SCHEDULE P
(Form 1120-IC-DISC)
(Rev. September 2017)
Department of the Treasury
Internal Revenue Service
Intercompany Transfer Price or Commission
Attach a separate schedule for each transaction or group of transactions to
which the intercompany pricing rules under section 994(a)(1) and (2) are applied.
Go to www.irs.gov/Form1120ICDISC for the latest information.
For the calendar year 20 , or fiscal year beginning , 20 , and ending , 20
For amount reported on line
, Schedule , Form 1120-IC-DISC
OMB No. 1545-0123
Name as shown on Form 1120-IC-DISC Employer identification number
Identify product or product line reported on this schedule. Also, enter the Principal Business Activity code
number, if used. See instructions.
This schedule is for a (check one):
Single transaction . . . . . .
Group of transactions . . . . .
Part I IC-DISC Taxable Income
SECTION A—Combined Taxable Income
Section A-1—If marginal costing is not used
1 Gross receipts from transaction between IC-DISC (or related supplier) and third party . . . . .
1
2 Less costs and expenses allocable to gross receipts from transaction:
a Cost of goods sold from property if sold, or depreciation from property if leased 2a
b Related supplier’s expenses allocable to gross receipts from transaction . . . 2b
c IC-DISC export promotion expenses allocable to gross receipts from transaction 2c
d Other IC-DISC expenses allocable to gross receipts from transaction . . . . 2d
e Add lines 2a through 2d . . . . . . . . . . . . . . . . . . . . . . . . . . 2e
3 Combined taxable income. Subtract line 2e from line 1. If a loss, enter -0- . . . . . . . . . 3
Section A-2—If marginal costing is used
4 Gross receipts from resale by IC-DISC (or sale by related supplier) to third party . . . . . . .
4
5 Costs and expenses allocable to gross receipts from sale:
a Cost of direct material from property sold . . . . . . . . . . . . . 5a
b Cost of direct labor from property sold . . . . . . . . . . . . . . 5b
c IC-DISC export promotion expenses allocable to gross receipts from sales that
are claimed as promotional . . . . . . . . . . . . . . . . . .
5c
d Add lines 5a through 5c . . . . . . . . . . . . . . . . . . . . . . . . . . 5d
6 Combined taxable income or (loss) before application of overall profit percentage limitation. Subtract
line 5d from line 4. If a loss, skip lines 7 through 11 and enter -0- on line 12 . . . . . . . . .
6
7 Gross receipts of related supplier and IC-DISC (or controlled group) from all foreign and domestic sales
of the product or product line . . . . . . . . . . . . . . . . . . . . . . . .
7
8 Costs and expenses of related supplier and IC-DISC (or controlled group) allocable to gross income
from such sales:
a Cost of goods sold from property sold . . . . . . . . . . . . . . 8a
b Expenses allocable to gross receipts from such sales . . . . . . . . . 8b
c Add lines 8a and 8b . . . . . . . . . . . . . . . . . . . . . . . . . . . 8c
9 Subtract line 8c from line 7. If a loss, skip lines 10 and 11 and enter -0- on line 12 . . . . . . . 9
10 Overall profit percentage. Divide line 9 by line 7. Check if controlled group optional method
is used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
%
11 Overall profit percentage limitation. Multiply line 4 by line 10 . . . . . . . . . . . . . .
11
12 Combined taxable income. Enter the smaller of line 6 or line 11 . . . . . . . . . . . . 12
SECTION B—50-50 Combined Taxable Income Method (Must be used if marginal costing is used. See instructions.)
13 Combined taxable income. Enter amount from line 3 or line 12 . . . . . . . . . . . . . 13
14 Multiply line 13 by 50% (0.50) . . . . . . . . . . . . . . . . . . . . . . . .
14
15 Enter 10% (0.10) of IC-DISC export promotion expenses allocable to gross income from transactions
that are claimed as export promotion . . . . . . . . . . . . . . . . . . . . . .
