1120-FSC U. S. Income Tax Return of a Foreign Sales Corporation

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TREASURY/IRS AND OMB USE ONLY DRAFT
Form

1120-FSC

U.S. Income Tax Return of a Foreign Sales Corporation
For calendar year 20
or other tax year beginning
, 20
and ending
, 20
Go to www.irs.gov/Form1120FSC for instructions and the latest information.

(Rev. December 2025)
Department of the Treasury
Internal Revenue Service

OMB No. 1545-0123

C Employer identification number

A Foreign country or U.S.
territory of incorporation

Name

B Check type of election made:

Number and street

FSC
Small FSC
Enter the effective date of
the election:

,

D Date incorporated

Room or suite number

City or town

State

E Total assets (see instructions)

ZIP code

$
F Check applicable boxes:

(1)

(2)

Final return

(3)

Name change

(4)

Address change

Amended return

FSC Information
a Name

b Identification number

c Address (number, street, and room or suite no., city or town, state, ZIP code, or country)

d Total assets (corporations only)

e Percentage of voting stock of the
principal shareholder

$
h Foreign owner? (check one)

g Service Center where tax return is filed

f Tax year ends (month and year)

%

Yes

No

2 Parent-subsidiary controlled group. Is the FSC a subsidiary in a parent-subsidiary controlled group? . . . . . . .
Yes
No
If “Yes,” and the principal shareholder (described in 1 above) is not the common parent of the group, complete lines 2a through 2g below for the common parent (see instructions).
a Name of common parent
b Identification number
c Address (number, street, and room or suite no., city or town, state, ZIP code, or country)

d Total assets (consolidated, if applicable)

e Percentage of voting stock of the common parent

$
g Service Center where tax return is filed

f Tax year ends (month and year)
%

3 Administrative pricing rules
a Check the applicable box(es) to show the pricing rule(s) used to determine taxable income on transactions resulting in foreign trading gross receipts.
(1)
(2)
(3)
1.83% of foreign trading gross receipts
23% of combined taxable income
Marginal costing
(4)

(5)

Section 482 method

Transactions at arm’s length with unrelated supplier(s)

b If the FSC and the related supplier(s) meet the payment rules of Temporary Regulations section 1.925(a)-1T(b)(2)(ii) and elect to use the administrative
pricing rules, check here
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax and Payments (see instructions)
1

Total tax (Schedule J, line 6)

2

Payments:
Overpayment from prior year allowed as a credit
Current year estimated tax payments .

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2c (
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1

2a
2b

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Less refund of overpaid estimated tax
applied for on Form 4466
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e

Tax deposited with Form 7004 .

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2d
2e

f
g
h

Credit for Federal tax paid on fuels (attach Form 4136) . . . .
U.S. income tax paid or withheld at source (attach Form 1042-S) .
Add lines 2d through 2g . . . . . . . . . . . . .

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2f
2g
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2h

3
4
5

Estimated tax penalty. Check if Form 2220 is attached . . . . . . . . . .
Tax due. If line 2h is smaller than the total of lines 1 and 3, enter amount owed . . .
Overpayment. If line 2h is larger than the total of lines 1 and 3, enter amount overpaid

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5

6

Enter portion of line 5 you want: a Credited to next year’s estimated tax
d Type:
Checking
Routing number
Account number

c
e

Sign
Here

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) d Bal

b Refunded
Savings

6b

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true,
correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

Signature of officer

Paid
Preparer
Use Only

Preparer’s name

Date

Title

Preparer’s signature

Date

Firm’s name

Check
if
self-employed

PTIN

Firm’s EIN

Firm’s address

For Paperwork Reduction Act Notice, see separate instructions.

May the IRS discuss this return
with the preparer shown below
(see instructions)?
Yes No

Phone no.

Cat. No. 11531K

Form 1120-FSC (Rev. 12-2025) Created 8/8/25

DRAFT — DO NOT FILE

DRAFT — DO NOT FILE

1 Principal shareholder. Complete for the shareholder that was the principal shareholder at the beginning of the FSC’s tax year. If two or more shareholders
own equal amounts of stock, complete for the shareholder that has the same tax year as the FSC (see instructions).

TREASURY/IRS AND OMB USE ONLY DRAFT
Page 2

Form 1120-FSC (Rev. 12-2025)

Schedule A

Cost of Goods Sold Related to Foreign Trading Gross Receipts (see instructions)
(b) Not using administrative pricing rules

Inventory at beginning of year
Purchases . . . . . .

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2

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5

Cost of labor . . . . . . . . . . .
Additional section 263A costs (attach schedule) .
Other costs (attach schedule) . . . . . .

