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Form 1120-IC-DISC (Schedule P)-Intercompany Transfer Price or Commission

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taxman taxman

1) The document is an IRS form used to calculate transfer prices or commissions between a related supplier and an IC-DISC (Interest Charge Domestic International Sales Corporation) for tax purposes. 2) It provides three methods (50-50 combined taxable income, 4% gross receipts, section 482) to determine the appropriate transfer price or commission amount in order to calculate the IC-DISC's taxable income. 3) The form requires information about the transaction, such as gross receipts, costs, expenses, and taxable income amounts, in order to calculate the transfer price or commission using one of the provided intercompany pricing methods.

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SCHEDULE P Intercompany Transfer Price or Commission (Form 1120-IC-DISC) Attach a separate schedule for each transaction or group of transactions to OMB No. 1545-0938 which the intercompany pricing rules under section 994(a)(1) and (2) are applied. (Rev. December 2008) For the calendar year 20 , or fiscal year beginning , 20 , and ending , 20 Department of the Treasury For amount reported on line , Schedule , Form 1120-IC-DISC Internal Revenue Service Name as shown on Form 1120-IC-DISC Employer identification number Identify product or product line reported on this schedule. (Also, enter the Principal Business Activity code This schedule is for a (check one): number, if used.) (See instructions.) Single transaction Group of transactions Part I IC-DISC Taxable Income SECTION A—Combined Taxable Income Section A-1—If marginal costing is not used 1 1 Gross receipts from transaction between IC-DISC (or related supplier) and third party 2 Less costs and expenses allocable to gross receipts from transaction: Cost of goods sold from property if sold, or depreciation from property if leased 2a a 2b b Related supplier’s expenses allocable to gross receipts from transaction 2c c IC-DISC export promotion expenses allocable to gross receipts from transaction 2d d Other IC-DISC expenses allocable to gross receipts from transaction 2e e Add lines 2a through 2d 3 Combined taxable income. Subtract line 2e from line 1. If a loss, enter -0- 3 Section A-2—If marginal costing is used 4 4 Gross receipts from resale by IC-DISC (or sale by related supplier) to third party 5 Costs and expenses allocable to gross receipts from sale: 5a a Cost of direct material from property sold 5b b Cost of direct labor from property sold c IC-DISC export promotion expenses allocable to gross receipts from sales that 5c are claimed as promotional 5d d Add lines 5a through 5c 6 Combined taxable income or (loss) before application of overall profit percentage limitation. Subtract 6 line 5d from line 4. If a loss, skip lines 7 through 11 and enter -0- on line 12 7 Gross receipts of related supplier and IC-DISC (or controlled group) from all foreign and domestic 7 sales of the product or product line 8 Costs and expenses of related supplier and IC-DISC (or controlled group) allocable to gross income from such sales: 8a a Cost of goods sold from property sold 8b b Expenses allocable to gross receipts from such sales 8c c Add lines 8a and 8b 9 9 Subtract line 8c from line 7. If a loss, skip lines 10 and 11 and enter -0- on line 12 10 Overall profit percentage. Divide line 9 by line 7. Check if controlled group optional method 10 % is used 11 11 Overall profit percentage limitation. Multiply line 4 by line 10 12 Combined taxable income. Enter the smaller of line 6 or line 11 12 SECTION B—50-50 Combined Taxable Income Method (Must be used if marginal costing is used. See instructions.) 13 Combined taxable income. Enter amount from line 3 or line 12 13 14 14 Multiply line 13 by 50% (.50) 15 Enter 10% (.10) of IC-DISC export promotion expenses allocable to gross income from transactions 15 that are claimed as export promotion 16 16 Add lines 14 and 15 17 IC-DISC taxable income. Enter the smaller of line 13 or line 16 17 SECTION C—4% Gross Receipts Method (Cannot be used if marginal costing is used.) 18 18 Gross receipts from transaction. Enter amount from line 1 19 19 Multiply line 18 by 4% (.04) 20 20 Multiply line 2c by 10% (.10) 21 21 Add lines 19 and 20 22 Combined taxable income. Enter amount from line 3 or amount computed under special rule. If special 22 rule is applied, check here . See instructions 23 IC-DISC taxable income. Enter the smaller of line 21 or line 22 23 For Paperwork Reduction Act Notice, see the Instructions for Form 1120-IC-DISC. Cat. No. 11478S Schedule P (Form 1120-IC-DISC) (Rev. 12-2008)
