “market” (for normal goods)  
means the current bid price prevailing on the  
inventory valuation date for the particular  
merchandise in the volume usually  
Tax and Payments  
Line 2h. Backup withholding. If the FSC  
had income tax withheld from any payments  
it received due to backup withholding,  
include the amount withheld in the total for  
line 2h. Show the amount withheld in the  
blank space in the right-hand column  
between lines 1 and 2h, and write “backup  
withholding.”  
supplies that are non-incidental, or conform  
to the FSC's treatment of inventories in an  
applicable financial statement (as defined in  
section 451(b)(3)), or if the FSC does not  
have an applicable financial statement, the  
method of accounting used in the FSC's  
books and records prepared in accordance  
with the FSC's accounting procedures.  
Changing an accounting method generally  
requires IRS consent. See the Change in  
accounting method section, earlier.  
purchased by the taxpayer. If section 263A  
applies to the taxpayer, the basic elements of  
cost must reflect the current bid price of all  
direct costs and all indirect costs properly  
allocable to goods on hand at the inventory  
date.  
Inventory may be valued below cost when  
the merchandise is unsalable at normal  
prices or unusable in the normal way  
because the goods are subnormal due to  
damage, imperfections, shop wear, etc. The  
goods may be valued at the bona fide selling  
price, minus direct cost of disposition (but  
not less than scrap value). Bona fide selling  
price means actual offering of goods during a  
period ending not later than 30 days after  
inventory date.  
Note. Do not include backup withholding  
amounts on line 2g. Include on line 2g only  
amounts withheld under Chapter 3 or 4 of the  
Code.  
Small business taxpayer. For tax years  
beginning in 2023, a FSC qualifies as a small  
business taxpayer if (a) it has average annual  
gross receipts of $29 million or less for the 3  
prior tax years, and (b) is not a tax shelter (as  
defined in section 448(d)(3)).  
Line 3. Estimated tax penalty. A FSC that  
does not make estimated tax payments  
when due may be subject to an  
underpayment penalty for the period of  
underpayment. Generally, a FSC is subject to  
the penalty if its tax liability is $500 or more  
and it did not timely pay at least the smaller  
of:  
All FSCs should see Section 263A  
uniform capitalization rules in the instructions  
for Schedule G, later. See those instructions  
before completing Schedule A.  
Its tax liability for the current year, or  
Its prior year's tax.  
Lines 9c and 9d. LIFO method. If this is  
the first year the Last-in, First-out (LIFO)  
inventory method was either adopted or  
extended to inventory goods not previously  
valued under the LIFO method provided in  
section 472, attach Form 970, Application To  
Use LIFO Inventory Method, or a statement  
with the information required by Form 970.  
Also check the LIFO box on line 9c. On  
line 9d, enter the amount of total closing  
inventories computed under section 472.  
Estimates are acceptable.  
Use Form 2220, Underpayment of  
If the FSC uses intercompany pricing  
rules (for purchases from a related supplier),  
use the transfer price figured in Part II of  
Schedule P (Form 1120-FSC).  
Estimated Tax by Corporations, to see if the  
FSC owes a penalty and to figure the amount  
of the penalty. If Form 2220 is completed,  
enter the penalty on line 3, Estimated tax  
penalty.  
Line 1. Inventory at beginning of year. If  
the FSC is changing its method of  
accounting for the current tax year, it must  
refigure last year's closing inventory using its  
new method of accounting and enter the  
result on line 1. If there is a difference  
between last year's closing inventory and the  
refigured amount, attach an explanation and  
take it into account when figuring the FSC's  
section 481(a) adjustment (explained  
earlier).  
Schedule A  
Complete Schedule A only for the cost of  
goods sold deduction related to foreign  
trading gross receipts reported on lines 1  
through 5 of Schedule B.  
If the FSC changed or extended its  
inventory method to LIFO and had to write up  
the opening inventory to cost in the year of  
election, report the effect of the write-up as  
other income (as appropriate on Form  
1120-FSC, Schedule F, line 16),  
Complete column (a) to show the cost of  
goods sold for inventory acquired in  
transactions using the administrative pricing  
rules. Complete column (b) to show the cost  
of goods sold for inventory acquired in  
transactions that did not use the  
Line 4. Additional section 263A costs. If  
the FSC has elected a simplified method of  
accounting, enter on line 4 the balance of  
proportionately over a 3-year period that  
begins with the year of the LIFO election.  
Instructions for Form 1120-FSC (Rev. 1-2024)  
7
   
For more information on inventory  
valuation methods, see Pub. 538. For more  
information on changes in the method of  
accounting for inventory, see Form 3115 and  
the Instructions for Form 3115.  