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Total. Add lines 1 through 5 .
Inventory at end of year . .

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6
7

8

Cost of goods sold. Subtract line 7 from line 6. Enter here and on line
7 of Schedule B. Small FSCs, see instructions for Schedule A . . .

9a
b

Check all methods used for valuing closing inventory:
(1)
Other (Specify method used and attach explanation.)
(3)
Check if there was a writedown of subnormal goods
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c

Check if the LIFO inventory method was adopted this tax year for any goods. (If checked, attach Form 970.) .

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If the LIFO inventory method was used for this tax year, enter percentage (or amounts) of closing inventory
computed under LIFO
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e
f

If property is produced or acquired for resale, do the rules of section 263A apply to the FSC? . . . . .
Was there any change in determining quantities, cost, or valuations between opening and closing inventory?
If “Yes,” attach explanation . . . . . . . . . . . . . . . . . . . . . . . . .

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9d
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Yes

No

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Yes

No

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(2)

Cost
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Lower of cost or market
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Additional Information (see instructions). Note: Small FSCs, complete lines 1 through 8f only.
1
a
b
c

See the instructions and enter the FSC’s:

2

Enter the amount of tax-exempt interest received
or accrued during the tax year $

3

At any time during the tax year was the FSC engaged
in a trade or business in the United States?
. .
During the tax year, did the FSC own any foreign
entity that was disregarded as an entity separate
from its owner under Regulations sections
301.7701-2 and 301.7701-3? . . . . . .
If “Yes,” attach a statement listing the name,
country under whose laws the entity was organized,
and EIN (if any) of each such entity.

4

5

Yes

No

f

Business activity code no.
Business activity
Product or service

g

9

7

Enter the available NOL carryover from prior tax
years. (Do not reduce it by any deduction on
Schedule B, Part II, line 19a.) $

8

No

Did all formally convened meetings of the board of
directors and of the shareholders occur outside the U.S.?

b (1) Were all cash dividends, legal and accounting fees, salaries
of officers, and salaries or fees of members of the board of
directors disbursed from bank accounts maintained
outside the United States? (If “Yes,” these accounts are
considered to be the FSC’s principal bank accounts.) .
(2) At all times during the tax year, did the FSC
maintain its principal bank accounts in a qualifying
foreign country or U.S. territory (see instructions)?

During the tax year, did the FSC own at least a 10%
interest, directly or indirectly, in any foreign
partnership? . . . . . . . . . . .
If the FSC has an NOL for the tax year and is
electing to forego the carryback period, check here
(see instructions) . . . . . . . . .

Yes

Foreign management rules (does not apply to small FSCs):
a

Name of bank(s)
Account number(s)
Foreign economic process rules (does not apply to small FSCs):

If “Yes,” see the instructions for required attachment.
6

Small FSCs only: Check the applicable box if during the tax
year the small FSC was a member of a controlled group of
corporations that included a
DISC or a
FSC.
Check the applicable box if during the tax year the FSC
was a member of a controlled group of corporations
that included a
DISC or a
FSC.

10
a

b

FSC qualification rules (see instructions):

Check the applicable box if the FSC is electing to group transactions
from its sales activities (Regulations section 1.924(d)-1(c)(5)):
Customer grouping

Contract grouping

Product or product line grouping

Product or product line subgroupings

Check the applicable box(es) to indicate how the FSC met the
foreign direct costs requirement (see instructions):

a

Enter the largest number of shareholders the FSC had
at any time during the tax year

The FSC (or any person under contract with the FSC) met the
50% test of section 924(d)(1).

b

Did the FSC have any preferred stock outstanding
at any time during the tax year? . . . . . .

c

During the tax year, did the FSC maintain an office
in a qualifying foreign country or U.S. territory in
which a complete set of books and records was
maintained? . . . . . . . . . . .

The FSC (or any person under contract with the FSC) met the
alternative 85% test of section 924(d)(2). Check to indicate the
subparagraphs of section 924(e) for which this alternative test
was met:
c

During the tax year did the FSC maintain the
records required under section 6001 at a location
within the U.S.? . . . . . . . . . .

If box (e)(5) is checked, enter which of the five methods listed in
Regulations section 1.924(e)-1(e)(1)(i) through (v) describes how the
FSC bears the economic risk of nonpayment

d

Check the applicable box if the FSC is electing to group its foreign
direct costs on one of the following (Regulations section 1.924(d)-1(e)):

d

e

At all times during the tax year, did the FSC have at
least one non-U.S. resident on its board of directors?

