Instructions For Schedule P (Form 1120-F) - 2009

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Department of the Treasury
Internal Revenue Service
Instructions for Schedule P
(Form 1120-F)
List of Foreign Partner Interests in Partnerships
share of partnership net income or loss
interests. A foreign corporation that has
Section references are to the Internal
from a partnership that is not engaged in
ECI reported to it from a partnership is not
Revenue Code unless otherwise noted.
trade or business within the United States
required to file Schedule P (Form 1120-F)
as ECI with another trade or business of
if all of the corporation’s business profits
General Instructions
the corporation, the corporation’s entire
including its ECI from the partnership are
distributive share of items of income and
not attributable to a U.S. permanent
expense must also be reconciled between
establishment pursuant to an applicable
Purpose of Schedule
ECI and non-ECI and reported on
income tax treaty and the corporation files
Schedule P (Form 1120-F) is used to
Schedule P.
a protective tax return under Regulations
identify and reconcile the foreign
section 1.882-4(a)(3)(vi).
A foreign corporation may be engaged
corporation’s directly held partnership
Protective election on Schedule P.
in a trade or business within the United
interests with the distributive shares of
See Protective election on page 4 for
States either directly through its own
partnership effectively connected income
instructions for making a protective
non-partnership related activities or
and the foreign corporation’s effectively
partnership outside basis apportionment
indirectly through the activities of one or
connected outside tax basis in each
election with a protective return.
more partnerships in which the
interest. Part I is used to identify all
corporation owns a partnership interest.
partnership interests the foreign
When and Where To File
In addition, if a corporation owns an
corporation directly owns that give rise to
interest in a partnership that is itself
Attach Schedule P (Form 1120-F) to the
a distributive share of income or loss
deemed engaged in trade or business
foreign corporation’s Form 1120-F income
effectively connected with a trade or
within the United States as a result of the
tax return. See the instructions for Form
business within the United States (“ECI”)
partnership’s own directly or indirectly
1120-F for the time, place, and manner
of the foreign corporation. Part II is used
owned interest in another partnership
for filing the foreign corporation’s income
to reconcile the foreign corporation’s
(“lower tier partnership”), the corporation
tax return.
distributive share of ECI and allocable
is also treated as engaged in trade or
expenses with the total income and
Other Forms and
business as a result of its direct and
expenses reported to it on Schedule K-1
indirect ownership of such interests. See
(Form 1065). Part III is used as follows:
Schedules Related to
section 875(1). The foreign corporation’s
The corporation’s outside basis in its
distributive share of income from a
Schedule P
directly-held partnership interests that
domestic partnership and certain foreign
include ECI in the corporation’s
Form 1120-F, Section II. Gross ECI
partnership interests is reported to the
distributive share is apportioned between
includible in the corporation’s distributive
partner on Schedule K-1 (Form 1065),
ECI and non-ECI under Regulations
share is reportable on Form 1120-F,
together with the corporation’s allocable
section 1.884-1(d)(3) to determine the
Section II, lines 3 through 10, in the
share of partnership liabilities. If the
average value treated as a U.S. asset for
applicable category of income. Expenses
partnership is engaged in trade or
interest expense allocation purposes
(other than interest expense) that are
business directly or indirectly through a
under Regulations section 1.882-5. The
deductions allocated and apportioned on
lower-tier partnership and has ECI to
apportionment of the outside basis to ECI
Schedule P (Form 1120-F) to the
report in the distributive share of a foreign
as of the current and prior tax year end is
partner’s ECI are also reported on Form
partner, it is responsible for withholding
also taken into account in determining the
1120-F, Section II.
quarterly estimated taxes on the foreign
average apportioned value included in the
partner’s distributive share of estimated
Schedule I (Form 1120-F). Interest
corporation’s U.S. assets for purposes of
ECI under section 1446 and reporting the
expense reportable on Schedule P is
computing the branch profits tax. The
amounts to the foreign partner for the tax
includible in the corporation’s interest
U.S. assets, and partner share of booked
year on Form 8805, Foreign Partner’s
expense allocation computation under
liabilities and interest expense of the
Information Statement of Section 1446
Regulations section 1.882-5. The
partnership are also coordinated with the
Withholding Tax. If a partnership is
corporation’s distributive share of interest
interest expense allocation computations
required to report ECI on Form 8805 to a
expense that is directly allocable to
filed with Form 1120-F on Schedule I
foreign corporate partner, the corporation
effectively connected income under
(Form 1120-F).
must reconcile its entire distributive share
Regulations section 1.882-5(a)(1)(ii)(B) is
Who Must Complete
of income and expenses reported on
reported on Schedule P, line 14b, and on
Schedule K-1 (Form 1065) from such
Schedule I (Form 1120-F), line 22. The
Schedule P
partnership on Schedule P (Form
corporation’s distributive share of interest
1120-F).
A foreign corporation that is directly or
expense that is included in the taxpayer’s
indirectly engaged in trade or business
three-step allocation formula is reported
Exceptions from Filing
within the United States is required to file
on Schedule P, line 14c, and the total
Schedule P (Form 1120-F) for all
from line 14c is reported on Schedule I
Schedule P
directly-owned partnership interests that
(Form 1120-F), line 9, column (b). The
have ECI included in its distributive share
Do not file Schedule P if the corporation
average value of partnership liabilities the
of income reported to the corporation on
does not have any ECI with respect to its
corporation includes in the determination
Schedule K-1 (Form 1065). If the foreign
combined distributive shares of income
of its outside basis for which the
corporation treats any of its distributive
from all directly owned partnership
corporation also receives a distributive
Cat. No. 50608W

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