Schedule B.  
Line 10. All FSCs (except small FSCs) must  
answer these questions. On line 10b,  
indicate how the FSC met the foreign direct  
costs requirement of section 924(d) for all  
transactions that generated foreign trading  
gross receipts reported on lines 1 through 5  
of Schedule B. Also, complete line 10a  
and/or line 10d to make an election to use  
either of the annual grouping election(s)  
Rules, earlier, for details.  
Lines 6b through 6h. See section 924(b)  
(2)(B) for the rules regarding the limitation on  
the amount of foreign trading gross receipts  
that a small FSC can take into account in  
determining its exempt foreign trade income.  
Additional Information  
Line 6d. Temporary Regulations section  
1.921-1T(b)(5) indicates that, in the case of a  
small FSC having a short tax year, the dollar  
limitation reported on line 6b or 6c is to be  
prorated on a daily basis. A small FSC  
having a short tax year must divide the  
number of days in its short tax year by the  
number of days that would have made up a  
full tax year and enter the resulting fraction  
on line 6d as a decimal less than 1.00000.  
Example. For its 2023 calendar year tax  
year, a small FSC has a short tax year of 73  
days. The FSC enters 0.20 (73/365) on  
line 6d.  
Line 2. Enter any tax-exempt interest  
received or accrued. Include any  
exempt-interest dividends received as a  
shareholder in a mutual fund or other  
regulated investment company. Also include  
this amount on Schedule M-1, line 7a.  
Schedule B  
Use Schedule B to compute taxable income  
from all sources.  
Line 5. If the FSC owned at least a 10%  
interest, directly or indirectly, in any foreign  
partnership, attach a statement listing the  
following information for each foreign  
partnership. For this purpose, a foreign  
partnership includes an entity treated as a  
foreign partnership under Regulations  
section 301.7701-2 or 301.7701-3.  
Part I  
Use Part I to compute net income attributable  
to nonexempt foreign trade income. Income  
and expenses on lines 1 through 15 are  
reported in column (a) if the administrative  
pricing rules were used in the transaction  
that produced the income.  
Line 6f. If commission income is reported in  
the total for line 6a of Schedule B, total  
receipts for purposes of line 6f are figured as  
follows:  
1. Name and EIN (if any) of the foreign  
partnership;  
Report in column (b) all foreign trade  
income from all transactions in which the  
administrative pricing rules were not used.  
Attach a statement that shows the  
2. Identify which, if any, of the following  
forms the foreign partnership filed for its tax  
year ending with or within the FSC's tax year:  
Form 1042, 1065, or 8804;  
1. Enter total of columns (a) and  
(b), line 6a, Schedule B  
.
.
.
.
1.  
computation of the taxable and nontaxable  
income included on line 15, column (b).  
Include only the taxable amount on line 16.  
3. Name of the partnership  
2. Enter total commission income  
representative (if any); and  
reported on line 1 and line 2,  
Schedule B  
.
.
.
.
.
.
.
.
.
.
.
.
.
2.  
3.  
4. Beginning and ending dates of the  
foreign partnership's tax year.  
Nonaccrual experience method for serv-  
ice providers. Accrual method FSCs are  
not required to accrue certain amounts to be  
received from the performance of services  
that, based on their experience, will not be  
collected, if:  
3. Subtract line 2 from line 1  
.
4. With respect to the commission  
income reported on line 2 above,  
enter total gross receipts on the  
sale, lease, or rental of property  
on which the commission income  
arose (section 927(b)(2))  
5. Add lines 3 and 4. Enter here and  
on line 6f, Schedule B  
Line 6. Generally, if the FSC has a net  
operating loss (NOL) for the current tax year,  
it can elect to waive the entire carryback  
period for the NOL and instead carry the  
NOL forward to future tax years. To do so,  
check the box on line 6 and file the tax return  
by its due date, including extensions. Do not  
attach the statement described in Temporary  
Regulations section 301.9100-12T. Generally  
once made, the election is irrevocable.  
If the FSC timely filed its return for the  
loss year without making the election, it can  
make the election on an amended return filed  
within 6 months of the due date of the loss  
year return (excluding extensions). Attach the  
election to the amended return and write  
"Filed pursuant to section 301.9100-2" on  
the election statement. See the Instructions  
for Form 1139.  
The services are in the fields of health,  
law, engineering, architecture, accounting,  
actuarial science, performing arts, or  
consulting; or  
.
.
.
4.  
5.  
.
.
.
.
.
The FSC meets the section 448(c) gross  
receipts test for all prior years.  
This provision does not apply to any  
amount if interest is required to be paid on  
the amount or if there is any penalty for  
failure to timely pay the amount. See  
Regulations section 1.448-3 for more  
information on the nonaccrual experience  
method, including information on safe harbor  
methods.  
