General Instructions

Purpose of Schedule

Schedule V (Form 1120-F) is used by a foreign corporation to report basic information for each vessel or aircraft with respect to which the corporation is subject to the 4% rate of tax on U.S. source gross transportation income (USSGTI) under section 887.

Who Must File

Foreign corporations that are subject to the 4% tax on their USSGTI under section 887 must complete Schedule V.

When and Where to File

Attach Schedule V (Form 1120-F) to the foreign corporation's Form 1120-F income tax return. See the Instructions for Form 1120-F for the time, place, and manner for filing the corporation's income tax return.

Definitions

The term United States source gross transportation income (USSGTI) means any gross income (without reduction by any deductions or losses) that is transportation income (as defined in section 863(c)(3)) to the extent such income is treated as from sources within the United States under section 863(c)(2)(A).

The term does not include transportation income which is:

  • Not sourced under section 863(c)(2);

  • Taxable as effectively connected with the corporation's trade or business in the United States pursuant to section 887(b)(4); or

  • Taxable in a possession of the United States under a provision of the Code, as made applicable in such possession.

Note.

Foreign corporations may derive USSGTI directly, from participation in a pool, joint venture, joint service arrangement, as a partner in a partnership, or as the beneficiary of a trust or estate.

The term transportation income (as defined in section 863(c)(3)) means any income derived from, or in connection with:

  • The use (or hiring or leasing for use) of any vessel or aircraft, or

  • The performance of services directly related to the use of any vessel or aircraft.

The term vessel or aircraft includes any container used in connection with a vessel or aircraft. However, the term transportation income does not include income from the disposition of vessels, containers, or aircraft.

The term income derived from, or in connection with, the use (or hiring or leasing for use) of any vessel or aircraft means:

  • Income derived from transporting passengers or property by vessel or aircraft;

  • Income derived from hiring or leasing a vessel or aircraft for use in the transportation of passengers or property on the vessel or aircraft; and

  • Income derived by an operator of vessels or aircraft from the rental or use of containers and related equipment (container related income) in connection with, or incidental to, the transportation of cargo on such vessels or aircraft by the operator. Persons other than an operator of a vessel or aircraft do not derive container related income. Such income is treated as rental income, not transportation income.

The term income derived from, or in connection with, the performance of services directly related to the use of a vessel or aircraft includes the following categories of income.

  1. On board services. Income in this category is derived from services performed on board a vessel or aircraft in the course of the actual transportation of passengers or property aboard vessels or aircraft. Examples of income in this category include income from renting staterooms, berths, or living accommodations; furnishing meals and entertainment; operating shops and casinos; providing excess baggage storage; and the performance of personal services by individuals. The term also includes income derived from demurrage, dispatch, and dead freight.

  2. Off board services. Income in this category is derived from services performed off board any vessel or aircraft by an operator of a vessel or aircraft, provided such services are incidental to the operation of vessels or aircraft by such operator. The term does not include income from services performed by persons other than an operator. Examples of off board services include: terminal services such as dockage, wharfage, storage, lights, water, refrigeration, refueling and similar services; stevedoring and other cargo handling services; maintenance and repairs; and services performed as a travel or booking agent.

The term operator includes the actual operator of a vessel or aircraft, as well as a time or voyage charterer of such vessel or aircraft.


More Online Instructions