(e)(1)

Customer grouping

(e)(2)

(e)(3)

Contract grouping

(e)(4)

(e)(5)

Product or product line grouping

Form 1120-FSC (Rev. 12-2025)

DRAFT — DO NOT FILE

DRAFT — DO NOT FILE

(a) Using administrative pricing rules

1
2

TREASURY/IRS AND OMB USE ONLY DRAFT
Page 3

Form 1120-FSC (Rev. 12-2025)

Schedule B

Taxable Income or (Loss) (see instructions)
Part I—Net Income Attributable to Nonexempt Foreign Trade Income
(a) Using administrative
pricing rules

1
2

Sale, exchange, or other disposition of export property. (Enter 50% of military property
sales. Include the other 50% on Schedule F, line 1.) . . . . . . . . . . .
Lease or rental of export property for use outside the United States . . . . . .

3

Services related and subsidiary to:
a

b
4

1
2

Sale, exchange, or other disposition of export property. (Enter 50% of services related
to the sale or other disposition of military property. Include the other 50% on Schedule
F, line 1.) . . . . . . . . . . . . . . . . . . . . . . .
Lease or rental of export property . . . . . . . . . . . . . . . .
Engineering or architectural services for construction projects outside the U.S.
Managerial services for an unrelated FSC or IC-DISC (see instructions) .
Total foreign trading gross receipts. Add lines 1 through 5 . . . .
Small FSCs: Complete lines 6b through 6h.

b
c

Small FSC limitation (section 924(b)(2)(B)) . .
Controlled group member’s share of line 6b .

d

Enter 1. (Short tax year: Divide the number of days in the short
tax year by the number of days in the full tax year. Enter as a
decimal less than 1.00000.) . . . . . . . . . .

e

Multiply line 6b or line 6c (whichever applies) by line 6d

f

Total of line 6a, columns (a) and (b) .

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6a

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$5,000,000 00

6b
6c

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3a
3b
4

DRAFT — DO NOT FILE

DRAFT — DO NOT FILE

5
6a

(b) Not using administrative
pricing rules

6d
6e
6f

.

Note: See the instructions for line 6f if commission income is
included on line 6a.
g
h

Enter the smaller of line 6e or line 6f. Note: If line 6f exceeds line
6e, enter the excess on line 7 of Schedule F

6g
Allocate the amount from line 6g to columns (a) and (b) (see instructions)

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6h

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7

Cost of goods sold (Schedule A, line 8). (Small FSCs, enter only the part of cost of
goods sold from the receipts on line 6h above. See instructions for Schedule A.) . .

8

Foreign trade income. Subtract line 7 from line 6a or line 6h (whichever applies)

7
8

9a
b
10

Exemption percentage from Schedule E, line 3d .
Exemption percentage from Schedule E, line 2d .

11
12

Nonexempt foreign trade income. Subtract line 10 from line 8

13
14

Net income attributable to nonexempt foreign trade income. Subtract line 12 from line 11
Net income attributable to nonexempt foreign trade income from Schedule F, line 6 .

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14

15

Total net income attributable to nonexempt foreign trade income. Add lines 13
and 14 . . . . . . . . . . . . . . . . . . . . . . . .

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9b

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Exempt foreign trade income. Multiply line 8, column (a) by line 9a and line 8,
column (b) by line 9b . . . . . . . . . . . . . . . . . . . .
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%
%

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Deductions attributable to nonexempt foreign trade income. Enter amount from
Schedule G, line 18 . . . . . . . . . . . . . . . . . . . .

Part II—Taxable Income or (Loss)
16

Taxable income from foreign trade income. Enter total of line 15, columns (a) and (b), minus any nontaxable
income included in line 15, column (b). Attach a schedule that shows the computation of the taxable and
nontaxable income included on line 15, column (b) . . . . . . . . . . . . . . . . . .

17
18

Taxable nonforeign trade income from Schedule F, line 19 .

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Taxable income or (loss) before net operating loss
and 17 . . . . . . . . . . . . .
Net operating loss deduction (attach schedule) .
Dividends-received deduction (attach schedule) .
Add lines 19a and 19b . . . . . . . .

and dividends-received deduction. Add lines 16
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19a
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19b
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19a
b
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deduction
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Taxable income or (loss). Subtract line 19c from line 18. (See instructions for Schedule J to figure the tax on
this income.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16
17
18

19c
20

Form 1120-FSC (Rev. 12-2025)

TREASURY/IRS AND OMB USE ONLY DRAFT
Page 4

Form 1120-FSC (Rev. 12-2025)

Schedule E

Exemption Percentages Used in Figuring Exempt Foreign Trade Income (see instructions)

Note: If all shareholders of the FSC are C corporations, enter .30000 on line 2d and .65217 on line 3d and skip all other lines.
If all shareholders of the FSC are other than C corporations, enter .32000 on line 2d and .69565 on line 3d and skip all other lines.
1

Percentage (round to at least five decimal places) of voting stock owned by shareholders that are C
corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

2
a

Exemption percentage for foreign trade income determined by not using the administrative pricing rules:
Difference between section 923(a)(2) and section 291(a)(4)(A) percentage
. . . . . . . . . .

