Instructions for Shareholder
Section references are to the Internal Revenue
Code.
Purpose of forms. Copy B of Schedule K
(Form 1120-IC-DISC) reports an actual or
deemed distribution from an IC-DISC, former
IC-DISC, or former DISC. It also reports
deferred DISC income from an IC-DISC.
Keep it for your records; do not file it with
your income tax return.
Part I—Taxable Distributions
Report as distributions from an IC-DISC:
1. Deemed and actual taxable distributions;
and
2. Gain, to the extent of accumulated
IC-DISC income, on the sale of stock (see
Disposing of IC-DISC Stock below).
Line 1—Deemed distributions. You are
treated as having received deemed
distributions (line 1c) as of the last day of the
IC-DISC tax year. You must pay tax on the
distributions in your tax year that includes that
date.
Line 2—Actual taxable distributions. You
must pay tax on actual taxable distributions in
the year of receipt.
Line 4. Line 4a shows the part of the total
taxable distribution on line 3 that qualifies for
the 50% or 65% dividends-received
deduction under section 243. Line 4b shows
the part that does not qualify for the
deduction.
Line 5. If you are an individual, partnership,
S corporation, estate, or trust, line 5 shows
the amount of line 3 distributions taxable to
you as a dividend.
For a tax-exempt entity, treat any deemed
distribution or actual distribution of previously
untaxed income as derived from the conduct
of an unrelated trade or business.
Disposing of IC-DISC stock. If you disposed
of stock in an IC-DISC, former IC-DISC, or
former DISC, you may need to include all or
part of the gain in your income. The gain,
reported as a dividend under section 995(c), is
included to the extent of accumulated
IC-DISC income attributable to the stock
while you held it (line 9). This dividend is not
eligible for the section 243 deduction.
For a tax-exempt entity, treat the gain
under section 995(c) as derived from the
conduct of an unrelated trade or business.
Foreign shareholders treat all gains on the
disposition of stock in an IC-DISC, former
IC-DISC, or former DISC, and all distributions
from accumulated IC-DISC income or
accumulated pre-1985 DISC income,
including deemed distributions, as effectively
connected with the conduct of a trade or
business through a permanent establishment
within the United States. See section 996(g)
for details.
Acquiring IC-DISC stock. If you acquired
stock in an IC-DISC and subsequently
received a distribution with respect to that
stock, you may be able to treat part of that
distribution as a nontaxable distribution. See
section 996(d) for details.
Part II—Nontaxable Distributions
Actual distributions from previously taxed
income and accumulated pre-1985 DISC
income are generally not taxable to the extent
of your basis in the stock for which the
distribution was made. Except for
distributions of accumulated IC-DISC income
and of earnings and profits from the time
before the corporation became an IC-DISC,
actual distributions are not taxable to the
extent of your basis in the stock for which the
distribution was made. Treat distributions in
excess of your basis as a gain from the sale
or exchange of property. See section 996(e).
Part III—Other Information
Line 10—Deferred DISC income. Line 10
shows your share of the IC-DISC’s deferred
income for the year. Section 995(f) imposes
an interest charge on the additional tax you
would pay if you included this deferred
income in your income for your tax year that
ends with or includes the IC-DISC’s tax year
end shown on Schedule K. Complete Form
8404, Interest Charge on DISC-Related
Deferred Tax Liability, to figure the interest
charge.
Future developments. For the latest
information about developments related to
Schedule K (Form 1120-IC-DISC) and its
instructions, such as legislation enacted after
they were published, go to www.irs.gov/
Form1120icdisc.
Schedule K (Form 1120-IC-DISC) (Rev. 11-2018)