Instructions For Schedule P (Form 1120-F) - 2009 (Page 2 of 4) in pdf

share of interest expense is reported on

also owns a direct interest in the

non-interest expenses from Schedule K-1

Schedule P (Form 1120-F), line 17 (Total

lower-tier partnership. The corporation’s

(Form 1065).

•

column), and on Schedule I (Form

distributive share of ECI earned through

Schedule P, lines 10 and 11: Total

1120-F), line 8, column (b). The average

lower-tier partnership interests is

gross income and total gross ECI from

value of partnership liabilities reported on

includable on the Schedule K-1 (Form

Schedule K-1 (Form 1065).

•

Schedule P (Form 1120-F) and Schedule

1065) reportable to the corporation by the

Schedule P, lines 12 through 14:

I (Form 1120-F) does not include the

partnership in which the corporation owns

Reconciliation of total interest expense

partnership liabilities that give rise to

a direct interest, whether or not the

from Schedule K-1 (Form 1065).

directly allocable interest expense under

directly owned partnership is itself directly

Note. If you are reconciling the foreign

Regulations section 1.882-5(a)(1)(ii)(B),

engaged in trade or business within the

corporation’s distributive share of ECI and

reportable on Schedule P (Form 1120-F),

United States.

allocable expenses with the total income

line 14b. The average value of the

and expenses reported to the corporation

Schedule P (Form 1120-F)

partner’s outside basis apportioned to ECI

on Schedule K-1 (Form 1065-B), the

accommodates reporting for four

is reported on Schedule P (Form 1120-F),

relevant information will be located in box

directly-owned partnership interests.

line 19, and as a U.S. asset on Schedule I

9 of the Schedule K-1 (Form 1065-B) or in

Complete a separate line in Part I, and

(Form 1120-F), line 5, column (b).

an attachment for box 9. Specifically, the

the corresponding columns in Parts II and

lines on Schedule K-1 (Form 1065) noted

Schedule H (Form 1120-F), Part I, Part

III, for each directly owned partnership

throughout these instructions correspond

II, and Part IV. The corporation’s

interest. If the corporation directly owns

to the box 9 information on Schedule K-1

distributive share of non-interest

more than four partnership interests

(Form 1065-B) as follows:

expenses included on Schedule P, lines 4

which are required to be reported on

•

Schedule K-1 (Form 1065), line 1

and 5 is also included in the corporation’s

Schedule P (Form 1120-F), report the

corresponds to the information reported

overall allocation and apportionment of

required information for those additional

on Schedule K-1 (Form 1065-B), box 9

expenses on Schedule H (Form 1120-F),

partnership interests on attached

using code A1.

Part IV, lines 38a through 41, if the

separate sheets using the same size and

•

Schedule K-1 (Form 1065), line 2

partnership books constitute set(s) of

format as shown on the schedule. Also, in

corresponds to the information reported

books that are also reportable on Form

the “Totals” column of Parts II and III, for

on Schedule K-1 (Form 1065-B), box 9

1120-F, Schedule L or the partnership

each line item, enter the sum for all

using code B1.

interest is recorded on Schedule L books

directly owned partnership interests,

•

Schedule K-1 (Form 1065), line 3

of the corporation’s own separate trade or

including those interests reported on

corresponds to the information reported

business within the United States. If the

attached sheets.

on Schedule K-1 (Form 1065-B), box 9

partnership interest is not reported on

Entities treated as partnerships for tax

using code C1.

Schedule L, the distributive share of

purposes include Limited Liability

Also note that other interest expense

partnership expenses allocable to the

Partnerships (LLPs) and Limited Liability

reported on Schedule K-1 (Form 1065),

corporation’s distributive share of ECI is

Companies (LLCs) that are not classified

lines 13 and 18 corresponds to the

included on Schedule H (Form 1120-F) in

as corporations for federal income tax

information reported on Schedule K-1

Parts I and II. See the instructions for

purposes. Do not include any interest in

(Form 1065-B), box 9 using code M-2

Schedule H (Form 1120-F).

any entity treated as a disregarded entity

(nondeductible expenses) and/or code U

Schedule M-3 (Form 1120-F), Part II.

as described under Regulations section

(other information).

The corporation’s distributive share of

301.7701-2(c)(2).

partnership income may be reported on

Lines 1 Through 5. ECI and

Column (d). With respect to each

Schedule M-3 (Form 1120-F), Part II, line

Non-ECI Reconciliation of

partnership interest, check the “Yes” box

9 (domestic partnerships) and line 10

if the foreign corporation’s distributive

Income and Non-Interest

(foreign partnerships) in accordance with

share is ECI, or treated as ECI, in whole

Expenses

the corporation’s reporting on its

or in part, with a U.S. trade or business

applicable financial statements for

Line 1. Enter on line 1 the combined

determined under section 875.

Schedule M-3 (Form 1120-F) purposes.

total income (loss) from Schedule K-1

Accordingly, with respect to each

See the instructions for Schedule M-3

(Form 1065), Part III, line 1, Ordinary

partnership interest, check the “Yes” box

(Form 1120-F), Part II, lines 9 and 10 for

business income (loss); line 2, Net rental

if the foreign corporation is engaged in a

determining the applicable financial

real estate income (loss); and line 3,

U.S. trade or business indirectly through

statement.

Other net rental income (loss). Enter the

the activities of the partnership. Check the

combined amount in the column in Part II

“No” box if the foreign corporation has

Part I – List of Foreign

which corresponds to the line in Part I on

applied ECI principles solely at the

which the partnership is listed. The

Partner Interests in

partner level and not as a result of the

amount entered on line 1 is grouped into

partnership’s activities.

Partnerships

its gross income and gross expense

Part II – Foreign Partner

components for allocation and

In Part I, list the name, address, and

apportionment to ECI and non-ECI under

Employer Identification Number of each

Income and Expenses:

sections 864(c) and 882(c). The gross

directly owned partnership interest that

income apportionments are shown on line

Reconciliation to Schedule

has effectively connected income

3, and the allocation and apportionments

included in the partner’s distributive share

K-1 (Form 1065)

of non-interest expenses are determined

on Schedule K-1 (Form 1065). Also

under Regulations sections 1.861-8 and

include in the list of partnership interests

Part II reconciles the partner’s ECI and

1.861-17 and Temporary Regulations

any interest in a partnership that is not

non-ECI to its Schedule K-1 (Form 1065)

section 1.861-8T(c). See Regulations

engaged in trade or business within the

distributive share from each partnership

section 1.861-17 for the allocation and

United States if the corporation treats

listed in Part I. The Schedule K-1 lines

ECI apportionment treatment of research

some or all of its distributive share as ECI

are grouped for reconciliation of their

and experimentation expenditures that

with a separate trade or business of its

income and expense in the following

are included in trade or business income

own within the United States. Do not

manner:

•

on line 1 or 3, Schedule K-1, and which

report on Schedule P any indirectly

Schedule P, lines 1 through 5: ECI and

are also reportable on Schedule P (Form

owned partnership interests (lower-tier

non-ECI reconciliation of income and

1120-F), lines 4 and 5.

partnership interests) that have income

non-interest expenses from Schedule K-1

effectively connected with the lower-tier

(Form 1065), lines 1 through 3.

Lines 2 through 5. Gross income

•

partnership’s own trade or business within

Schedule P, lines 6 through 9:

(loss). Enter on line 2 the total gross

the United States unless the corporation

Reconciliation of other income and other

income included in Schedule P (Form

-2-

Instructions For Schedule P (Form 1120-F) - 2009 Page 2

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