2 Schedule P (Form 1120-IC-DISC) (Rev. 12-2008) Page Transfer Price From Related Supplier to IC-DISC (See instructions.) Part II 24 24 Gross receipts from transaction. Enter amount from line 1 or line 4, Part I 25 Less reductions: 25a a IC-DISC taxable income (but not to exceed amount determined in Part I) 25b b IC-DISC export promotion expenses allocable to gross income from transaction 25c c Other IC-DISC expenses allocable to gross income from transaction 25d d Add lines 25a through 25c 26 Transfer price from related supplier to IC-DISC. Subtract line 25d from line 24 26 Part III IC-DISC Commission From Related Supplier (See instructions.) 27 27 IC-DISC taxable income (but not to exceed amount determined in Part I) 28 28 IC-DISC export promotion expenses allocable to gross receipts from transaction 29 29 Other IC-DISC expenses allocable to gross receipts from transaction 30 IC-DISC commission from related supplier. Add lines 27 through 29 30 Instructions transaction to an amount that is no more than For purposes of line 2d, be sure to include the sum of (1) 50% of the IC-DISC’s and the appropriate apportionment of deductions related supplier’s combined taxable income that are not directly allocable such as interest Section references are to the Internal attributable to the qualified export receipts expenses and stewardship expenses. See Revenue Code unless otherwise noted. from the transaction and (2) 10% of the Temporary Regulations sections 1.861-11T(f) Purpose of schedule. Use Schedule P to IC-DISC’s export promotion expenses (as and 1.861-14T(f) for an explanation of show the computation of taxable income defined in Regulations section 1.994-1(f)) appropriate apportionment. used in computing (1) the transfer price from attributable to the qualified export receipts. Complete Section A-2 if marginal costing is a related supplier to an IC-DISC (Part II) or (2) Do not include in combined taxable income used. The marginal costing rules may be used the IC-DISC commission from a related (line 13) the discount amount reflected in only for sales, or commissions on sales, of supplier (Part III). receivables (on the sale of export property) property if the 50-50 method is used. Complete and attach a separate that a related supplier transferred to the Marginal costing cannot be used for Schedule P to Form 1120-IC-DISC for each IC-DISC. See Regulations sections (1) leasing of property, (2) performance of transaction or group of transactions to which 1.994-1(c)(3) and (6)(v). services, or (3) sales of export property that the intercompany pricing rules of sections See Part I, Section A instructions below if (in the hands of a purchaser related under 994(a)(1) and (2) are applied. marginal costing rules apply. section 954(d)(3) to the seller) give rise to IC-DISC taxable income. Generally, the 4% gross receipts method. The transfer foreign base company sales income as intercompany pricing determinations are to be price charged by the related supplier to the described in section 954(d) unless, for the made on a transaction-by-transaction basis. IC-DISC or IC-DISC commission from the purchaser’s year in which it resells the However, the IC-DISC may make an annual related supplier is the amount that ensures property, section 954(b)(3)(A) applies or the election to determine intercompany pricing on that the taxable income derived by the income is under the exceptions in section the basis of groups consisting of products or IC-DISC from the transaction does not 954(b)(4). product lines. If the group basis is elected, exceed the sum of (1) 4% of the qualified Line 10. The overall profit percentage may then all transactions for that product or export receipts of the IC-DISC derived from be computed under an optional method. See product line must be grouped. Each group is the transaction and (2) 10% of the export Regulations section 1.994-2(c)(2) for details. limited to one type of transaction (i.e., sales, promotion expenses (as defined in leases, or commissions). Part I, Section B and Section C. Complete Regulations section 1.994-1(f)) of the IC-DISC Section B or Section C. You must complete A product or product line determination will attributable to the qualified export receipts. Section B if marginal costing is used. be accepted if it conforms to either of the Section 482 method. The transfer price following standards: (1) a recognized industry Line 22. If IC-DISC taxable income on a the related supplier charged the IC-DISC, or or trade usage or (2) major product groups (or sale is computed under the 4% method and IC-DISC commission from the related any subclassifications within a major product the IC-DISC chooses to apply the special rule supplier, is the amount actually charged, but group) (see Schedule P (Form 1120-IC-DISC) for transfer prices or commissions, check the is subject to the arm’s length standard of Codes for Principal Business Activity on page box in line 22 and attach a separate section 482. Do not complete Schedule P if 13 of the Instructions for Form computation of the limitation on IC-DISC the section 482 method is used. 1120-IC-DISC). The corporation may choose taxable income determined under the special Incomplete transactions. For the 50-50 a product grouping for one product and use rule and enter the amount on line 22. Under and 4% methods, if the related supplier sells the transaction-by-transaction method for the special rule, a transfer price or property to the IC-DISC during the year but another product within the same tax year. commission will not be considered to cause a the IC-DISC does not resell it during the year, loss for a related supplier if the IC-DISC’s net Generally, the computation of taxable the related supplier’s transfer price to the profit on the sale does not exceed the income under the intercompany pricing rules IC-DISC must equal the related supplier’s IC-DISC’s and related supplier’s net profit will not be permitted to the extent that their cost of goods sold. Do not complete percentage on all their sales of the product or application would result in a loss to the Schedule P for incomplete transactions. The product line. See Regulations section related supplier. related supplier’s transfer price to the 1.994-1(e)(1)(ii) for details. Each of the following methods may be IC-DISC must be recomputed for the year in Reporting Part II and Part III amounts on applied for sales, leases, and services. See which the IC-DISC resells the property and Form 1120-IC-DISC. If the computed transfer the regulations under section 994. the transaction must then be reported on price for sales, leases, or services (Part II) or Schedule P for that year. 50-50 combined taxable income method. IC-DISC commission (Part III) is entered on The transfer price the related supplier charges Part I, Section A—Combined Taxable more than one line of Form 1120-IC-DISC, the IC-DISC, or the related supplier’s IC-DISC Income. Complete Section A-1 only if attach an explanation indicating the portion of commission, is the amount that lowers the marginal costing is not used. the total that is applied to each line. taxable income the IC-DISC derives from the Schedule P (Form 1120-IC-DISC) (Rev. 12-2008)

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Form 1120-IC-DISC (Schedule P)-Intercompany Transfer Price or Commission

  • 1. SCHEDULE P Intercompany Transfer Price or Commission (Form 1120-IC-DISC) Attach a separate schedule for each transaction or group of transactions to OMB No. 1545-0938 which the intercompany pricing rules under section 994(a)(1) and (2) are applied. (Rev. December 2008) For the calendar year 20 , or fiscal year beginning , 20 , and ending , 20 Department of the Treasury For amount reported on line , Schedule , Form 1120-IC-DISC Internal Revenue Service Name as shown on Form 1120-IC-DISC Employer identification number Identify product or product line reported on this schedule. (Also, enter the Principal Business Activity code This schedule is for a (check one): number, if used.) (See instructions.) Single transaction Group of transactions Part I IC-DISC Taxable Income SECTION A—Combined Taxable Income Section A-1—If marginal costing is not used 1 1 Gross receipts from transaction between IC-DISC (or related supplier) and third party 2 Less costs and expenses allocable to gross receipts from transaction: Cost of goods sold from property if sold, or depreciation from property if leased 2a a 2b b Related supplier’s expenses allocable to gross receipts from transaction 2c c IC-DISC export promotion expenses allocable to gross receipts from transaction 2d d Other IC-DISC expenses allocable to gross receipts from transaction 2e e Add lines 2a through 2d 3 Combined taxable income. Subtract line 2e from line 1. If a loss, enter -0- 3 Section A-2—If marginal costing is used 4 4 Gross receipts from resale by IC-DISC (or sale by related supplier) to third party 5 Costs and expenses allocable to gross receipts from sale: 5a a Cost of direct material from property sold 5b b Cost of direct labor from property sold c IC-DISC export promotion expenses allocable to gross receipts from sales that 