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Additions to Qualified Deficit Rollover Balances for Tax Years 2011 and Later
For tax years 2011 and later, additions to the Qualified Deficits ending balances for rollover are only generated under the following conditions and limited to the Current Year Earnings and Profits Deficit:
- There is an overall loss in Current Year after Tax Earnings and Profits; and
- Current Year after Tax Earnings and Profits for the Qualified Activity (FTC Type/Subpart F Type/Qualified Activity Indicator = 1) is negative; and
- There is a Current Year after Tax Earnings and Profits Deficit for the Qualified Activity's basket/category (FTC Type/Subpart F type).
- Unutilized Qualified Deficit balances are aggregated into one source code with the same FTC Type/Subpart F Type/Qualified Activity Indicator for display on the Summary of Year End Tax Attributes report and for rollover to theQualified Deficitscreen in the subsequent year.
Additions to Qualified Deficit Rollover Balance(s)
For foreign entities with an overall deficit in Current Year after Tax Earnings and Profits, additions (increases) to a Qualified Deficit rollover balance(s) are determined as follows:
Step 1:
Determine the Current Year after Tax Earnings and Profits by basket/category (FTC Type/Subpart F Type).
- If Current Year after Tax Earnings and Profits for a basket/category group is equal to or greater than zero there will be no current year addition to the Qualified Deficit rollover balance in that basket/category.
- If the Current Year after Tax Earnings and Profits for a basket/category group is negative (i.e. less than zero) continue to Step 2.
Step 2:
Determine the total Current Year after Tax Earnings and Profits for the Qualified Activities within those basket/category groups with negative Current Year after Tax Earnings and Profits (calculated in Step 1.)
note
Qualified Activities are identified in the Source Code Definition screen by a Qualified Activity Indicator of 1 - Qualified Activity.
- If the total Current Year after Tax Earnings and Profits for the source codes with a Qualified Activity indicator of 1 - Qualified Activity is equal to or greater than zero there will be no current year addition to the Qualified Deficit rollover balance for that qualified activity.
- If the total Current Year after Tax Earnings and Profits for the source codes with a Qualified Activity Indicator of 1 - Qualified Activity is negative (i.e. less than zero) continue to Step 3.
Step 3:
Determine if the current year addition to the Qualified Deficit rollover balances needs to be limited to the overall deficit in Current Year after Tax Earnings and Profits.
- Sum the total Current Year after Tax Earnings and Profits for all qualified activity group(s) that have negative total After Tax Earnings and Profits, as determined in Step 2.
- If the sum is equal to or less than the overall Current Year after Tax Earnings and Profits Deficit go to Step 4.
- If the sum is greater than the overall Current Year after Tax Earnings and Profits Deficit go to Step 5.
Step 4:
Addition(s) to the Qualified Deficit rollover balance(s) is less than or equal to the overall Current Year Earnings and Profits Deficit.
For each Qualified Activity with negative total Current Year after Tax Earnings and Profits (as determined in step 2), a Qualified Deficit equal to that amount is added to the Qualified Deficit rollover balance.
Step 5:
Addition(s) to the Qualified Deficit rollover balance(s) is greater than the overall Current Year Earnings and Profits Deficit.
For each Qualified Activity with negative total Current Year after Tax Earnings and Profits (as determined in Step 2), calculate the portion of that amount that can be added to the Qualified Deficit rollover balance:
(a) Divide the negative total Current Year after Tax Earnings and Profits of the Qualified Activity (from Step 2), by the sum of the total Current Year after Tax Earnings and Profits for all qualified activities that have negative total Current Year after Tax Earnings and Profits as determined in Step 3.
(b) Multiply the ratio calculated in Step 5(a) by the overall deficit in Current Year after Tax Earnings and Profits to determine the addition to the Qualified Deficit rollover balance for each Qualified Activity.
Summary of Year End Tax Attribute Report and Qualified Deficit Balances for Rollover
After determining the additions to the Qualified Deficit balances and any current year utilization of prior Qualified Deficits, the balance(s) for rollover for each Qualified Activity is determined. For each Qualified Activity group (FTC Type | Subpart F Type | Qualified Activity Indicator of 1) one source code with matching combination of characteristics is used to display the aggregate ending balance on the Summary of Year End Tax Attributes Report and to rollover the balance to the Qualified Deficit screen in the following year.
- If there is a system defined source code with the same FTC Type | Subpart F Type | Qualified Activity Indicator settings as the source code(s) that have an ending Qualified Deficit balance, that system defined source code is used for the Summary of Year End Tax Attributes Report and rollover.
- If there is not a system defined source code with the same FTC Type |Subpart F Type | Qualified Activity Indicator as the source code(s) that have an ending Qualified Deficit balance
- If there is a user defined source code in the current year binder's Qualified Deficit screen with matching characteristics, that source code is used for the Summary of Year End Tax Attributes Report and rollover.
note
If there are multiple user defined source codes in the current year binder's Qualified Deficit screen with matching characteristics, the source code with the lowest source code number is used.
If there is not a user defined source code in the current year binder's
Qualified Deficit
screen with matching characteristics, the qualified activity source code with the lowest source code number giving rise to an addition in the qualified deficit balances is used.This article applies to:
- PRODUCT: ONESOURCE Income Tax
- Return type: international
- Subject: Roll forward / rollover