Line 6h. When making the line 6h  
allocation, allocate only the commission  
income from the gross receipts on line 4  
above. If the small FSC's foreign trading  
gross receipts for the tax year (line 6f,  
Schedule B) exceed its allowable limitation  
(line 6e, Schedule B), the small FSC may  
select the gross receipts to which the  
limitation is allocated. In such a case,  
allocate the amount on line 6g between  
columns (a) and (b) on line 6h based on  
whether the administrative pricing rules were  
used for the gross receipts selected. See  
Regulations section 1.921-2(b), Q&A-4.  
FSCs that qualify to use the nonaccrual  
experience method should attach a  
Line 7. Enter the amount of the NOL  
carryover to the tax year from prior years,  
even if some of the loss is used to offset  
income on this return. The amount to enter is  
the total of all NOLs generated in prior years  
but not used to offset income (either as a  
carryback or carryover) to a tax year prior to  
the current tax year. Do not reduce the  
amount by any NOL deduction reported on  
line 19a, Part II, of Schedule B.  
statement showing total gross receipts, the  
amount not accrued because of the  
application of section 448(d)(5), and the net  
amount accrued. Enter the net amount on  
the applicable line of Schedule B.  
Part II  
Lines 1 through 5. Enter the foreign trading  
gross receipts requested on lines 1 through  
5. See section 924 and Foreign Trading  
Gross Receipts, earlier, for receipts that are  
excluded and other details. Report  
Line 19a. Net operating loss deduction.  
A FSC may use the NOL incurred in one tax  
year to reduce its taxable income in another  
tax year. Enter on line 19a the total NOL  
carryovers from other tax years, but do not  
enter more than the FSC's taxable income  
(after the dividends-received deduction).  
Attach a statement showing the computation  
of the NOL deduction. Also complete line 7  
in Additional Information on page 2 of the  
form.  
Lines 8c and 9b(2). See Definition of a  
definitions of qualifying foreign country and  
U.S. possession.  
commission income on line 1 or line 2 based  
on the sale, lease, or rental of property on  
which that commission arose.  
Line 5. If the 50% gross receipts test of  
section 924(a)(5) is not met, report the FSC's  
gross receipts that would have otherwise  
qualified under that section on line 16,  
Schedule F, instead of line 5,  
Line 9. All FSCs (except small FSCs) must  
answer these questions. For more  
information, see Foreign Management Rules,  
earlier.  
8
Instructions for Form 1120-FSC (Rev. 1-2024)  
       
For more details on the NOL deduction,  
see section 172 and the Instructions for Form  
1139.  
should receive a notice from the RIC  
specifying the amount of dividends that  
qualify for the deduction.  
Part II  
Enter the taxable portion of gross income of  
the FSC that was not derived from foreign  
trading gross receipts. This type of income  
includes:  
Line 19b. Dividends-received deduction.  
A FSC may be entitled to a deduction for  
dividends it receives from other corporations.  
Complete the worksheet on page 12 using  
the Instructions for Dividends and  
Report so-called dividends or earnings  
received from mutual savings banks, etc., as  
interest. Do not treat them as dividends.  
Small FSCs only. Amounts specifically  
excluded from foreign trade income because  
of the small FSC limitation (the amount by  
which line 6f of Schedule B exceeds line 6e  
of Schedule B). (Enter the excess, if any, on  
line 7 of Schedule F.)  
Line 2, Column (a)  
Dividends-Received Deduction Worksheet,  
later. Attach the completed worksheet to  
Form 1120-FSC.  
Enter dividends (except those received on  
certain debt-financed stock acquired after  
July 18, 1984) that are received from  
Investment type income. (Enter on lines 8  
Line 20. Taxable income or (loss). If  
line 20 is zero or less, the FSC may have an  
NOL that may be carried back or forward as  
a deduction to other tax years.  
Only farming losses can be carried back.  
The carryback period for these losses is 2  
years. For NOLs that can be carried back,  
the FSC can elect to waive the carryback  
period and instead carry the NOL forward to  
future tax years.  
See the instructions for Additional  
Information, line 6, earlier, for information on  
making the election to waive the entire  
carryback period for farming losses. See the  
Instructions for Form 1139 for other special  
rules and elections.  
through 12 of Schedule F.)  
20%-or-more-owned domestic corporations  
subject to income tax and that are subject to  
the 65% deduction under section 243(c).  
Income from property that is subsidized,  
deemed in short supply, or destined for use  
in the United States. (Enter on lines 13 and  
14 of Schedule F.)  
