SCHEDULE B
(Form 5713)

(Rev. October 1979)

Department of the Treasury
Internal Revenue Service

> See Instructions on Back.

Specifically Attributable Taxes and Income (Section 999(c)(2))

(To be completed only by persons not computing loss of tax benefits by the international boycott factor on Schedule A (Form 5713).)
> Attach to Form 5713.

Name

Taxpayer identifying number

Name of country being boycotted .

- [ Israel

[J Other (identify) >

Specifically Attributable Taxes and Income by Operation (Use a separate line for each operation)

Name of Country

Principal business activity

Foreign tax credit

Subpart F income

DISC income

@

Code

(2)

Description

@)

Foreign taxes
attributable to boycott
operations

(3)

Pro-rata share of,
international boycott
income

(5)

Taxable income
attributable to boycott
operations

6)

10

11

12

13

14

15 Total. . - - -

>

Note: Jf you are involved in more than one international boycott, use a separate Schedule B (Form 5713) to compute the specifically attributable taxes and income for each boycott.

283-289-1


General Instructions

A. General Information.—Schedule B
(Form 5713) is to be completed only by per-
sons who report acts of participation in or
cooperation with an international boycott
and who do not choose to compute the loss
of tax benefits by applying the international
boycott factor on Schedule A (Form 5713).
Taxpayers using the specifically attributable
taxes and income method for computing the
loss of tax benefits are to report taxes and in-
come for the period covered by their own in-
come tax return. Under the specific attribu-
tion method, taxes and income are reported
on this schedule on an individual basis and
not for all members of the controlled group.

Since the benefits of deferral, DISC, and
the deemed paid tax credits under section
902 are denied at the shareholders’ level,
shareholders of a DISC and of a foreign cor-
poration must report on this schedule their
pro-rata shares of the income of the DISC
and of the foreign corporation that would
have been deferrable, and the foreign taxes
of the foreign corporation that would have
been creditable, had there been no partici-
pation in or cooperation with an international
boycott.

B. Presumption.—Generally, one act of
participation in or cooperation with an inter-
national boycott by a person will taint all the
operations of that person and of each mem-
ber of the controlled group (as defined in
section 993(a)(3)) of which that person is a
member in each country that is associated
with a group of countries in carrying out that
particular international boycott unless re-
butted as explained below. The effect of this
taint is that the benefits of DISC, deferral,
and the foreign tax credit attributable to all
operations in boycotting countries for which
the taint is not rebutted will be denied.

The presumption of boycott participation
or cooperation is rebutted for a particular op-
eration if it is clearly demonstrated that that
operation is a clearly separate and identifi-
able operation in connection with which there
was no participation in or cooperation with
an international boycott. Since the presump-
tion applies only to operations in countries
associated in carrying out an international
boycott, the presumption need not be re-
butted for operations outside (but related to)
those countries. If the presumption is re-
butted with respect to a particular operation
or does not apply to a particular operation,
then the tax benefits resulting from that op-
eration will not be lost.

C. Boycotting Operations.—For purposes
of determining the tax benefits denied under
the specifically attributable taxes and in-
come method, all operations that are not in
boycotting countries but in connection with
which there is participation in or cooperation
with an international boycott are considered
boycotting operations. In addition, all opera-
tions that are in boycotting countries, other
than those operations for which the pre-
sumption of boycott participation or coopera-
tion has been rebutted in accordance with
General Instruction B, are considered boy-
cotting operations.

However, operations that would be consid-
ered boycotting operations in accordance
with the preceding paragraph will not be con-
sidered boycotting operations if they are
carried out in accordance with the terms of
a binding contract entered into before Sep-
tember 2, 1976, and are completed on or
before December 31, 1977.

D. Determination of Specifically Attributa-
ble Taxes and Income.—To compute the loss
of tax benefits under the specifically attrib-
utable taxes and income method, you must
first identify those operations that are boy-
cotting operations within the meaning of
General Instruction C. Once those boycotting
operations have been identified, the follow-
ing tax benefits are denied:

(i) DISC.—The deferral of taxation of the
taxable income of the DISC that is attributa-
ble to boycotting operations is denied. The
shareholder of the DISC is treated as having
received a distribution of his pro-rata share
of one-half of the excess of the taxable in-
come of the DISC for the taxable year, be-
fore reduction for any distributions during
the year, over the sum of the amounts
deemed distributed for the taxable year
under subparagraphs (A), (B), (C), (D) and
(E) of section 995(b)(1), to the extent that
such income is attributable to boycotting
operations.

