### Specific Instructions

#### Affiliated Group Checkbox

A single form must be filed for all members of an affiliated group as defined in section 163(j)(6)(C), including those that are not members of the same consolidated group.

#### Line 1d

Enter the total amount of the corporation's indebtedness as of the last day of the tax year. Enter all indebtedness owed to related parties and all indebtedness owed to third parties. For more information, see Ratio of Debt to Equity, earlier.

#### Line 1f. Debt to Equity Ratio

Divide line 1d by line 1e.

Divide the total amount of the corporation's indebtedness as of the last day of the tax year by the sum of money and adjusted basis of all the corporation's other assets reduced by the total indebtedness.

Enter the results as a decimal (rounded to five decimal places).

Example 1.

Corporation A is a calendar year corporation. At the end of 2011, Corporation A's money totaled \$300,500. The adjusted basis of the corporation's other assets totaled \$574,500. Corporation A's total indebtedness at the end of 2011 is \$525,000. The debt to equity ratio for Corporation A is 1.50000.

 Example 1: Money \$300,500 Plus: Adjusted basis of all other assets 574,500 Total \$875,000 Minus: Total indebtedness 525,000 Corporation A's equity \$350,000 Calculation of Corporation A's debt to equity ratio: Corporation A's total indebtedness \$525,000 Divided by: Corporation A's equity 350,000 Corporation A's debt to equity ratio (Form 8926, line 1f) 1.50000

### Note.

Since the debt to equity ratio does not exceed 1.5 to 1, disqualified interest paid or accrued in the current tax year will not be disallowed by section 163(j).

Example 2.

Corporation B is a calendar year corporation. At the end of 2011, Corporation B's money totaled \$400,000. The adjusted basis of the corporation's other assets totaled \$599,950. Corporation B's total indebtedness at the end of 2011 is \$600,020. The debt to equity ratio for Corporation B is 1.50031.

 Example 2: Money \$400,000 Plus: Adjusted basis of all other assets 599,950 Total \$999,950 Minus: Total indebtedness 600,020 Corporation B's equity \$399,930 Calculation of Corporation B's debt to equity ratio: Corporation B's total indebtedness \$600,020 Divided by: Corporation B's equity 399,930 Corporation B's debt to equity ratio (Form 8926, line 1f) 1.50031

### Note.

Since the debt to equity ratio exceeds 1.5 to 1, disqualified interest paid or accrued in the current tax year will be disallowed by section 163(j) to the extent of the corporation's excess interest expense for the tax year.

#### Line 1i

Enter all assets that are directly owned by the corporation, including assets held through a partnership or trust.

### Note.

Partnerships and simple trusts are treated as aggregates.

#### Line 3f

Enter any additional adjustments the corporation has made to its taxable income (loss) in arriving at its adjusted taxable income under section 163(j)(6).

Attach to your return a separate sheet showing:

• A list of each adjustment item and the amount for each adjustment item, and

• The total of all adjustments at the bottom.

Enter the total of all adjustments on line 3f.

#### Line 4b

Enter the amount of any unused excess limitation carried forward (if any) from the corporation's first preceding tax year and, to the extent not previously taken into account in a prior tax year, the second and third preceding tax years.

#### Line 7. Amount of Interest Deduction Disallowed Under Section 163(j) for the Current Tax Year and Carried Forward to the Next Tax Year

The amount entered on line 7 is the amount of the corporation's interest deduction that is disallowed under section 163(j) and carried forward to the next tax year. If line 1f is greater than 1.5, subtract the smaller of line 4d or line 5d from the interest the corporation would have otherwise deducted on its tax return. A corporation filing Form 1120 will reduce the amount reported on page 1, line 18. A corporation filing Form 1120-F will reduce the amount reported on Schedule I (Form 1120-F), line 24b. A corporation filing another tax return will reduce the amount reported on the appropriate interest deduction line.

The corporation may be allowed by section 163(j) to deduct the disallowed amount in a subsequent year. If not, it can be carried forward indefinitely.

#### Line 8c. Excess Limitation Carryforward to the Next Tax Year

If the corporation has an excess limitation for any taxable year, the amount of such excess limitation shall be an excess limitation carryforward to the first succeeding tax year and to the second and third succeeding tax years to the extent not previously taken into account in a prior tax year.

Add lines 8a and 8b. This is your excess limitation carryforward to your next tax year. Generally, this will be the amount you will enter on line 4b of Form 8926 in the following tax year.