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Subpart F

Previously Taxed Income Exchange Gain/Loss Calculation for Tax Years 2010 and Later

For tax years 2010 and later, ONESOURCE Income Tax runs the Previously Taxed Income (PTI) Exchange Gain/Loss calculation using either the existing by basket or a new by basket and 959(c) category method. The state of the new
Use Separate Category Treatment
 box (checked or unchecked) on a top consolidation binder's
FTC Defaults
 screen determines the calculation approach for tracking US Dollar Basis in PTI and any gain/loss on distributions.
We redesigned the
PTI in US$
 screen to accommodate the by category information. The following information applies to both Pre-87 and Post-86 PTI.

FTC Defaults

The
FTC Defaults
 screen in a tax year 2010 top consolidation binder contains a new option, Use Separate Category Treatment. When you select this, the system will track additions and reductions to the U.S. Dollar basis of PTI by the separate 959(c) categories within a basket. The system default leaves the option unchecked; which means it uses the existing by basket method which combines 959(c) PTI categories for purposes of the gain/loss calculation.

PTI in US$

PTI Functional currency amounts from the
Summary
 tab of the
Post-86 Earnings and Profits
 screen (less any Adjustments made in the current year) flow to the Beginning Balance Functional Currency column on the
Post-86
 tab. Own and Sub amounts are summarized by E&P category: 959(c)(1)(A), 959(c)(1)(B), and 959(c)(2). Amounts entered in the
Adjustments
 tab of the
Post-86 Earnings and Profits
screen for the current year (
Adjustments Made in Current Year
 box is checked) flow to the Current Year Adjustment Functional Currency column.
  1. Enter the US Dollar basis associated with each category of E&P.
  2. Click the "+/-" next to the basket name to expand or collapse the category list.
A new Previously Taxed Income (Post-86) report is available from the data entry screen and the
International Data Entry Reports | Previously Taxed Income
folder.

Pre-87

PTI Functional currency amounts from the
Pre-87 EP and Taxes
 tab of the
Pre-87 E&P and Taxes
 screen flow to the Beginning Balance Functional Currency column on Pre-87 tab. Own and Sub amounts are summarized by E&P category: 959(c)(1) and 959(c)(2). Amounts entered in the
Pre-87 Adjustments
 tab of the
Pre-87 E&P and Taxes
 screen flow to the Current Year Adjustment Functional Currency column.
  1. Enter the US Dollar basis associated with each category of E&P.
  2. Click the "+/-" next to the basket name to expand or collapse the category list.

By Basket Method

The "by basket" method is used for the PTI Exchange Gain/Loss calculation in tax year 2009 and earlier binders. Under this method, beginning balances and current year additions or reductions for all 959(c) PTI categories are summarized by basket. This is the default method of tax year 2010 binders.

Post-86 and Pre-87 PTI Exchange Gain/Loss Reports

Post-86 and Pre-87 PTI Exchange Gain/Loss reports include a breakdown by 959(c) category of the functional currency and US Dollar Basis amounts that rollover to the subsequent year. However, since the by basket method does track additions and reductions at a separate category level, the ending US Dollar amount for each basket is prorated to the individual categories based on the functional currency values.
As stated earlier, if the calculation is executed on the by basket method, the system uses the basket sum to determine the gain/loss - the amount allocated to each individual category does not influence the calculation result.

Separate Category Method

The "by basket and 959(c) category" or Separate Category method is available for the PTI Exchange Gain/Loss calculation in tax year 2010 and later binders. Under this method, beginning balances and current year additions or reductions are tracked by individual 959(c) PTI categories within a basket. When a dividend is paid to a US Shareholder, the PTI exchange gain/loss calculation refers to the US Dollar basis of the specific category(s) of earnings depleted and the spot rate in effect on the date the distribution to determine the gain/loss to be recognized.

Reports

Under this method, the Post-86 and Pre-87 PTI Exchange Gain/Loss reports have separate columns for each PTI category. The amounts on the End of Year Balance for Rollover lines in the functional currency and US Dollar Basis sections identify the amounts that rollover to the subsequent year.

This article applies to:

  • Product: ONESOURCE Income Tax
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