5c are claimed as promotional 5d d Add lines 5a through 5c 6 Combined taxable income or (loss) before application of overall profit percentage limitation. Subtract 6 line 5d from line 4. If a loss, skip lines 7 through 11 and enter -0- on line 12 7 Gross receipts of related supplier and IC-DISC (or controlled group) from all foreign and domestic 7 sales of the product or product line 8 Costs and expenses of related supplier and IC-DISC (or controlled group) allocable to gross income from such sales: 8a a Cost of goods sold from property sold 8b b Expenses allocable to gross receipts from such sales 8c c Add lines 8a and 8b 9 9 Subtract line 8c from line 7. If a loss, skip lines 10 and 11 and enter -0- on line 12 10 Overall profit percentage. Divide line 9 by line 7. Check if controlled group optional method 10 % is used 11 11 Overall profit percentage limitation. Multiply line 4 by line 10 12 Combined taxable income. Enter the smaller of line 6 or line 11 12 SECTION B—50-50 Combined Taxable Income Method (Must be used if marginal costing is used. See instructions.) 13 Combined taxable income. Enter amount from line 3 or line 12 13 14 14 Multiply line 13 by 50% (.50) 15 Enter 10% (.10) of IC-DISC export promotion expenses allocable to gross income from transactions 15 that are claimed as export promotion 16 16 Add lines 14 and 15 17 IC-DISC taxable income. Enter the smaller of line 13 or line 16 17 SECTION C—4% Gross Receipts Method (Cannot be used if marginal costing is used.) 18 18 Gross receipts from transaction. Enter amount from line 1 19 19 Multiply line 18 by 4% (.04) 20 20 Multiply line 2c by 10% (.10) 21 21 Add lines 19 and 20 22 Combined taxable income. Enter amount from line 3 or amount computed under special rule. If special 22 rule is applied, check here . See instructions 23 IC-DISC taxable income. Enter the smaller of line 21 or line 22 23 For Paperwork Reduction Act Notice, see the Instructions for Form 1120-IC-DISC. Cat. No. 11478S Schedule P (Form 1120-IC-DISC) (Rev. 12-2008)
  • 2. 2 Schedule P (Form 1120-IC-DISC) (Rev. 12-2008) Page Transfer Price From Related Supplier to IC-DISC (See instructions.) Part II 24 24 Gross receipts from transaction. Enter amount from line 1 or line 4, Part I 25 Less reductions: 25a a IC-DISC taxable income (but not to exceed amount determined in Part I) 25b b IC-DISC export promotion expenses allocable to gross income from transaction 25c c Other IC-DISC expenses allocable to gross income from transaction 25d d Add lines 25a through 25c 26 Transfer price from related supplier to IC-DISC. Subtract line 25d from line 24 26 Part III IC-DISC Commission From Related Supplier (See instructions.) 27 27 IC-DISC taxable income (but not to exceed amount determined in Part I) 28 28 IC-DISC export promotion expenses allocable to gross receipts from transaction 29 29 Other IC-DISC expenses allocable to gross receipts from transaction 30 IC-DISC commission from related supplier. Add lines 27 through 29 30 Instructions transaction to an amount that is no more than For purposes of line 2d, be sure to include the sum of (1) 50% of the IC-DISC’s and the appropriate apportionment of deductions related supplier’s combined taxable income that are not directly allocable such as interest Section references are to the Internal attributable to the qualified export receipts expenses and stewardship expenses. See Revenue Code unless otherwise noted. from the transaction and (2) 10% of the Temporary Regulations sections 1.861-11T(f) Purpose of schedule. Use Schedule P to IC-DISC’s export promotion expenses (as and 1.861-14T(f) for an explanation of show the computation of taxable income defined in Regulations section 1.994-1(f)) appropriate apportionment. used in computing (1) the transfer price from attributable to the qualified export receipts. Complete Section A-2 if marginal costing is a related supplier to an IC-DISC (Part II) or (2) Do not include in combined taxable income used. The marginal costing rules may be used the IC-DISC commission from a related (line 13) the discount amount reflected in only for sales, or commissions on sales, of supplier (Part III). receivables (on the sale of export property) property if the 50-50 method is used. Complete and attach a separate that a related supplier transferred to the Marginal costing cannot be used for Schedule P to Form 1120-IC-DISC for each IC-DISC. See Regulations sections (1) leasing of property, (2) performance of transaction or group of transactions to which 1.994-1(c)(3) and (6)(v). services, or (3) sales of export property that the intercompany pricing rules of