15
16 Add lines 14 and 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17 IC-DISC taxable income. Enter the smaller of line 13 or line 16 . . . . . . . . . . . . . 17
SECTION C—4% Gross Receipts Method (Cannot be used if marginal costing is used.)
18 Gross receipts from transaction. Enter amount from line 1 . . . . . . . . . . . . . . . 18
19 Multiply line 18 by 4% (0.04) . . . . . . . . . . . . . . . . . . . . . . . . 19
20 Multiply line 2c by 10% (0.10) . . . . . . . . . . . . . . . . . . . . . . . . 20
21 Add lines 19 and 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
22 Combined taxable income. Enter amount from line 3 or amount computed under special rule. If special
rule is applied, check here . See instructions . . . . . . . . . . . . . . . . . .
22
23 IC-DISC taxable income. Enter the smaller of line 21 or line 22 . . . . . . . . . . . . . 23
For Paperwork Reduction Act Notice, see the Instructions for Form 1120-IC-DISC.
Cat. No. 11478S
Schedule P (Form 1120-IC-DISC) (Rev. 9-2017)
Schedule P (Form 1120-IC-DISC) (Rev. 9-2017)
Page 2
Part II Transfer Price From Related Supplier to IC-DISC (See instructions.)
24 Gross receipts from transaction. Enter amount from line 1 or line 4, Part I . . . . . . . . . . 24
25 Less reductions:
a IC-DISC taxable income (but not to exceed amount determined in Part I) . . . 25a
b
IC-DISC export promotion expenses allocable to gross income from transaction .
25b
c Other IC-DISC expenses allocable to gross income from transaction . . . . 25c
d Add lines 25a through 25c . . . . . . . . . . . . . . . . . . . . . . . . . 25d
26 Transfer price from related supplier to IC-DISC. Subtract line 25d from line 24 . . . . . . . 26
Part III IC-DISC Commission From Related Supplier (See instructions.)
27 IC-DISC taxable income (but not to exceed amount determined in Part I) . . . . . . . . . . 27
28 IC-DISC export promotion expenses allocable to gross receipts from transaction . . . . . . . 28
29 Other IC-DISC expenses allocable to gross receipts from transaction . . . . . . . . . . . 29
30 IC-DISC commission from related supplier. Add lines 27 through 29 . . . . . . . . . . 30
Instructions
Section references are to the Internal Revenue
Code unless otherwise noted.
Purpose of schedule. Use Schedule P to
show the computation of taxable income used
in computing (1) the transfer price from a
related supplier to an IC-DISC (Part II), or (2)
the IC-DISC commission from a related
supplier (Part III).
Complete and attach a separate
Schedule P to Form 1120-IC-DISC for each
transaction or group of transactions to which
the intercompany pricing rules of sections
994(a)(1) and (2) are applied.
IC-DISC taxable income. Generally, the
intercompany pricing determinations are to be
made on a transaction-by-transaction basis.
However, the IC-DISC may make an annual
election to determine intercompany pricing on
the basis of groups consisting of products or
product lines. If the group basis is elected,
then all transactions for that product or
product line must be grouped. Each group is
limited to one type of transaction (for
example, sales, leases, or commissions).
A product or product line determination will
be accepted if it conforms to either of the
following standards: (1) a recognized industry
or trade usage, or (2) major product groups
(or any subclassifications within a major
product group) (see Schedule P (Form 1120-
IC-DISC) Codes for Principal Business Activity
in the Instructions for Form 1120-IC-DISC).
The corporation may choose a product
grouping for one product and use the
transaction-by-transaction method for
another product within the same tax year.
Generally, the computation of taxable
income under the intercompany pricing rules
will not be permitted to the extent that their
application would result in a loss to the
related supplier.
Each of the following methods may be
applied for sales, leases, and services. See
the regulations under section 994.
50-50 combined taxable income method.