Amounts from transactions that did not  
Line 3, Column (a)  
meet the foreign economic process  
requirements. (Enter on line 15 of  
Schedule F.)  
Enter the following.  
Dividends received on certain  
Other nonforeign trade income. (Enter on  
debt-financed stock acquired after July 18,  
1984, from domestic and foreign  
line 16 of Schedule F.)  
For more details, see sections 924(f) and  
927(a)(2) and (3).  
corporations subject to income tax that  
would otherwise be subject to the  
dividends-received deduction under section  
243(a)(1), 243(c), or 245(a). Generally,  
debt-financed stock is stock that the FSC  
acquired by incurring a debt (for example, it  
borrowed money to buy the stock).  
Line 9. See the Dividends and  
Dividends-Received Deduction Worksheet,  
later, to figure the total dividends to report on  
line 9. Attach the completed worksheet to  
Form 1120-FSC.  
See section 172 for additional  
information.  
Dividends received from a RIC on  
debt-financed stock. The amount of  
dividends eligible for the dividends-received  
deduction is limited by section 854(b). The  
FSC should receive a notice from the RIC  
specifying the amount of dividends that  
qualify for the deduction.  
Line 18. Enter the deductions allocated or  
apportioned to line 17 income. Attach to  
Form 1120-FSC a statement listing each  
type of deduction. Show deductions related  
to cost of goods sold separately. See the  
instructions for Schedule A, earlier, before  
completing this line.  
Schedule E  
For purposes of the Note at the top of  
Schedule E, a C corporation is a corporation  
other than an S corporation. Shareholders,  
other than C corporations, are individuals,  
partnerships, S corporations, trusts, and  
estates.  
Line 3, Columns (b) and (c)  
Passive activity limitations. Section 469  
generally limits the deduction of passive  
activity losses for closely held FSCs and  
FSCs that are personal service corporations.  
See section 469 and the Instructions for  
Form 8810 for details.  
Use lines 2a through 2d to figure the  
exemption percentage for foreign trade  
income determined by not using the  
administrative pricing rules. See section  
923(a)(2).  
Dividends received on certain debt-financed  
stock acquired after July 18, 1984, are not  
entitled to the full 50% or 65%  
dividends-received deduction under section  
243 or 245(a). The 50% or 65% deduction is  
reduced by a percentage that is related to  
the amount of debt incurred to acquire the  
stock. See section 246A. Also, see section  
245(a) before making this computation for an  
additional limitation that applies to certain  
dividends received from foreign corporations.  
Attach a statement to Form 1120-FSC  
showing how the amount on line 3, column  
(c), was computed.  
Use lines 3a through 3d to figure the  
exemption percentage for foreign trade  
income that was determined by using the  
administrative pricing rules (see section  
923(a)(3)). If a qualified cooperative is a  
shareholder of the FSC, see section 923(a)  
(4).  
Instructions for Dividends  
and Dividends-Received  
Deduction Worksheet  
For purposes of the 20% ownership test on  
lines 1 through 7, the percentage of stock  
owned by the FSC is based on voting power  
and value of the stock.  
Schedule F  
Part I  
Line 1, Column (a)  
Enter net income from nonexempt foreign  
trade income and related expenses in Part I.  
Line 4, Column (a)  
Enter dividends (except those received on  
certain debt-financed stock acquired after  
July 18, 1984–see section 246A) that:  
Enter dividends received on the preferred  
stock of a less-than-20%-owned public utility  
that is subject to income tax and is allowed  
the 23.3% deduction provided in sections  
244 and 247 (as affected by P.L. 113-295,  
Div. A, section 221(a)(41)(A), Dec. 19, 2014,  
128 Stat. 4043) for dividends paid.  
Line 2. Enter FSC income that resulted from  
the FSC's cooperation with an international  
boycott. See section 927(e)(2) and Form  
5713 and related schedules and instructions.  
Are received from less-than-20%-owned  
domestic corporations subject to income tax,  
and  
Qualify for the 50% deduction under  
Line 3. Enter the amount, if any, of illegal  
payments, bribes, or kickbacks that the FSC  
paid, directly or indirectly, to government  
officials, employees, or agents. See section  
927(e)(2).  
section 243(a)(1).  
Also include on line 1 dividends (except  
those received on certain debt-financed  
stock acquired after July 18, 1984) from a  
regulated investment company (RIC). The  
amount of dividends eligible for the  
Line 5, Column (a)  
Line 5. See the instructions for Schedule A  
Enter dividends received on preferred stock  
of a 20%-or-more-owned public utility that is  
subject to income tax and is allowed the  
26.7% deduction provided in sections 244  
before completing this line.  
dividends-received deduction under section  
243 is limited by section 854(b). The FSC  
Instructions for Form 1120-FSC (Rev. 1-2024)  
9
   
and 247 (as affected by P.L. 113-295, Div. A,  
section 221(a)(41)(A), Dec. 19, 2014, 128  
Stat. 4043) for dividends paid.  