sections See Part I, Section A instructions below if (in the hands of a purchaser related under 994(a)(1) and (2) are applied. marginal costing rules apply. section 954(d)(3) to the seller) give rise to IC-DISC taxable income. Generally, the 4% gross receipts method. The transfer foreign base company sales income as intercompany pricing determinations are to be price charged by the related supplier to the described in section 954(d) unless, for the made on a transaction-by-transaction basis. IC-DISC or IC-DISC commission from the purchaser’s year in which it resells the However, the IC-DISC may make an annual related supplier is the amount that ensures property, section 954(b)(3)(A) applies or the election to determine intercompany pricing on that the taxable income derived by the income is under the exceptions in section the basis of groups consisting of products or IC-DISC from the transaction does not 954(b)(4). product lines. If the group basis is elected, exceed the sum of (1) 4% of the qualified Line 10. The overall profit percentage may then all transactions for that product or export receipts of the IC-DISC derived from be computed under an optional method. See product line must be grouped. Each group is the transaction and (2) 10% of the export Regulations section 1.994-2(c)(2) for details. limited to one type of transaction (i.e., sales, promotion expenses (as defined in leases, or commissions). Part I, Section B and Section C. Complete Regulations section 1.994-1(f)) of the IC-DISC Section B or Section C. You must complete A product or product line determination will attributable to the qualified export receipts. Section B if marginal costing is used. be accepted if it conforms to either of the Section 482 method. The transfer price following standards: (1) a recognized industry Line 22. If IC-DISC taxable income on a the related supplier charged the IC-DISC, or or trade usage or (2) major product groups (or sale is computed under the 4% method and IC-DISC commission from the related any subclassifications within a major product the IC-DISC chooses to apply the special rule supplier, is the amount actually charged, but group) (see Schedule P (Form 1120-IC-DISC) for transfer prices or commissions, check the is subject to the arm’s length standard of Codes for Principal Business Activity on page box in line 22 and attach a separate section 482. Do not complete Schedule P if 13 of the Instructions for Form computation of the limitation on IC-DISC the section 482 method is used. 1120-IC-DISC). The corporation may choose taxable income determined under the special Incomplete transactions. For the 50-50 a product grouping for one product and use rule and enter the amount on line 22. Under and 4% methods, if the related supplier sells the transaction-by-transaction method for the special rule, a transfer price or property to the IC-DISC during the year but another product within the same tax year. commission will not be considered to cause a the IC-DISC does not resell it during the year, loss for a related supplier if the IC-DISC’s net Generally, the computation of taxable the related supplier’s transfer price to the profit on the sale does not exceed the income under the intercompany pricing rules IC-DISC must equal the related supplier’s IC-DISC’s and related supplier’s net profit will not be permitted to the extent that their cost of goods sold. Do not complete percentage on all their sales of the product or application would result in a loss to the Schedule P for incomplete transactions. The product line. See Regulations section related supplier. related supplier’s transfer price to the 1.994-1(e)(1)(ii) for details. Each of the following methods may be IC-DISC must be recomputed for the year in Reporting Part II and Part III amounts on applied for sales, leases, and services. See which the IC-DISC resells the property and Form 1120-IC-DISC. If the computed transfer the regulations under section 994. the transaction must then be reported on price for sales, leases, or services (Part II) or Schedule P for that year. 50-50 combined taxable income method. IC-DISC commission (Part III) is entered on The transfer price the related supplier charges Part I, Section A—Combined Taxable more than one line of Form 1120-IC-DISC, the IC-DISC, or the related supplier’s IC-DISC Income. Complete Section A-1 only if attach an explanation indicating the portion of commission, is the amount that lowers the marginal costing is not used. the total that is applied to each line. taxable income the IC-DISC derives from the Schedule P (Form 1120-IC-DISC) (Rev. 12-2008)