Rev. April 2018
Form 8902 is a form used by corporations to report qualifying shipping activities and calculate alternative tax on those activities. The form requires information about the corporation, its subsidiaries, and the vessels included in the election for the electing group. It also asks for gross income from core qualifying activities, qualifying secondary activities, and qualifying incidental activities. Part III of the form requires information about the vessel, including its name, IMO number, USCG VIN number, flag, date flagged, type, and use. The form also has a section for notional shipping income, which is calculated by multiplying the dead weight tons by 0.004, subtracting net tons, and then multiplying the result by 0.002. The final step is to calculate the annual notional shipping income by summing all columns of Part IV. Form 8902 also includes a section for alternative tax on qualifying shipping activities, which is calculated based on the highest rate of tax specified in Section 11.
The Ownership Percentage refers to the percentage of ownership that a corporation has in a vessel. It is used to determine how much notional interest expense should be reported on Form 8902.
The two alternative tax rates for corporations are 35% and 21%. The higher rate is used if the corporation does not have a valid election in place, while the lower rate (21%) is used if a valid election is in place.
Form 8902, also known as the 'Notional Interest Expense' form, is used to calculate the amount of interest expense that should be reported on a taxpayer's return for a given year. It is typically used in situations where a taxpayer has entered into a leveraged transaction (such as issuing debt or equity), and it helps to ensure that the taxpayer reports enough interest expense to avoid being in a net income position.
For a leased vessel, the following columns should be completed: O (for owned), L (for leased), CL (for capitalized lease), and TC (if the vessel is time-chartered).
The purpose of Form 8902 is to calculate notional interest expense, which is used to determine a taxpayer's interest deduction limit. It is also used to ensure that a taxpayer does not have an indefinite postponement of their income.
Part V of Form 8902 is used to calculate alternative tax on qualifying shipping activities. It is an optional tax calculation that allows a corporation to pay a reduced amount of tax based on their qualifying shipping income.
Form 8902 is one of Tax forms that are documents used to report information related to taxes to the relevant tax authority. There are various types of tax forms, including federal, state, and local tax forms, which can vary depending on the taxpayer's circumstances and location.
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