246(c)(4) and Regulations section 1.246-5  
for more details.  
1. Refigure line 18, Part II,  
Schedule B (page 3 of Form  
1120-FSC) without any  
adjustment under section 1059  
and without any capital loss  
carryback to the tax year under  
b. Dividends received on any share of  
preferred stock that are attributable to  
periods totaling more than 366 days if such  
stock was held for less than 91 days during  
the 181-day period that began 90 days  
before the ex-dividend date. When counting  
the number of days the FSC held the stock,  
you may not count certain days during which  
the FSC's risk of loss was diminished. See  
section 246(c)(4) and Regulations section  
1.246-5 for more details. Preferred dividends  
attributable to periods totaling less than 367  
days are subject to the 46-day holding period  
rule discussed above.  
c. Dividends on any share of stock to  
the extent the FSC is under an obligation  
(including a short sale) to make related  
payments with respect to positions in  
substantially similar or related property.  
5. Any other taxable dividend income  
not properly reported elsewhere on the  
Dividends and Dividends-Received  
Deduction Worksheet.  
Line 6, Column (a)  
section 1212(a)(1)  
2. Multiply line 1 by 65%  
(0.65)  
.
.
.
.
.
.
.
1.  
2.  
Enter the U.S.-source portion of dividends  
that:  
Are received from less-than-20%-owned  
.
.
.
.
.
.
.
.
.
.
.
.
.
.
foreign corporations, and  
3. Add lines 2, 5, and 7, column (c),  
and the part of the deduction on  
line 3, column (c), that is  
Qualify for the 50% deduction under  
section 245(a). To qualify for the 50%  
deduction, the FSC must own at least 10% of  
the stock of the foreign corporation by vote  
and value.  
attributable to dividends from  
20%-or-more-owned  
corporations  
.
.
.
.
.
.
.
.
.
.
3.  
4.  
4. Enter the smaller of line 2 or  
Line 7, Column (a)  
line 3. If line 3 is greater than  
line 2, stop here; enter the  
amount from line 4 on line 8,  
Enter the U.S.-source portion of dividends  
that are received from 20%-or-more-owned  
foreign corporations and that qualify for the  
65% deduction under sections 243 and  
245(a).  
column (c), and do not complete  
lines 5–10 below  
.
.
.
.
.
.
.
.
5. Enter the total amount of  
dividends from  
20%-or-more-owned  
corporations that are included on  
lines 2, 3, 5, and 7, column  
Line 8, Column (c)  
If patronage dividends or per-unit retain  
allocations are included on line 10, identify  
the total of these amounts in a statement  
attached to Form 1120-FSC.  
Limitation on dividends-received deduc-  
tion. Generally, line 8, column (c), may not  
exceed the amount on line 10 of the  
worksheet below. However, in a year in which  
an NOL occurs, this limitation does not apply,  
even if the loss is created by the  
(a)  
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
5.  
6.  
6. Subtract line 5 from line 1  
.
.
.
7. Multiply line 6 by 50%  
(0.50)  
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7.  
8.  
9.  
Schedule G  
Limitations on Deductions  
Section 263A uniform capitalization  
rules. The uniform capitalization rules of  
section 263A require FSCs to capitalize  
certain costs to inventory or other property.  
In general, FSCs subject to the section  
263A uniform capitalization rules are  
required to capitalize:  
8. Subtract line 3 above from line 8,  
dividends-received deduction. See sections  
172(d) and 246(b).  
column (c)  
9. Enter the smaller of line 7 or  
line 8  
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
10. Dividends-received deduction  
after limitation (sec. 246(b)).  
Add lines 4 and 9. Enter the  
result here and on line 8, column  
(c)  
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
10.  
1. Direct costs of property produced or  
acquired for resale, and  
2. Certain indirect costs (including  
taxes) that are properly allocable to property  
produced or property acquired for resale.  
Line 10, Column (a)  
Include the following.  
Indirect costs properly allocable to  
property acquired for resale are generally  
those costs in the following categories:  
1. Dividends (other than capital gain  
distributions reported on Schedule D (Form  
1120) and exempt-interest dividends) that  
are received from RICs and that are not  
subject to the 50% deduction.  
Off-site storage or warehousing.  
Purchasing.  
Handling, such as processing,  
2. Dividends from tax-exempt  
assembling, repackaging, and transporting.  
organizations.  
General and administrative costs (mixed  
service costs).  
