SCHEDULE C
(Form 5713) Tax Effect of the International Boycott Provisions

(Rev. April 1978)

Inernal Revenue Sernce 7 D> Attach to Form 5713. > See Instructions on Back.

Name Taxpayer identifying number

1 Method used in computing loss of tax benefits under sections 's 908(a), 952(a)(3) and 995(b)(1)(F) (check one):
(a) International boycott factor. . . . . e ee oe i]
(b) Identification of specifically attributable taxes and income. se ee ee ee

2 Reduction of foreign tax credit (section 908(a)): Y
(a) International boycott factor method (to be completed by persons checking box 1(a) above and

answering “Yes,” to foreign tax credit question (line 7(d), Form 5713))—
(1) Foreign tax credit before adjustment (line 6, Part Ill, Schedule B, Form 1118 (corporations); or
line 6, Schedule D, Form 1116 (individuals) . 2. 6 6 6 ee ee ew ee ee

(2) International boycott factor (from Schedule A (Form 5713), line 3). .

(3) Reduction of foreign tax credit (multiply line 2(a)(1) by line 2(a)(2)). Enter here and on line 7,
Part Ill, Schedule B, Form 1118 (corporations); or enter here and on line 7, Schedule D, Form
1116 (individuals)... kee

(4) Adjusted foreign tax credit (subtract line 2(a)(3) from line 2(a)(1)). - 6 +e we

(b) Specific identification of taxes and income method (to be completed by persons checking box 1b) GY
above and answering “Yes,” to foreign tax credit question (line 7(d), Form 5713)). Enter 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 boycotting

operations. (From line 15, column (4), Schedule B (Form 5713)) .

Note: Enter the appropriate amount of disallowed boycott taxes on line 3, ‘Part ti, Schedule B, of all
applicable Form(s) 1118 (corporations); or enter the appropriate amount of disallowed boycott
taxes in column 5, Schedule B, of all applicable Form(s) 1116 (individuals).

_
3 Denial of deferral under Subpart F (section 952(a)(3)): 7/
(a) International boycott factor method (to be completed by persons checking box 1(a) above and
answering “Yes,” to controlled foreign corporation question (line 7(b), Form 5713))— Yj

(1) Pro rata share of total income of controlled foreign corporations (line 9, Schedule H, Form 3646) .
(2) Less pro rata share of income attributable to earnings and profits of controlled foreign corpora-
tions included in income under sections 951(a)(1)(A)(ii), 951(a)(1)(A)(iii), 951(a)(1)(B), 952

M3

(a)(1), 952(a)(2), 952(a)(4), and 952(b). we
(3) Subtract line 3(a)(2) from line 3(a)(1). . ew wk
(4) International boycott factor (from Schedule A (Form 5713), line3). . . - «© - «© © e
(5) Pro rata share of Subpart F international boycott income (multiply line 3(a)(3) by line 3(a)(4)).
Enter here and on line 5, Schedule B, Form 3646. . . ed ee

pro rata share of total income of controlled foreign corporations (other than income attributable to
earnings and profits of foreign corporations included in gross income under section 951 (other than
by reason of section 952(a)(3)) and other than amounts excluded from Subpart F income by section
952(b)) that is attributable to boycotting operations, (From line 15, column ©, Schedule B (Form
5713)) (Enter this amount on line 5, Schedule B, Form 3646)... . - rer

4 Denial of DISC benefits (section 995(b)(1)(F)): Y
(a) International boycott factor method (to be completed by persons checking box 1(a) above and

answering “Yes,” to DISC question (line 7(c), Form 5713))—
(1) Pro rata share of section 995(b)(1)(F)(i) amount. (Pro rata share of line 10, Part I, Schedule J,

(b) Specific identification of taxes and income method (to be completed by persons checking box 1(b) Y
above and answering “Yes,” to controlled foreign corporation question (line 7(b), Form 5713)). Enter

Va

Form 1120-DISC) . . 6 6 6 we ee ee ee ee ee ee ee
(2) International boycott factor (from Schedule A (Form 5713), line3). . . . « + «
(3) Pro rata share of DISC international boycott income (multiply line 4(a)(1) by line a(ay(2)).
(See instructions.) . . . . - ee ee?

(b) Specific identification of taxes and income method (to be completed by persons checking box 1(b)

above and answering “Yes,” to DISC question (line 7(c), Form 5713)). Enter pro rata share of one-half

of the excess of the taxable income of the DISC for the taxable year, before reduction for any distribu-

tions 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 boycotting _
Ua

operations. (From line 15, column (6), Schedule B (Form 5713)) (Enter this amount on line 11, Part I,
Schedule J, Form 1120—DISC). ss

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General Instructions

(Partnerships and DISCs need not complete Schedule C (Form 5713). However,
partners and shareholders in DISCs must complete Schedule C (Form 5713).)

Application of the International Boycott Factor and
Specifically Attributable Taxes and Income As Applied
to Controlled Groups.—Unless a consolidated return is
filed, each member of a controlled group (within the
meaning of section 993(a)(3)) may independently
choose either to apply the international boycott factor
under section 999(c)(1) or to identify specifically attrib-
utable taxes and income under section 999(c)(2). The
method chosen by each member for determining the loss
of tax benefits must be applied consistently by that mem-
ber to determine its loss of tax benefits.

For example, if a member chooses to use the inter-
national boycott factor, then it must apply the interna-
tional boycott factor to determine its loss of the section
902 indirect foreign tax credit in respect of a dividend
paid to it by another member of the controlled group,
even if that other member determines its loss of tax
benefits by identifying specifically attributable taxes and
income.

‘Ye US, GOVERNMENT PRINTING OFFICE : 1978—-O-263-401

Thus, if a person applies the international boycott
factor to one operation during the taxable year, the factor
must be applied to all operations of that person during
the taxable year under each of sections 908(a), 952(a)
(3), and 995(b)(1)(F).

Further, if a person identifies specifically attributable
taxes and income under section 999(c)(2), that method
must be applied to all operations of that person during
the taxable year under sections 908(a), 952(a)(3), and
995(b)(1)(F).

In the case of a DISC whose taxable year does not co-
incide with the common taxable year of the controlled
group of which it is a member, it is not necessary that the
DISC amend its return to show on Schedule J the amount
of DISC benefits lost because of boycott participation.
Since the benefits of DISC are lost at the shareholder
level, the shareholder must include in income the pro
rata share of income attributable to boycott operations
shown on line 4(a)(3).

263-401-2