The transfer price the related supplier charges
the IC-DISC, or the related supplier’s IC-DISC
commission, is the amount that lowers the
taxable income the IC-DISC derives from the
transaction to an amount that is no more than
the sum of (1) 50% (0.50) of the IC-DISC’s
and related supplier’s combined taxable
income attributable to the qualified export
receipts from the transaction and (2) 10%
(0.10) of the IC-DISC’s export promotion
expenses (as defined in Regulations section
1.994-1(f)) attributable to the qualified export
receipts. Do not include in combined taxable
income (line 13) the discount amount reflected
in receivables (on the sale of export property)
that a related supplier transferred to the
IC-DISC. See Regulations sections
1.994-1(c)(3) and (6)(v).
If marginal costing rules apply, see Part I,
Section A instructions below.
4% gross receipts method. The transfer
price charged by the related supplier to the
IC-DISC or IC-DISC commission from the
related supplier is the amount that ensures
that the taxable income derived by the
IC-DISC from the transaction does not
exceed the sum of (1) 4% (0.04) of the
qualified export receipts of the IC-DISC
derived from the transaction and (2) 10%
(0.10) of the export promotion expenses (as
defined in Regulations section 1.994-1(f)) of
the IC-DISC attributable to the qualified
export receipts.
Section 482 method. The transfer price the
related supplier charged the IC-DISC, or
IC-DISC commission from the related
supplier, is the amount actually charged, but
is subject to the arm’s length standard of
section 482. Do not complete Schedule P if
the section 482 method is used.
Incomplete transactions. For the 50-50
and 4% methods, if the related supplier sells
property to the IC-DISC during the year but
the IC-DISC does not resell it during the year,
the related supplier’s transfer price to the
IC-DISC must equal the related supplier’s
cost of goods sold. Do not complete
Schedule P for incomplete transactions. The
related supplier’s transfer price to the
IC-DISC must be recomputed for the year in
which the IC-DISC resells the property and
the transaction must then be reported on
Schedule P for that year.
Part I, Section A—Combined Taxable
Income. Complete Section A-1 only if
marginal costing is not used.
For purposes of line 2d, be sure to include
the appropriate apportionment of deductions
that are not directly allocable such as interest
expenses and stewardship expenses. See
Temporary Regulations sections 1.861-11T(f)
and 1.861-14T(f) for an explanation of
appropriate apportionment.
Complete Section A-2 if marginal costing is
used. The marginal costing rules may be used
only for sales, or commissions on sales, of
property if the 50-50 method is used.
Marginal costing cannot be used for
(1) leasing of property; (2) performance of
services; or (3) sales of export property that
(in the hands of a purchaser related under
section 954(d)(3) to the seller) give rise to
foreign base company sales income as
described in section 954(d) unless, for the
purchaser’s year in which it resells the
property, section 954(b)(3)(A) applies or the
income is under the exceptions in section
954(b)(4).
Line 10. The overall profit percentage may
be computed under an optional method. See
Regulations section 1.994-2(c)(2) for details.
Part I, Section B and Section C. Complete
Section B or Section C. If marginal costing is
used, you must complete Section B.
Line 22. If IC-DISC taxable income on a
sale is computed under the 4% method and
the IC-DISC chooses to apply the special rule
for transfer prices or commissions, check the
box in line 22 and attach a separate
statement showing the computation of the
limitation on IC-DISC taxable income
determined under the special rule and enter
the amount on line 22. Under the special rule,
a transfer price or commission will not be
considered to cause a loss for a related
supplier if the IC-DISC’s net profit on the sale
does not exceed the IC-DISC’s and related
supplier’s net profit percentage on all their
sales of the product or product line. See
Regulations section 1.994-1(e)(1)(ii) for details.
Reporting Part II and Part III amounts on
Form 1120-IC-DISC. If the computed
transfer price for sales, leases, or services
(Part II) or IC-DISC commission (Part III) is
entered on more than one line of Form
1120-IC-DISC, attach an explanation
indicating the portion of the total that is
applied to each line.
Schedule P (Form 1120-IC-DISC) (Rev. 9-2017)
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