3. Dividends (other than capital gain  
distributions) received from a real estate  
investment trust that, for the tax year of the  
trust in which the dividends are paid,  
For details, see Regulations section  
1.263A-3(d).  
In general, the FSC cannot deduct the  
costs required to be capitalized under  
section 263A until it sells, uses, or otherwise  
disposes of the property (to which the costs  
relate). The FSC recovers these costs  
through depreciation, amortization, or costs  
of goods sold.  
qualifies under sections 856 through 860.  
4. Dividends not eligible for a  
dividends-received deduction, which include  
the following.  
a. Dividends received on any share of  
stock held for less than 46 days during the  
91-day period beginning 45 days before the  
ex-dividend date. When counting the number  
of days the FSC held the stock, you may not  
count certain days during which the FSC's  
risk of loss was diminished. See section  
A small business taxpayer (defined  
earlier) is not required to capitalize costs  
under section 263A. A small business  
taxpayer that wants to discontinue  
capitalizing costs under section 263A must  
change its method of accounting. See  
10  
Instructions for Form 1120-FSC (Rev. 1-2024)  
   
section 263A(i) and Regulations section  
1.263A-1(j). Also, see the Instructions for  
Form 3115.  
For more information on the uniform  
capitalization rules, see Pub. 538. Also, see  
Regulations sections 1.263A-1 through  
1.263A-3.  
contributed under a salary reduction SEP  
agreement or a SIMPLE IRA plan. See the  
Instructions for Form 1125-E for more  
information on officers' compensation,  
including any special rules and limitations  
that may apply. You are not required to  
complete Form 1125-E or attach it to Form  
1120-FSC.  
Group. See Schedule O and the Instructions  
for Schedule O for more information.  
Line 2  
FSCs, including FSCs that are qualified  
personal service corporations (as defined in  
section 448(d)(2)), figure their tax by  
multiplying taxable income (Schedule B,  
line 20) by 21%. Enter this amount on line 2.  
Transactions between related taxpayers.  
Generally, an accrual basis taxpayer may  
only deduct business expenses and interest  
owed to a related party in the year the  
payment is included in the income of the  
related party. See sections 163(e)(3) and  
267(a)(2) for limitations on deductions for  
unpaid interest and expenses.  
Line 14. Other. Attach a statement, listing  
by type and amount, all allowable deductions  
that are not deductible elsewhere on Form  
1120-FSC. Enter the total on line 14.  
Line 3  
If the corporation had gross receipts of at  
least $500 million in any 1 of the 3 tax years  
preceding the current tax year, complete and  
attach Form 8991. Enter on line 3 the base  
erosion minimum tax from Form 8991, Part  
IV, line 5e. See section 59A and the  
Examples of other deductions include:  
Amortization. See Part VI of Form 4562.  
Insurance premiums.  
Legal and professional fees.  
Limitations on business interest ex-  
pense. Business interest expense may be  
limited. See section 163(j) and Form 8990.  
Supplies used and consumed in the  
Instructions for Form 8991.  
business.  
Line 4  
Utilities.  
Line 1. Enter only foreign direct costs on  
lines 1a through 1e. See section 924(e) and  
Regulations sections 1.924(e)-1(a) through  
(e) for definitions and rules on direct activity  
costs related to foreign trade income.  
A FSC generally enters on line 4 the sum of  
Schedule J, lines 2 and 3. However, if the  
FSC is an applicable corporation under  
section 59(k) and is subject to the corporate  
alternative minimum tax (CAMT), complete  
Form 4626 and attach it to Form 1120-FSC.  
Enter on line 4 the sum of (a) the amount  
from Form 1120-FSC, Schedule J, lines 2  
and 3, and (b) the amount from Form 4626,  
Part II, line 13.  
Do not deduct:  
Amounts paid or incurred to, or at the  
direction of, a government or governmental  
entity for the violation, or investigation or  
inquiry into the potential violation, of a law.  
However, see section 162(f) for exceptions to  
the general rule.  
Line 5. Salaries and wages. Enter the total  
salaries and wages paid for the tax year. Do  
not include salaries and wages deductible  
elsewhere on the return, such as amounts  
included in officers' compensation, cost of  
goods sold, elective contributions to a  
section 401(k) cash or deferred  
Any amount that is allocable to a class of  
exempt income. See section 265(b) for  
exceptions.  
See Pub. 542 and the Instructions for  
Form 1120 for details on other deductions  
that may apply to corporations.  
Line 5  
Foreign tax credit. Generally, a FSC may  
not claim a foreign tax credit. It may,  
however, claim a foreign tax credit for any  
foreign taxes imposed on foreign source  
taxable nonforeign trade income  
arrangement, or amounts contributed under  
a salary reduction SEP agreement or a  
SIMPLE IRA plan.  
