Form 8404 (2019)
Page 2
name in item E, and report the combined
income on line 2.
Item D—Tax year. Enter in item D the
calendar year or the beginning and ending
dates of the tax year shown on your tax return
for which the interest charge is figured.
Special Computation Rules
Carrybacks. The determination of the
shareholder’s DISC-related deferred tax
liability on lines 1 through 7 shall be made
without taking into account any capital loss
carryback or credit carryback to the tax year.
Carryovers. The determination of the
shareholder’s tax liability (line 5) for the tax
year is made by disregarding any loss,
deduction, or credit to the extent that such
loss, deduction, or credit may be carried
forward by the shareholder to any other tax
year.
Note: If the tax year is the last tax year to
which the amount of carryforward (of loss,
deduction, or credit) may be carried, the line 3
adjustments and line 5 tax shall be figured
with regard to the full amount of such
carryforward.
For example, a shareholder had an NOL
carryover (originating before 2018) to 2020 of
$12,000; $10,000 income to which $10,000 of
the NOL can be applied; $2,000 allowable
NOL carryover to 2021; and $5,000 deferred
DISC income for 2020. In this case, for
purposes of figuring line 5, the allowed NOL is
$10,000. Note: If 2020 was the last tax year to
which the $12,000 NOL (originating before
2018) could be carried, the full $12,000 NOL
would be allowed for purposes of figuring line
5 tax liability. The additional $2,000 loss
would be entered on line 3.
Other adjustments. In figuring line 3
adjustments, take into account any income
and expense adjustments that don’t result in
amounts that may be carried back or forward
to other tax years. For example, in the case of
an IC-DISC shareholder who is an individual,
the amount of medical expenses allowable as
a deduction under section 213 must be
redetermined for purposes of line 3
adjustments. However, the amount allowable
as a charitable deduction under section 170
isn’t redetermined because this adjustment
could result in a carryback or carryover.
See Proposed Regulations section
1.995(f)-1(d) for other details regarding these
and other special computation rules.
Line-by-Line Instructions
Line 1. Enter on line 1 the taxable income or
loss from your federal income tax return for
your tax year that ends with or includes the
IC-DISC’s tax year end. If you haven’t yet filed
your tax return, estimate your income or loss
based on all information available to you. See
Amended Form 8404, earlier.
Line 2. Enter the deferred DISC income from
line 10, Part III of Schedule K (Form
1120-IC-DISC), for the IC-DISC tax year that
ends with or within your tax year.
Line 3. Enter the net amount of all section
995(f)(2) adjustments to taxable income. See
Special Computation Rules, earlier, for details
on the income (loss) and expense
adjustments to be made. If more than one
adjustment is involved, attach a statement
listing each item and show the computation of
the net amount.
Lines 5 and 6. “Tax liability” on lines 5 and 6
(with and without the deferred DISC income)
means the amount of tax imposed on the
IC-DISC shareholder for the tax year by
chapter 1 of the Internal Revenue Code (other
than taxes listed below) reduced by credits
allowable against such tax (other than credits
listed below).
See Special Computation Rules, earlier, for
rules for carrybacks and carryovers. These
rules may affect the line 5 computation.
The following taxes aren’t taken into
account.
• Alternative minimum tax (individuals only).
• Any other provisions described in section
26(b)(2) (relating to certain other taxes treated
as not imposed by chapter 1).
The following credits aren’t taken into
account.
• Section 31 (taxes withheld on wages).
• Section 32 (earned income credit).
• Section 34 (fuels credit).
For 2019, a Form 1040 or 1040-SR filer or a
Form 1120 filer using the above rules will
generally figure their line 6 tax liability using
the following items shown on the following
lines of those forms. All other filers should use
the corresponding lines of other income tax
returns. If you haven’t yet filed your return,
estimate the line 6 tax liability based on all
information available to you.
2019
Form 1040
or 1040-SR
Line
2019
Form 1120
Line
Tax less nonrefundable
credits . . . . . . 14 7, Sch. J
Plus: (1) Recapture taxes
* *
(2) Prior year minimum
tax credit . . .
6b, Sch. 3
5d, Sch. J
Less: (1) Alternative minimum
tax . . . . . 1, Sch. 2
(2) Additional child tax
credit . . . . 18b
(3) American
opportunity credit . 18c
(4) Premium tax credit
(Form 8962) . .
9, Sch. 3
(5) Credit for tax paid
on undistributed
capital gains (Form
2439) . . . .
13a, Sch. 3
20a, Sch. J
(6) Health insurance
credit for eligible
recipients (Form
8885) . . . .
13c, Sch. 3
* Caution: Only use the portion of Form 1040
or 1040-SR, line 16, or Form 1120, Schedule
J, line 10, attributable to recapture of credits
allowable against taxes treated as imposed
under chapter 1 (for example, recapture of
investment tax and low-income housing
credits). See section 26(b)(2) for a list of
recapture taxes to exclude.
Line 8. The base period T-bill rate is defined
in section 995(f)(4). The base period T-bill rate
is compounded daily based on the number of
days in the shareholder’s tax year to
determine the base period T-bill rate factor.
The base period T-bill rate factor for 2019 is
0.023470459 for a 365-day tax year. Enter the
appropriate factor on line 8 of Form 8404. See
Rev. Rul. 2019-27, 2019-51 I.R.B. 1378, for a
short tax year or a 52–53-week tax year.
Privacy Act and Paperwork Reduction Act
Notice. We ask for the information on this
form to carry out the Internal Revenue laws of
the United States. We need it to figure and
collect the right amount of tax. Section 995(f)
requires taxpayers to pay over to the IRS
interest on DISC-Related Deferred Tax
Liability. This form is used to determine the
amount of tax that you owe. Sections 6001
and 6011 require you to provide the
requested information if the tax applies to
you. Section 6109 requires you to provide
your identifying number. Routine uses of this
information include disclosing it to the
Department of Justice for civil and criminal
litigation and to other federal agencies, as
provided by law. We may disclose the
information to cities, states, the District of
Columbia, and U.S. Commonwealths or
possessions to administer their tax laws. We
may also disclose this information to other
countries under a tax treaty, to federal and
state agencies to enforce federal nontax
criminal laws, or to federal law enforcement
and intelligence agencies to combat terrorism.
If you don’t provide this information or provide
incomplete or fraudulent information, you may
be subject to penalties.
You aren’t required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB control
number. Books or records relating to a form
or its instructions must be retained as long as
their contents may become material in the
administration of any Internal Revenue law.
Generally, tax returns and return information
are confidential, as required by section 6103.
The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated burden for
business taxpayers filing this form is
approved under OMB control number
1545-0123.
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler, we
would be happy to hear from you. You can
send us comments from
www.irs.gov/FormComments. Or you can
write to the Internal Revenue Service, Tax
Forms and Publications, 1111 Constitution
Ave. NW, IR-6526, Washington, DC 20224.
Don’t send the form to this office. Instead,
see Where to file, earlier.
