Important:   All information reported on Schedule K (Form 1118) must be in English. All amounts must be stated in U.S. dollars.

Checkboxes at top of page 1.   Complete Schedule K separately for each category of income. Check the box for the category of income for which this schedule is being completed.

Line 1. Foreign tax carryover from the prior tax year.   Enter on line 1 the amount from line 6 of the worksheet on page 3 of these instructions. See Line 1 Reconciliation Worksheet instructions on page 2 before completing the worksheet.

Line 2. Adjustments to line 1.   Report on lines 2a, 2b, 2c, 2d, etc. any adjustments resulting from events that occurred between the filing of the prior year tax return and the filing of the current year tax return.

Example. In the 2009 tax year, Corporation A has excess foreign taxes of $100 (i.e., the sum of lines 1 through 4 of Form 1118, Schedule B, Part II exceeds Form 1118, Schedule B, Part II, line 11 by $100) entered on Schedule K (Form 1118), line 6. Corporation A enters $20 on line 7 as the estimated amount of line 6 to be carried back to the 2008 tax year. Corporation A enters $80 on line 8 as the carryover amount for following years. The actual carryback amount to the 2008 tax year is later determined to be $15. In the 2010 tax year, Corporation A enters $80 on line 1, column (xii) as the carryover from the 2009 tax year, corresponding to the amount entered on line 8, column (xiii) of the Schedule K filed for the 2009 tax year. Because the estimated carryback amount of $20 from the 2009 tax year to the 2008 tax year (entered on line 7 of the Schedule K filed for the 2009 tax year) exceeds the actual carryback of $15, on the Schedule K for the 2010 tax year, Corporation A enters the $5 excess ($20 - $15) on line 2a as a positive number. Assuming no other adjustments are needed, the total carryover amount from 2009 entered on line 3, column (xii) of the 2010 Schedule K will be $85 ($80 + $5).

Line 3. Adjusted foreign tax carryover from prior tax year.   Combine lines 1 and 2. The total amount in line 3, column (xiv) is the adjusted carryover amount from the prior tax year. It is included on Schedule B, Part II, line 5 (and, if filing an amended return, combined with carrybacks into the current tax year) to determine the total amount of foreign taxes that are available for credit in the current tax year.

Line 4. Foreign tax carryover utilized in current tax year.   With respect to a given separate limitation, line 4 is completed only if the corporation has a current year excess limitation (defined above).

  Enter in each column the foreign tax carryover utilized in the current tax year. Starting with column (i), the amount to be entered on line 4 of a given column will be the amount on line 3 of that column, but only to the extent that it does not exceed:

Line 5. Foreign tax carryover expired unused in current tax year.   Line 5 is completed only with respect to the 10^th preceding tax year (and the “Subtotal” and “Totals” columns). For the 10^th preceding tax year (column (i)), combine lines 3 and 4 and enter the result on line 5, column (i).

Line 6. Foreign tax carryover generated in current tax year.   With respect to a given separate limitation, line 6 is completed only if the corporation has current year excess foreign taxes (defined on page 1). Enter in column (xiii) (the current tax year column) the amount of the corporation's unused foreign tax for the current tax year (i.e., the amount by which the sum of lines 1 through 4 of Form 1118, Schedule B, Part II, exceeds the amount on Form 1118, Schedule B, Part II, line 11). Also enter the same amount in the “Totals” column (column (xiv)).

Line 7. Actual or estimated amount of line 6 carried back to the prior tax year.   Enter the amount of line 6 carried back to the first preceding tax year. If, at the time the corporation files its 2009 income tax return, the actual amount is not available, an estimated or tentative amount may be entered on line 7. If an estimated amount is entered on line 7 and this amount differs from the actual carryback amount, the difference will be entered on line 2a of the subsequent year Schedule K (Form 1118).

Lines 2 through 5.   Use the instructions for lines 4 through 7 of the Schedule K above to complete lines 2 through 5, respectively, of the Line 1 Reconciliation Worksheet.

For more information, see section 904(c) and Regulations section 1.904-2 and Temporary Regulations section 1.904-2T.