U.S. Income Tax Return of a Foreign Sales Corporation OMB No. 1545-0935

Form 1120-FSC

 See separate instructions. Please type or print. Department of the Treasury

Internal Revenue Service

For calendar year 2005 or other tax year beginning , 2005,

D Date incorporated

Foreign country or U.S.

possession of incorporation

(see instructions)

Name A C Employer identification number

B Number, street, and room or suite no. (see instructions)

City or town, state, and ZIP code

E Total assets (see instructions)

Check type of election made:

FSC Small FSC

$

1 Principal shareholder. Complete for the shareholder that was the principal shareholder at the beginning of the FSC’s tax year. If two or more shareholders

own equal amounts of stock, complete for the shareholder that has the same tax year as the FSC (see instructions).

a Name b Identification number

c Address (number, street, and room or suite no., city or town, state, ZIP code, or country) d Total assets (corporations only)

$

Percentage of voting stock of the f Tax year ends (month and year) g Service Center where tax return is filed h Foreign owner? (check one)

principal shareholder

e

Yes No

Parent-subsidiary controlled group. Is the FSC a subsidiary in a parent-subsidiary controlled group? 

Total assets (consolidated, if applicable)

a Name of common parent

d

b

c

e Percentage of voting stock of the common parent f Tax year end (month and year) g Service Center where tax return is filed

3 Administrative pricing rules

a Check the applicable box(es) to show the pricing rule(s) used to determine taxable income on transactions resulting in foreign trading gross receipts.

23% of combined taxable income (3) Marginal costing

(4)

(1)

Section 482 method

1.83% of foreign trading gross receipts

b If the FSC and the related supplier(s) meet the payment rules of Temporary Regulations section 1.925(a)-1T(b)(2)(ii) and elect to use the administrative

pricing rules, check here 

Tax and Payments (see instructions)

1 Total tax (Schedule J, line 7) 1

2 Payments:

2h

3 Estimated tax penalty. Check if Form 2220 is attached  3

4 Tax due. If line 2h is smaller than the total of lines 1 and 3, enter amount owed 4

5 Overpayment. If line 2h is larger than the total of lines 1 and 3, enter amount overpaid 5

6 Enter amount of line 5 you want: Credited to 2006 estimated tax  Refunded  6

For Privacy Act and Paperwork Reduction Act Notice, see instructions. Cat. No. 11531K Form 1120-FSC (2005)

Enter the effective date of

the election:

F Check applicable boxes:

a 2004 overpayment credited to 2005 2a

b 2005 estimated tax payments 2b

( ) 2c 2d d Bal 

Less 2005 refund applied for on

Form 4466

c

e Tax deposited with Form 7004 2e

Credit for Federal tax paid on fuels (attach Form 4136) 2f f

g U.S. income tax paid or withheld at source (attach Form 1042-S) 2g

If “Yes,” and the principal shareholder (described in 1 above) is not the common parent of the group, complete

lines 2a through 2g below for the common parent (see instructions).

h Add lines 2d through 2g

2

(1) Final return (3) Address change (4) Amended return

Yes No

(5)

Address (number, street, and room or suite no., city or town, state, ZIP code, or country)

Transactions at arm’s length with unrelated supplier(s)

(2)

$

and ending

Identification number

FSC Information

%

%

(2) Name change

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true,

correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Sign

Here

Signature of officer Date Title

Date Preparer’s SSN or PTIN Preparer’s

signature

Check if

self-employed

Paid

Preparer’s

Use Only

Firm’s name (or

yours if self-employed),

address, and ZIP code

EIN

Phone no. ( )

May the IRS discuss this return with

the preparer shown below (see  instructions)? Yes No







, 20 2005
Form 1120-FSC (2005) Page 2

Cost of Goods Sold Related to Foreign Trading Gross Receipts (see instructions)

(a) Using administrative pricing rules (b) Not using administrative pricing rules

1 Inventory at beginning of year 1

2 Purchases 2

3 Cost of labor 3

4 Additional section 263A costs (attach schedule) 4

Other costs (attach schedule) 5

6 Total. Add lines 1 through 5 6

7 Inventory at end of year 7

Cost of goods sold. Subtract line 7 from line 6. Enter here and on

line 7 of Schedule B. Small FSCs, see instructions for Schedule A

8

8

9a Check all methods used for valuing closing inventory:

c Check if the LIFO inventory method was adopted this tax year for any goods. (If checked, attach Form 970.) 