Schedule J  
Line 1  
Line 10. Compensation of officers. Enter  
deductible officers' compensation on line 10.  
Do not include compensation deductible  
elsewhere on the return, such as amounts  
included in cost of goods sold, elective  
contributions to a section 401(k) cash or  
deferred arrangement, or amounts  
(Schedule F, Part II) that is treated as  
effectively connected with a U.S. trade or  
business. See Temporary Regulations  
section 1.921-3T(d)(2) for more details.  
If the FSC is a member of a controlled group,  
as defined in section 927(d)(4), it must check  
the box on line 1 and complete Schedule O  
(Form 1120),Consent Plan and  
Apportionment Schedule for a Controlled  
Instructions for Form 1120-FSC (Rev. 1-2024)  
11  
 
Keep for Your Records  
Dividends and Dividends-Received Deduction Worksheet  
(See Instructions for Dividends and Dividends-Received Deduction Worksheet, earlier.)  
(c)  
(a) Dividends  
received  
Dividends-received  
(b) %  
50  
deduction: (a) x (b)  
1
2
3
4
5
Dividends from less-than-20%-owned domestic corporations (other than  
debt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
Dividends from 20%-or-more-owned domestic corporations (other than  
debt-financed stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
65  
Dividends on certain debt-financed stock of domestic and foreign corporations  
(section 246A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
See Inst.  
23.3  
Dividends on certain preferred stock of less-than-20%-owned public  
utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
Dividends on certain preferred stock of 20%-or-more-owned public  
utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
26.7  
50  
6
7
Dividends from less-than-20%-owned foreign corporations . . . . . . . . . . . . . . . .  
Dividends from 20%-or-more-owned foreign corporations . . . . . . . . . . . . . . . .  
65  
8 Total dividends-received deduction. Add lines 1 through 7. See instructions for  
limitation. Enter here and on Schedule B, line 19b . . . . . . . . . . . . . . . . . . . . . .  
9
Other dividends from foreign corporations not included on line 3, 6, or 7 . . . . . . .  
10 Other dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
11 Total dividends. Add lines 1 through 10. Enter here and on  
Schedule F, line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
If the total adjustment to be entered on  
line 27 is a negative amount, enter the  
amount in parentheses.  
the value is over $400 ($1,600 if part of a  
qualified plan).  
Schedule L  
The balance sheet should agree with the  
FSC's books and records. Include  
certificates of deposit as cash on line 1,  
Schedule L.  
The cost of skyboxes.  
Nondeductible club dues.  
The part of luxury water travel expenses  
Schedule M-1  
not deductible under section 274(m).  
Line 5c. Travel and entertainment.  
Expenses for travel as a form of  
Line 5. Tax-exempt securities. Include on  
Include on line 5c any of the following.  
education.  
this line:  
Entertainment expenses not deductible  
Other nondeductible travel and  
State and local government obligations,  
under section 274(a).  
Meal expenses not deductible under  
entertainment expenses.  
the interest on which is excludible from gross  
income under section 103(a), and  
Line 7a. Tax-exempt interest. Report any  
tax-exempt interest received or accrued,  
including any exempt-interest dividends  
received as a shareholder in a mutual fund or  
other regulated investment company. Also  
report this same amount on line 2, Additional  
Information, on page 2 of the form.  
section 274(n).  
Expenses for the use of an entertainment  
Stock in a mutual fund or other regulated  
investment company that distributed  
exempt-interest dividends during the tax year  
of the FSC.  
facility.  
The part of business gifts over $25.  
Expenses of an individual over $2,000,  
Line 27. Adjustments to shareholders'  
equity. Some examples of adjustments to  
report on this line include:  
that are allocable to conventions on cruise  
ships.  
Employee achievement awards of  
Foreign currency translation adjustments.  
The excess of additional pension liability  
nontangible property or of tangible property if  
over unrecognized prior service cost.  
12  
Instructions for Form 1120-FSC (Rev. 1-2024)  
   
Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You  
are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the  
right amount of tax.  
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays  
a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become  
material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by Internal  
Revenue Code section 6103.  
The estimated burden for taxpayers filing this form is approved under OMB control number 1545-0123.  
If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related schedule simpler,  
we would be happy to hear from you. You can send us comments through IRS.gov/FormComments. Or you can write to the Internal Revenue  
Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this  
address. Instead, see Where To File, earlier, near the beginning of the instructions.  