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2a

.02000

b

Section 923(a)(2) percentage

.32000

c

Multiply line 1 by line 2a .

d

Exemption percentage. Subtract line 2c from line 2b. Enter here and on Schedule B, line 9b, and on
Schedule G, line 16b
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3

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2b

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2c
2d

Exemption percentage for foreign trade income determined using administrative pricing rules:
a

Difference between section 923(a)(3) fraction and section 291(a)(4)(B) fraction (16/23–15/23 = 1/23) shown as a
decimal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3a

.04348

b

Section 923(a)(3) fraction (16/23) shown as a decimal

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3b

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c

Multiply line 1 by line 3a .

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3c

d

Exemption percentage. Subtract line 3c from line 3b. Enter here and on Schedule B, line 9a, and on Schedule
G, line 16a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule F

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3d

Net Income From Nonexempt Foreign Trade Income and Taxable Nonforeign Trade Income
(see instructions)
Part I—Net Income From Nonexempt Foreign Trade Income
(a) Using administrative
pricing rules

1

Enter 50% of total receipts from the sale, exchange, or other disposition of military
property and related services . . . . . . . . . . . . . . . . .

1

2
3
4

International boycott income
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Illegal bribes and other payments
Total. Add lines 1, 2, and 3 . .

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3
4

5

Cost of goods sold and other costs related to above income (attach schedule) .

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6

Net income from nonexempt foreign trade income. Subtract line 5 from line 4.
Enter here and on Schedule B, line 14, columns (a) and (b) . . . . . . . . .

6

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(b) Not using administrative
pricing rules

Part II—Taxable Nonforeign Trade Income
7

Small FSCs: If line 6f, Schedule B, is greater than line 6e, Schedule B, enter the excess here

8

Interest .

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Dividends (attach schedule—see instructions)

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Carrying charges .

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Royalties . . . . .
Other investment income

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12

13

Receipts excluded under section 924(f) on the basis of use, subsidized receipts, and receipts from related
parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

Income from excluded property under sections 927(a)(2) and (3)

15

Income from transactions that did not meet the Foreign economic process rules (see instructions). (See
Foreign Trading Gross Receipts in the instructions.) . . . . . . . . . . . . . . . . .

16
17

Other income . . . . .
Total. Add lines 7 through 16

18

Enter deductions allocated or apportioned to line 17 income. (Attach schedule. Small FSCs also include the
cost of goods sold deduction attributable to the amount entered on line 7 above.) . . . . . . . . .

19

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Taxable nonforeign trade income. Subtract line 18 from line 17. Enter here and on Schedule B, line 17

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15
16
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18
19

Form 1120-FSC (Rev. 12-2025)

DRAFT — DO NOT FILE

DRAFT — DO NOT FILE

.

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TREASURY/IRS AND OMB USE ONLY DRAFT
Page 5

Form 1120-FSC (Rev. 12-2025)

Schedule G

(a) Using administrative
pricing rules

a

Foreign direct costs described in section 924(e):
Advertising and sales promotion . . . . .

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b
c

Certain processing and arranging costs
Certain transportation costs . . . .

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1a
1b
1c

d
e
f

Certain determination and transmittal costs . . .
Assumption of credit risk
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Total foreign direct costs. Add lines 1a through 1e

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1d
1e
1f

2
3

Advertising .
Interest . .

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2
3

4

Depreciation from Form 4562 (less any depreciation claimed elsewhere on this return)
(attach Form 4562) . . . . . . . . . . . . . . . . . . . .

5
6

Salaries and wages
Rents . . . .

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4
5
6

7
8
9

Sales commissions
Warehousing . .
Freight . . . .

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7
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9

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11
12

Compensation of officers
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Bad debts . . . . . . . .
Pension, profit-sharing, etc., plans .

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10
11
12

13
14
15

Employee benefit programs . . . . .
Other deductions (attach list)
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Total deductions. Add lines 1f through 14

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13
14
15

16a
b

Exemption percentage from Schedule E, line 3d .
Exemption percentage from Schedule E, line 2d .