9d

d If the LIFO inventory method was used for this tax year, enter percentage (or amounts) of closing

inventory computed under LIFO

e If property is produced or acquired for resale, do the rules of section 263A apply to the FSC? Yes No

f Was there any change in determining quantities, cost, or valuations between opening and closing inventory?

If “Yes,” attach explanation Yes No

Additional Information (see instructions). Note: Small FSCs, complete lines 1 through 8f only.

At any time during the tax year was the FSC engaged in

a trade or business in the United States?

3

1 See the instructions and enter the FSC’s:

10

a Business activity code no. 

b Business activity 

c Product or service 

d During the tax year did the FSC maintain the records

required under section 6001 at a location within the U.S.?

e At all times during the tax year, did the FSC have at

least one non-U.S. resident on its board of directors?

Small FSCs only: Check the applicable box if during the tax

year the small FSC was a member of a controlled group of

corporations that included a DISC or a FSC.

f

Foreign management rules (does not apply to small FSCs):

Did all formally convened meetings of the board of directors

and of the shareholders occur outside the U.S.?

a

b (1) Were all cash dividends, legal and accounting fees, salaries

of officers, and salaries or fees of members of the board of

directors disbursed from bank accounts maintained outside

the United States? (If “Yes,” these accounts are considered

to be the FSC’s principal bank accounts.)

(2) At all times during the tax year, did the FSC maintain its

principal bank accounts in a qualifying foreign country or

U.S. possession (see instructions)?

Name of bank(s)  

Foreign economic process rules (does not apply to small FSCs):

a Check the applicable box if the FSC is electing to group transactions

from its sales activities (Regulations section 1.924(d)-1(c)(5)):

Customer grouping

Check the applicable box(es) to indicate how the FSC met the foreign direct

costs requirement (see instructions):

b

The FSC (or any person under contract with the FSC) met the

50% test of section 924(d)(1).

The FSC (or any person under contract with the FSC) met the alternative

85% test of section 924(d)(2). Check to indicate the subparagraphs of

section 924(e) for which this alternative test was met:

Check the applicable box if the FSC is electing to group its foreign direct

costs on one of the following (Regulations section 1.924(d)-1(e)):

d

If box (e)(5) is checked, enter which of the five methods listed in

Regulations section 1.924(e)-1(e)(1)(i) through (v) describes how the

FSC bears the economic risk of nonpayment 

Other (Specify method used and attach explanation.) 

Lower of cost or market as described in Regulations section 1.471-4

Cost as described in Regulations section 1.471-3

Schedule A

5

Enter the amount of tax-exempt interest received or

accrued during the tax year 

2

$

9

FSC qualification rules (see instructions):

Enter the largest number of shareholders the FSC had at

any time during the tax year 

a

Did the FSC have any preferred stock outstanding at

any time during the tax year?

b

During the tax year, did the FSC maintain an office in a

qualifying foreign country or U.S. possession in which a

complete set of books and records was maintained?

c

6

8

If the FSC has an NOL for the tax year and is electing to

forego the carryback period, check here 

Account number(s) 

(e)(1) (e)(2) (e)(3) (e)(4) (e)(5)

Customer grouping Contract grouping Product or product line grouping

Contract grouping

Product or product line grouping Product or product line subgroupings

Enter the available NOL carryover from prior tax years.

(Do not reduce it by any deduction on Schedule B, Part

II, line 19a.) 

7

$

c

Check the applicable box if during the tax year the FSC was

a member of a controlled group of corporations that

included a DISC or a small FSC.

g

(1)

(2)

(3)

b Check if there was a writedown of subnormal goods as described in Regulations section 1.471-2(c) 

During the tax year, did the FSC own any foreign entity

that was disregarded as an entity separate from its

owner under Regulations sections 301.7701-2 and

301.7701-3?