Instructions for Form 1120-FSC (Rev. 1-2024)  
13  
Using the list of activities and codes below, determine  
from which activity the FSC derives the largest percentage  
of its “total receipts.” Total receipts is defined as the sum of  
the foreign trading gross receipts on Form 1120-FSC,  
page 3, Schedule B, line 6a, and the total income on  
page 4, Schedule F, lines 4 and 17. If the FSC's largest  
percentage of its total receipts is derived from the  
wholesale trading of durable goods, the FSC must use one  
of the corresponding codes from the list below  
(423100-423990).  
Once the principal business activity is determined,  
entries must be made on Form 1120-FSC, page 2,  
Additional Information, lines 1a, 1b, and 1c. For the  
business activity code number, enter the six digit code  
selected from the list below. On line 1b, enter a brief  
description of the FSC's business activity. Finally, enter a  
description of the principal product or service of the FSC on  
line 1c.  
Forms 1120-FSC  
Principal Business Activity Codes  
This list of principal business activities and their associated  
codes is designed to classify an enterprise by the type of  
activity in which it is engaged to facilitate the administration  
of the Internal Revenue Code. These principal business  
activity codes are based on the North American Industry  
Classification System.  
424300 Apparel, Piece Goods, & Notions  
424400 Grocery & Related Products  
513210 Software Publishers  
532210 Consumer Electronics &  
Wholesale Trade  
Appliances Rental  
Motion Picture and Sound Recording  
Merchant Wholesalers, Durable Goods  
Industries  
532281 Formal Wear & Costume Rental  
532282 Video Tape & Disc Rental  
532283 Home Health Equipment Rental  
532284 Recreational Goods Rental  
532289 All Other Consumer Goods Rental  
532310 General Rental Centers  
424500 Farm Product Raw Materials  
424600 Chemical & Allied Products  
424700 Petroleum & Petroleum Products  
423100 Motor Vehicle & Motor Vehicle  
512100 Motion Picture & Video Industries  
(except video rental)  
Parts & Supplies  
423200 Furniture & Home Furnishings  
512200 Sound Recording Industries  
424800 Beer, Wine, & Distilled Alcoholic  
423300 Lumber & Other Construction  
Broadcasting, Content Providers, and  
Beverages  
Materials  
Telecommunications  
424910 Farm Supplies  
423400 Professional & Commercial  
Equipment & Supplies  
516100 Radio & Television Broadcasting  
424920 Book, Periodical, & Newspapers  
532400 Commercial & Industrial Machinery  
516210 Media Streaming, Social Networks,  
& Equipment Rental & Leasing  
423500 Metal & Mineral (except Petroleum)  
424930 Flower, Nursery Stock, & Florists'  
& Other Content Providers  
Supplies  
423600 Household Appliances and  
Professional Services  
517000 Telecommunications (including  
Wired, Wireless, Satellite, Cable &  
Other Program Distribution,  
Resellers, Agents, Other  
Electrical & Electronic Goods  
424940 Tobacco Products & Electronic  
Cigarettes  
Architectural, Engineering, and Related  
423700 Hardware & Plumbing & Heating  
Equipment & Supplies  
Services  
424950 Paint, Varnish, & Supplies  
541310 Architectural Services  
541320 Landscape Architecture Services  
541330 Engineering Services  
541340 Drafting Services  
Telecommunications, & Internet  
Service Providers)  
423800 Machinery, Equipment, & Supplies  
424990 Other Miscellaneous Nondurable  
Goods  
423910 Sporting & Recreational Goods &  
Data Processing Services  
Supplies  
Wholesale Electronic Markets and Agents  
and Brokers  
518210 Computing Infrastructure  
Providers, Data Processing, Web  
Hosting, & Related Services  
423920 Toy & Hobby Goods & Supplies  
423930 Recyclable Materials  
425120 Wholesale Trade Agents & Brokers  
541350 Building Inspection Services  
541360 Geophysical Surveying & Mapping  
423940 Jewelry, Watch, Precious Stone, &  
Information  
519200 Web Search, Rentals, Libraries,  
Services  
Precious Metals  
Archives, & Other Info. Services  
Publishing Industries (except Internet)  
513110 Newspaper Publishers  
513120 Periodical Publishers  
513130 Book Publishers  
541370 Surveying & Mapping (except  
Geophysical) Services  
423990 Other Miscellaneous Durable  
Goods  
Rental and Leasing  
541380 Testing Laboratories  
Merchant Wholesalers, Nondurable  
Rental and Leasing Services  
Goods  
Other Professional Services  
532100 Automotive Equipment Rental &  
424100 Paper & Paper Products  
513140 Directory & Mailing List Publishers  
513190 Other Publishers  
Leasing  
541600 Management, Scientific, &  
Technical Consulting Services  
424210 Drugs & Druggists' Sundries  
14