(ii) Deferral.—The deferral of taxation of
the income of controlled foreign corporations
that is attributable to boycotting operations
is denied. A United States shareholder of a
controlled foreign corporation is required to
take into gross income his pro-rata share of
the income of the controlled corporation that
is attributable to boycotting operations and
that is not otherwise included in gross in-
come under section 951 or excluded from
subpart F income under section 952(b). In
computing the amount of boycott income in-
cluded in the gross income of the United
States shareholder, a reasonable allowance
may be made for deductions (including for-
eign taxes) properly allocable to that income.

(iii) Foreign Tax Credit——The portion of
the foreign tax credit for foreign taxes paid,
accrued, or deemed paid attributable to boy-
cotting operations is denied. See Part N of
the Treasury Department's International Boy-
cott Guidelines for the computation of the
portion of the foreign tax credit that is
denied.

Transitional Rule.—The following transi-
tional rule applies in determining the tax ben-
efits denied under the specifically attributa-
ble taxes and income method.

In the case of a boycotting operation
carried out in accordance with the terms of a
binding contract entered into before Septem-
ber 2, 1976, that continues after December
31, 1977, only a pro-rata portion of the bene-
fits of deferral, DISC, and the foreign tax
credit attributable to that operation is
denied. The amount of benefits denied is the
amount of such benefits that would be
denied under (i) through (iii) above, multi-
plied by a fraction, the numerator of which is
the number of days in the taxable year of the
person engaging in the boycotting operation
that remain after December 31, 1977, and
the denominator of which is the number of
days in that person’s taxable year. (For
example, in the case of a shareholder of a
DISC computing the loss of DISC benefits
resulting from a boycotting operation of a
DISC that began before December 31, 1977
but continued after that date, the numerator
of the fraction is the number of days in the
DISC's taxable year that remain after Decem-
ber 31, 1977. If that shareholder also owns
stock of a second DISC or of a controlled
foreign corporation that has a taxable year
that differs from that of the first DISC, the
benefits of DISC or deferral that are denied
for the boycotting operations of the second
DISC or of the controlled foreign corpora-

‘x U.S, GOVERNMENT PRINTING OFFICE : 1979—-0-283-289

tion are computed by using as the numera-
tor of the fraction the number of days of the
taxable year of the second DISC or the con-
trolled foreign corporation that remain after
December 31, 1977.)

Specifically Attributable
Taxes and Income by Operation

Column (1).—Enter, for each boycotting
operation, the name of a country on the list
maintained by the Secretary under section
999(a)(3) (or any other country that you
know or have reason to know requires par-
ticipation in or cooperation with an interna-
tional boycott) to which your international
boycott operation relates. For example, if
you have an operation in Country Z (which
is not a boycotting country) and the opera-
tion relates to Country X (which is a boycott-
ing country), enter the name of Country X.

Column (2).—Enter, for each boycotting
operation, the principal business activity
gode (see Page 4 of instructions for Form

Column (3).—Enter, for each boycotting
operation, a brief description of the principal
business activity.

_ DISCs.—Enter, for each boycotting opera-
tion, in parentheses, the product code and
description. (See Instructions for Schedule N
(Form 1120-DISC).)

Column (4).—Enter, for each boycotting
operation, the amount of foreign taxes paid,
accrued, or deemed paid (other than foreign
taxes otherwise disallowed by reason of the
provisions of sections 901-907, 911, 1503
(b), or 6038) that is attributable to that boy-
cotting operation. (See Part N of the Treas-
ury Department's International Boycott
Guidelines.)

Enter this amount on line 2(b), Schedule
C (Form 5713).

Column (5).—Enter, for each boycotting
operation, your pro-rata share of the income
of the controlled foreign corporation (other
than income attributable to earnings and
profits of the foreign corporation included in
gross income under section 951 (other than
by reason of section 952(a)(3)) or excluded
from Subpart F income under section 952
(b)) that is attributable to that boycott op-
eration. In computing your pro-rata share of
the boycott income of a controlled foreign
Corporation, a reasonable allowance may
be made for deductions (including foreign
taxes) properly allocable to that income.

Enter this amount on line 3(b), Schedule C
(Form 5713).

Column (6).—Enter, for each boycotting
operation, your pro-rata share of one-half of
the excess of the taxable income of the DISC
for the taxable year, before reduction for any
distributions during the year, over the sum
of the amounts deemed distributed for the
taxable year under subparagraphs (A), (B),
(C), (D), and (E) of section 995(b)(1), that
is attributable to that boycott operation. The
taxable income of the DISC attributable to
that boycotting operation is the gross income
of the DISC for the taxable year specifically
attributable to that operation minus the de-
ductions which are properly apportioned or
allocated to such income.

Enter this amount on line 4(b), Schedule C
(Form 5713).

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