4

If “Yes,” attach a statement listing the name, country

under whose laws the entity was organized, and EIN

(if any) of each such entity.

During the tax year, did the FSC own at least a 10%

interest, directly or indirectly, in any foreign partnership?

5

If “Yes,” see the instructions for required attachment.

Yes No Yes No

Form 1120-FSC (2005)
20

Form 1120-FSC (2005) Page 3

Part I—Net Income Attributable to Nonexempt Foreign Trade Income

(a) Using administrative

pricing rules

(b) Not using

administrative

pricing rules

Sale, exchange, or other disposition of export property. (Enter 50% of

military property sales. Include the other 50% on Schedule F, line 1.)

1

2 Lease or rental of export property for use outside the United States

3 Services related and subsidiary to:

Sale, exchange, or other disposition of export property. (Enter 50% of

services related to the sale or other disposition of military property.

Include the other 50% on Schedule F, line 1.)

a

b Lease or rental of export property

4 Engineering or architectural services for construction projects outside the U.S.

5 Managerial services for an unrelated FSC or IC-DISC (see instructions)

6a Total foreign trading gross receipts. Add lines 1 through 5

b Small FSC limitation (section 924(b)(2)(B))

c Controlled group member’s share of line 6b

Enter 1. (Short tax year: Divide the number of days in

the short tax year by the number of days in the full tax

year. Enter as a decimal less than 1.00000.)

d

e Multiply line 6b or line 6c (whichever applies) by line 6d

f Total of line 6a, columns (a) and (b)

g

h Allocate the amount from line 6g to columns (a) and (b) (see instructions)

Cost of goods sold (Schedule A, line 8). (Small FSCs, enter only the part of

cost of goods sold from the receipts on line 6h above. See instructions for

Schedule A.)

7

8 Foreign trade income. Subtract line 7 from line 6a or line 6h (whichever applies)

9a Exemption percentage from Schedule E, line 3d %

b Exemption percentage from Schedule E, line 2d %

10 Exempt foreign trade income. Multiply line 8, column (a) by line 9a and

line 8, column (b) by line 9b

11 Nonexempt foreign trade income. Subtract line 10 from line 8

Deductions attributable to nonexempt foreign trade income. Enter amount

from Schedule G, line 18

12

Net income attributable to nonexempt foreign trade income. Subtract line

12 from line 11

13

Net income attributable to nonexempt foreign trade income from Schedule

F, line 6

14

Total net income attributable to nonexempt foreign trade income. Add

lines 13 and 14

15

Part II—Taxable Income or (Loss)

Taxable income from foreign trade income. Enter total of line 15, columns (a) and (b), minus any

nontaxable income included in line 15, column (b). Attach a schedule that shows the computation

of the taxable and nontaxable income included on line 15, column (b)

16

17 Taxable nonforeign trade income from Schedule F, line 19

Taxable income or (loss) before net operating loss deduction and dividends-received deduction.

Add lines 16 and 17

18

Net operating loss deduction (attach schedule)

Dividends-received deduction (attach schedule)

Add lines 19a and 19b

Taxable income or (loss). Subtract line 19c from line 18. (See instructions for Schedule J to

figure the tax on this income.)

20

Schedule B

19a

b

c

1

2

3a

3b

4

5

6a

6b

6c

6d

6e

6f

6g

6h

7

8

9a

9b

10

11

12

13

14

15

16

17

18

19a

19b

19c

$5,000,000 00

Small FSCs: Complete lines 6b through 6h.

Note: See the instructions for line 6f if commission

income is included on line 6a.

Form 1120-FSC (2005)

Taxable Income or (Loss) (see instructions)

Enter the smaller of line 6e or line 6f. Note: If line 6f

exceeds line 6e, enter the excess on line 7 of Schedule F
Form 1120-FSC (2005) Page 4

Exemption Percentages Used in Figuring Exempt Foreign Trade Income (see instructions)

Note: If all shareholders of the FSC are C corporations, enter .30000 on line 2d and .65217 on line 3d and skip all other lines.