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16a
16b

17

Deductions attributable to exempt foreign trade income. Multiply line 15, column (a) by
line 16a and enter the result in column (a). Multiply line 15, column (b) by line 16b and
enter the result in column (b)
. . . . . . . . . . . . . . . . .

17

Deductions allocated or apportioned to nonexempt foreign trade income other
than foreign trade income reported on Schedule F. Subtract line 17 from line 15.
Enter here and on Schedule B, line 12, columns (a) and (b) . . . . . . . . .

18

18

Schedule J

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Tax Computation (see instructions)

(b) Not using administrative
pricing rules

%
%

1

Check if the FSC is a member of a controlled group (see section 927(d)(4)) (attach Schedule O (Form 1120))

2

Income tax

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2

3

Base erosion minimum tax amount (attach Form 8991) .

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3

4

Add lines 2 and 3 .

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4

5

Foreign tax credit (attach Form 1118) .

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5

6

Total tax. Subtract line 5 from line 4. Enter here and on line 1, page 1

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6

Form 1120-FSC (Rev. 12-2025)

DRAFT — DO NOT FILE

DRAFT — DO NOT FILE

1

Deductions Allocated or Apportioned to Foreign Trade Income Other Than Foreign Trade Income
Reported on Schedule F (See instructions for limitations on deductions before completing lines 1 through 14.)

TREASURY/IRS AND OMB USE ONLY DRAFT
Page 6

Form 1120-FSC (Rev. 12-2025)

Schedule L

Balance Sheets per Books

Beginning of tax year
(a)

Cash
. . . . . . . . . .
Trade notes and accounts receivable .
Commissions receivable . . . . .
Less allowance for bad debts . . .
Inventories . . . . . . . . .
U.S. government obligations
. . .
Tax-exempt securities (see instructions)
Other current assets (attach schedule) .
Loans to shareholders . . . . .
Mortgage and real estate loans . . .
Other investments (attach schedule) .
Buildings and other depreciable assets
Less accumulated depreciation . . .
Depletable assets . . . . . . .
Less accumulated depletion . . . .
Land (net of any amortization) . . .
Intangible assets (amortizable only)
.
Less accumulated amortization . . .
Other assets (attach schedule) . . .
Total assets
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(b)

(c)

(d)

(

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(

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(

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(

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(

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(

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(

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(

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DRAFT — DO NOT FILE

DRAFT — DO NOT FILE

Assets
1
2a
b
c
3
4
5
6
7
8
9
10a
b
11a
b
12
13a
b
14
15

End of tax year

Liabilities and Shareholders’ Equity
16
17
18
19
20
21
22
23
24
25
26
27
28
29

Accounts payable . . . . . . . .
Mtges., notes, bonds payable in less than 1 year
Transfer prices payable . . . . . .
Other current liabilities (attach schedule) .
Loans from shareholders . . . . . .
Mtges., notes, bonds payable in 1 year or more
Other liabilities (attach schedule) . . .
Capital stock . . . . . . . . .
Additional paid-in capital . . . . . .
Retained earnings—Appropriated (attach schedule)
Retained earnings—Unappropriated . .
Adjustments to shareholders’ equity (attach schedule)
Less cost of treasury stock . . . . .
Total liabilities and shareholders’ equity .

Schedule M-1

(

)

(

Reconciliation of Income (Loss) per Books With Income per Return (see instructions)
7

1
2

Net income (loss) per books .
Federal income tax per books

3
4

Excess of capital losses over capital gains

a

Tax-exempt interest $

Income subject to tax not recorded on
books this year (itemize):

b

Exempt foreign trade
$
income
. . .

5

Expenses recorded on books this year not
deducted on this return (itemize):
Depreciation

b

Deductions attributable to
exempt foreign trade income $

c

Travel and entertainment

6

a

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Add lines 1 through 5 .

Schedule M-2

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Income recorded on books this year
not included on this return (itemize):

8

9
10

$
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Deductions on this return not charged
against book income this year (itemize):
Depreciation .

$

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Add lines 7 and 8

$

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Taxable income (line 18, Schedule B)—
line 6 less line 9 . . . . . . .

Analysis of Unappropriated Retained Earnings per Books (Line 26, Schedule L)

1
2

Balance at beginning of year
Net income (loss) per books .

3

Other increases (itemize):

4

)

Add lines 1, 2, and 3 .

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5

Distributions:

a
b

6
7
8

c Property . . .
Other decreases (itemize):
Add lines 5 and 6
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Balance at end of year (line 4 less line 7)

Cash .
Stock .

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Form 1120-FSC (Rev. 12-2025)