OMB No. 1545-1722

Form 8873 Extraterritorial Income Exclusion

 See separate instructions. Department of the Treasury

Internal Revenue Service

Name(s) as shown on return Identifying number

For Paperwork Reduction Act Notice, see instructions. Cat. No. 30732F Form 8873 (2005)

 Attach to your tax return.

Attachment

Sequence No. 126

(a) Foreign Trade

Income

(b) Foreign Sale and

Leasing Income

6 Sale, exchange, or other disposition of qualifying foreign trade property

Enter the amount from line 6, column (a), attributable to the sale of property

formerly leased or rented for use by the lessee outside the United States

7

Lease or rental of qualifying foreign trade property for use by the lessee

outside the United States. Enter the same amount in both columns

8

Engineering or architectural services for construction projects outside the United States

9

15 Foreign trading gross receipts. Add lines 6 through 13 in column (a)

6

7

8

9

10

15

Part I

Add lines 7 through 14 in column (b)

Cost of goods sold:

Inventory at beginning of year

Purchases

Cost of labor

Additional section 263A costs (attach schedule)

Other costs (attach schedule)

Total. Add lines 17a through 17e

Inventory at end of year

Subtract line 17g from line 17f

In column (a), subtract line 17h from line 15. In column (b), subtract line 17h

from line 16

Other expenses and deductions (see instructions) (attach schedule)

Foreign trade income. In column (a), subtract line 19 from line 18. If -0- or

less, stop here. You do not qualify for the exclusion

Foreign sale and leasing income. In column (b), subtract line 19 from line 18

17

a

b

c

d

e

f

g

h

18

19

20

21

16

17a

17b

17c

17d

17e

17f

17g

17h

18

19

20

21

Caution: If a related person is also eligible for an extraterritorial income

exclusion, see Excluded property in the instructions.

Check the box if you are electing under section 942(a)(3) to exclude a portion of your gross receipts from foreign trading gross

receipts on line 15. Attach a schedule indicating which receipts are being excluded 

Elections and Other Information

1

Are you excepted from the foreign economic process requirements because your foreign trading gross

receipts are $5 million or less? 

b If “No,” check the applicable box to indicate how you met the foreign economic process requirements:

You met the 50% foreign direct cost test (see instructions).

You met the alternative 85% foreign direct cost test (see instructions).

Yes No

4a

Part II Foreign Trade Income and Foreign Sale and Leasing Income

See instructions before completing lines 5a through 5c. Note: For transactions for which the exclusion is determined using

the foreign sale and leasing income method (i.e., line 44 equals line 45), complete only lines 5a and 5c(1).

5

a Business activity code

c Check the applicable box to indicate the basis of your reporting:

(1)

(a)

(2)

3 Check the box if the taxpayer is a foreign corporation electing to be treated as a domestic corporation (see instructions) 

Transaction-by-transaction:

Group of transactions (see instructions for an important change made to reflect the American Jobs Creation Act of 2004)

Check the box if you are electing to apply the extraterritorial income exclusion provisions to certain transactions involving a FSC

(see instructions). Attach a schedule listing the affected transactions 

2

Aggregate on Form 8873 Aggregate on tabular schedule Tabular schedule of transactions

b Product or product line

Services related and subsidiary to the sale, exchange, or other disposition of

qualifying foreign trade property

10 Enter the amount from line 9, column (a), attributable to the sale of property

formerly leased or rented for use by the lessee outside the United States

11 Services related and subsidiary to the lease of qualifying foreign trade property for use

by the lessee outside the United States. Enter the same amount in both columns

12

13 Managerial services provided to unrelated persons (see instructions)

14 Enter the sum of the amounts from lines 6, 9, 12, and 13 of column (a)

attributable to foreign economic processes. Do not include any amounts

already included on lines 7, 8, 10, or 11 in column (b)

11

12

13

14

16

(1)

(2)

(b) (c)

2005
Form 8873 (2005) Page 2

Form 8873 (2005)

Part III

Extraterritorial Income Exclusion (Net of Disallowed Deductions)

Enter your foreign trade income from line 20

Multiply line 37 by 15% (.15)

Enter your foreign trading gross receipts from line 15

Multiply line 39 by 1.2% (.012)

Multiply line 38 by 2.0

Enter the smaller of line 40 or line 41

Enter your foreign sale and leasing income from line 21

Multiply line 43 by 30% (.30)

If line 44 equals line 45, divide the amount on line 45 by the amount

on line 43. Otherwise, divide the amount on line 45 by the amount on

line 37. Carry the result to at least three decimal places

If line 44 equals line 45, enter the amount from line 19, column (b).

Otherwise, enter the amount from line 19, column (a)

Multiply line 46 by line 47

Add lines 45 and 48

37

38

39

40

41

42

43

44

45

46

47

48

37

38

39

40

41

42

45

46

47

48

Enter the greatest of lines 33, 36, 38, 42, or 44. If you are using the alternative computation,

see instructions for the amount to enter

43

44

Reduction for international boycott operations, illegal bribes, kickbacks, etc. (see instructions)

Qualifying foreign trade income. Subtract line 50 from line 49. If -0- or less, stop here. You do

not qualify for the exclusion

49

50

51

49

50

51

52 Subtract line 48 from line 51

Part IV

Marginal Costing (Note: If you are not using Marginal Costing, skip Part III and go to Part IV.)

Section A — Foreign Trade Income Using Marginal Costing Method

Section C — 1.2% of Foreign Trading Gross Receipts Method

Section B — 15% of Foreign Trade Income Method

Foreign trading gross receipts. Enter the amount from line 15

Costs and expenses allocable to the amount reported on line 22:

Cost of direct material attributable to property sold

Cost of direct labor attributable to property sold

Subtract line 23c from line 22

22

23

24

22

23a

23b

23c

24

a

b

c Add lines 23a and 23b

25 Worldwide gross receipts from sales of the product or product line 25

Costs and expenses allocable to the amount reported on line 25:

Cost of goods sold attributable to property sold

Other expenses and deductions attributable to gross income

26

26a

26b

26c

a

b

c Add lines 26a and 26b

Subtract line 26c from line 25. (Note: If -0- or less, stop here. You may not use Part III to determine

your qualifying foreign trade income. Go to line 37.)

27

27

Overall profit percentage. Divide line 27 by line 25. Carry the result to at least three decimal

places

28

28

29 Overall profit percentage limitation. Multiply line 22 by line 28 29

30 Foreign trade income using marginal costing. Enter the smaller of line 24 or line 29 30

31 Multiply line 30 by 15% (.15) 31

32 Foreign trade income using full costing. Enter the amount from line 20 32

33 Enter the smaller of line 31 or line 32 33

34 Multiply line 22 by 1.2% (.012) 34

35 Multiply line 30 by 30% (.30) 35

36 Enter the smallest of lines 32, 34, or 35 36

52

b Multiply the amount from line 52 that is attributable to 80% transactions (see instructions) by

80% (0.80) and enter the result here

Note. If you do not have a reduction for international boycott operations, illegal bribes, kickbacks, etc. (see

the instructions for line 50), skip lines 46 through 51 and enter on line 52 the amount from line 45.

53a Enter the amount from line 52 that is attributable to 100% transactions (see instructions)

c Multiply the amount from line 52 that is attributable to 60% transactions (see instructions) by

60% (0.60) and enter the result here

54 Extraterritorial income exclusion (net of disallowed deductions). Add lines 53a through 53c. Enter the result

here and include it on the “other deductions” line of your tax return or schedule (see instructions)

53b

53c

53a

54