1

Percentage (round to at least five decimal places) of voting stock owned by shareholders that

are C corporations

1

2 Exemption percentage for foreign trade income determined by not using the administrative pricing rules:

a Difference between section 923(a)(2) and section 291(a)(4)(A) percentage 2a .02000

b Section 923(a)(2) percentage 2b .32000

c Multiply line 1 by line 2a 2c

Exemption percentage. Subtract line 2c from line 2b. Enter here and on Schedule B, line 9b,

and on Schedule G, line 16b

d

2d

3 Exemption percentage for foreign trade income determined using administrative pricing rules:

Difference between section 923(a)(3) fraction and section 291(a)(4)(B) fraction (16/23 – 15/23 =

1/23) shown as a decimal

a

3a .04348

b Section 923(a)(3) fraction (16/23) shown as a decimal 3b .69565

c 3c

Exemption percentage. Subtract line 3c from line 3b. Enter here and on Schedule B, line 9a,

and on Schedule G, line 16a

d

3d

Net Income From Nonexempt Foreign Trade Income and Taxable Nonforeign Trade Income

(see instructions)

Part I—Net Income From Nonexempt Foreign Trade Income

(b) Not using administrative

pricing rules

(a) Using administrative

pricing rules Enter 50% of total receipts from the sale, exchange, or other disposition of

military property and related services

1

2 International boycott income

3 Illegal bribes and other payments

4 Total. Add lines 1, 2, and 3

Cost of goods sold and other costs related to above income

(attach schedule)

5

Net income from nonexempt foreign trade income. Subtract line 5 from

line 4. Enter here and on Schedule B, line 14, columns (a) and (b)

6

Part II—Taxable Nonforeign Trade Income

7 Small FSCs: If line 6f, Schedule B, is greater than line 6e, Schedule B, enter the excess here 7

8 Interest 8

9 Dividends (attach schedule—see instructions) 9

10 Carrying charges 10

11 Royalties 11

12 Other investment income 12

Receipts excluded under section 924(f) on the basis of use, subsidized receipts, and receipts

from related parties

13

13

14 Income from excluded property under sections 927(a)(2) and (3) 14

15 Income from transactions that did not meet the Foreign economic process rules (see

instructions). (See Foreign Trading Gross Receipts in the instructions.) 15

16 Other income 16

17 Total. Add lines 7 through 16 17

18

18 Enter deductions allocated or apportioned to line 17 income. (Attach schedule. Small FSCs also

include the cost of goods sold deduction attributable to the amount entered on line 7 above)

19 Taxable nonforeign trade income. Subtract line 18 from line 17. Enter here and on

Schedule B, line 17 19

Schedule E

Schedule F

2

3

4

5

6

1

Multiply line 1 by line 3a

Form 1120-FSC (2005)

If all shareholders of the FSC are other than C corporations, enter .32000 on line 2d and .69565 on line 3d and skip all other lines.
Form 1120-FSC (2005) Page 5

(b) Not using administrative

pricing rules

(a) Using administrative

pricing rules 1 Foreign direct costs described in section 924(e):

a Advertising and sales promotion 1a

b Certain processing and arranging costs 1b

c Certain transportation costs 1c

d Certain determination and transmittal costs 1d

e Assumption of credit risk 1e

Total foreign direct costs. Add lines 1a through 1e 1f f

2 Advertising 2

3 Interest 3

4 Depreciation from Form 4562 (less any depreciation claimed elsewhere on

this return) (attach Form 4562) 4

5 Salaries and wages 5

6 Rents 6

7 Sales commissions 7

8 Warehousing 8

9 Freight 9

10 Compensation of officers 10

11 Bad debts 11

12 Pension, profit-sharing, etc., plans 12

13 Employee benefit programs 13

14 Other deductions (attach list) 14

15 Total deductions. Add lines 1f through 14 15

16a Exemption percentage from Schedule E, line 3d 16a %

b Exemption percentage from Schedule E, line 2d 16b %

17 Deductions attributable to exempt foreign trade income. Multiply line 15,

column (a) by line 16a and enter the result in column (a). Multiply line 15,

column (b) by line 16b and enter the result in column (b) 17

Deductions allocated or apportioned to nonexempt foreign trade

income other than foreign trade income reported on Schedule

F. Subtract line 17 from line 15. Enter here and on Schedule B,

line 12, columns (a) and (b)

