Page 117 - BusinessStructures & Forms

16:38 - 30-Jan-2023
Page 23 of 31
Fileid: … ions/i1120/2022/a/xml/cycle08/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
it separately. A taxpayer that files a rule under Regulations section see section 163(j) and the Instructions for
protective Form 1120 must also file 1.267A-5(b)(6). Form 8990.
Schedule UTP if it satisfies the Extent to which deduction is disal- Question 24
requirements set forth above. lowed. When section 267A applies to Generally, a taxpayer with a trade or
For details, see the Instructions for interest or royalties paid or accrued business must file Form 8990 to claim a
Schedule UTP. pursuant to a hybrid arrangement, it deduction for business interest. In
generally disallows a deduction for the
Questions 15a and 15b amount to the extent that, under the addition, Form 8990 must be filed by any
taxpayer that owns an interest in a
If the corporation made any payment in foreign tax law, there is not a partnership with current year, or prior year
2022 that would require the corporation to corresponding income inclusion (including carryover, excess business interest
file any Form(s) 1099, check the “Yes” box long-term deferral). However, the expense allocated from the partnership.
for question 15a and answer question deduction is not disallowed to the extent
15b. Otherwise, check the “No” box for the amount is directly or indirectly included Exclusions from filing. A taxpayer is not
question 15a and skip question 15b. See in income in the United States, such as if required to file Form 8990 if the taxpayer
Am I Required to File a Form 1099 or the amount is taken into account with is a small business taxpayer (defined
Other Information Return? on IRS.gov. respect to a U.S. shareholder under below) and does not have excess
business interest expense from a
section 951(a) or section 951A. For
Question 19 additional information, see Regulations partnership. A taxpayer also is not
If the corporation made any payments in sections 1.267A-2 through 1.267A-4. For required to file Form 8990 if the taxpayer
2022 that would require the corporation to examples illustrating the application of only has business interest expense from
file any Forms 1042 and 1042‐S, check section 267A, see Regulations section these excepted trades or businesses:
the “Yes” box. See the Instructions for 1.267A-6. • An electing real property trade or
Form 1042 and Instructions for Form Question 22 business,
1042‐S for information regarding who is • An electing farming business, or
required to file Forms 1042 and 1042‐S If the corporation had gross receipts of at • Certain utility businesses.
and what types of payments are subject to least $500 million in any 1 of the 3 Small business taxpayer. A small
reporting on Forms 1042 and 1042‐S. preceding tax years, complete and attach business taxpayer is not subject to the
Form 8991. For this purpose, the
Question 21 corporation's gross receipts include the business interest expense limitation and is
If the corporation paid or accrued gross receipts of all persons aggregated not required to file Form 8990. A small
business taxpayer is a taxpayer that (a) is
(including through a partnership) any with the corporation, as specified in not a tax shelter (as defined in section
interest or royalty for which a deduction is section 59A(e)(3). See the Instructions for 448(d)(3)), and (b) meets the gross
not allowed under section 267A, check Form 8991 to determine if the corporation receipts test of section 448(c), discussed
"Yes" for question 21 and enter the total is subject to the base erosion minimum next.
amount for which a deduction is not tax.
allowed. Question 23 Gross receipts test. For 2022, a
taxpayer meets the gross receipts test if
Payments to which section 267A ap- The limitation on business interest the taxpayer has average annual gross
plies. Interest or royalty paid or accrued expense applies to every taxpayer with a receipts of $27 million or less for the 3
by a domestic corporation (including, in trade or business, unless the taxpayer prior tax years. A taxpayer's average
the case of a domestic corporation that is meets certain specified exceptions. A annual gross receipts for the 3 prior tax
a partner in a partnership, the domestic taxpayer may elect out of the limitation for years is determined by adding the gross
corporation's allocable share of interest or certain businesses otherwise subject to receipts for the 3 prior tax years and
royalty paid or accrued by the partnership) the business interest expense limitation. dividing the total by 3. Gross receipts
is subject to section 267A. Section 267A See Question 24. Also, see the include the aggregate gross receipts from
generally applies to interest or royalty paid Instructions for Form 8990. all persons treated as a single employer,
or accrued according to a hybrid such as a controlled group of
arrangement (such as, for example, a Certain real property trades or corporations, commonly controlled
payment according to a hybrid instrument, businesses and farming businesses partnerships, or proprietorships, and
or a payment to a reverse hybrid), qualify to make an election not to limit affiliated service groups. See section
provided that the payment or accrual is to business interest expense. This is an 448(c) and the Instructions for Form 8990
a related party (or according to a irrevocable election. If you make this for additional information.
structured arrangement). In addition, election, you are required to use the
under an imported mismatch rule, section alternative depreciation system to Question 25
267A generally applies to interest or depreciate any nonresidential real To certify as a QOF, the corporation must
royalties paid or accrued according to a property, residential rental property, and file Form 1120 and attach Form 8996,
non-hybrid arrangement where the income qualified improvement property for an even if the corporation had no income or
attributable to that payment or accrual is electing real property trade or business, expenses to report. If the corporation is
directly or indirectly offset by certain and any property with a recovery period of attaching Form 8996, check the “Yes” box
deductions involving hybridity incurred by 10 years or more for an electing farming for question 25. On the line following the
a related party or according to a structured business. See section 168(g)(1)(F). Also, dollar sign, enter the amount from Form
arrangement. However, section 267A you are not entitled to the special 8996, line 15.
does not apply if a de minimis exception is depreciation allowance for that property.
satisfied. See Regulations section For a taxpayer with more than one The penalty reported on this line from
1.267A-1(c). For purposes of section qualifying business, the election is made Form 8996, line 15, is not due with the
267A, interest and royalties are defined with respect to each business. filing of this form. The IRS will separately
broadly. For additional information about Check “Yes” if the corporation has an send to you a notice setting forth the due
arrangements subject to section 267A, election in effect to exclude a real property date for the penalty payment and where
see Regulations sections 1.267A-2 and trade or business or a farming business that payment should be sent.
1.267A-4. Also, see the anti-avoidance from section 163(j). For more information,

Instructions for Form 1120 -23-