18

18

Tax Computation (see instructions)

1 Check if the FSC is a member of a controlled group (see section 927(d)(4)) 

If the box on line 1 is checked, enter the FSC’s share of the $50,000, $25,000, and

$9,925,000 taxable income brackets (in that order):

2a

(1) $ (2) $

b Enter the FSC’s share of: 

Income tax. Check this box if the FSC is a qualified personal service corporation as defined in

section 448(d)(2) (see instructions). 

3

3

4

Foreign tax credit (attach Form 1118)

4

5

Total tax. Subtract line 6 from line 5. Enter here and on line 1, page 1

5

6 6

7 7

Alternative minimum tax (attach Form 4626)

Schedule J

Schedule G

(3) $

(1) Additional 5% tax (not more than $11,750)

(2) Additional 3% tax (not more than $100,000)

$

$

Important: Members of a controlled group, see instructions.

Form 1120-FSC (2005)

Add lines 3 and 4

Deductions Allocated or Apportioned to Foreign Trade Income Other Than Foreign Trade Income Reported

on Schedule F (See instructions for limitations on deductions before completing lines 1 through 14.)
Form 1120-FSC (2005) Page 6

Balance Sheets per Books Beginning of tax year End of tax year

(a) (b) (c) (d) Assets

1 Cash

2a Trade notes and accounts receivable

b Commissions receivable

c Less allowance for bad debts

3 Inventories

4 U.S. government obligations

5 Tax-exempt securities (see instructions)

6 Other current assets (attach schedule)

7 Loans to shareholders

8 Mortgage and real estate loans

9 Other investments (attach schedule)

10a Buildings and other depreciable assets

( ) ( ) b Less accumulated depreciation

11a Depletable assets

b Less accumulated depletion ( ) ( )

12 Land (net of any amortization)

13a Intangible assets (amortizable only)

( ) ( ) b Less accumulated amortization

14 Other assets (attach schedule)

15 Total assets

Liabilities and Shareholders’ Equity

16 Accounts payable

17 Mtges., notes, bonds payable in less than 1 year

18 Transfer prices payable

19 Other current liabilities (attach schedule)

20 Loans from shareholders

21 Mtges., notes, bonds payable in 1 year or more

22 Other liabilities (attach schedule)

23 Capital stock

24 Additional paid-in capital

25 Retained earnings—Appropriated (attach schedule)

26 Retained earnings—Unappropriated

( ) ( ) 28 Less cost of treasury stock

29 Total liabilities and shareholders’ equity

Reconciliation of Income (Loss) per Books With Income per Return (see instructions)

1 Net income (loss) per books Income recorded on books this year not

included on this return (itemize):

7

2 Federal income tax per books

3 Excess of capital losses over capital gains a Tax-exempt interest

Income subject to tax not recorded

on books this year (itemize):

4 b Exempt foreign trade

income

Expenses recorded on books this year

not deducted on this return (itemize):

5 Deductions on this return not charged

against book income this year (itemize):

8

a Depreciation Depreciation

Deductions attributable to 

exempt foreign trade income

b

c Travel and entertainment 9 Add lines 7 and 8

Taxable income (line 18, Schedule B)—

line 6 less line 9

10

6 Add lines 1 through 5

Analysis of Unappropriated Retained Earnings per Books (Line 26, Schedule L)

1 Balance at beginning of year 5 Distributions: a Cash

2 Net income (loss) per books b Stock

3 Other increases (itemize): c Property

6 Other decreases (itemize):

7 Add lines 5 and 6

4 Add lines 1, 2, and 3 8 Balance at end of year (line 4 less line 7)

Schedule L

Schedule M-1

Schedule M-2

$

$

$

$

$

$

() ()

27 Adjustments to shareholders’ equity (attach schedule)

Form 1120-FSC (2005)