Instructions For Schedule P (Form 1120-F) - 2009 (Page 3 of 4) in pdf

1120-F), line 1. On line 3, enter the

(Form 1065) and in the net income (loss)

tax purposes under Regulations section

amount of ECI included in the gross

reported on line 1 of Schedule P (Form

1.884-1(d)(3), except that the amounts

income reported on line 2. If all of the

1120-F). On line 13, enter the sum of the

entered on lines 15 through 19 are the

gross income reported on line 2 is ECI,

other interest expense reported on

average values rather than the

then report the same number on line 3.

Schedule K-1 (Form 1065), lines 13 and

determination dates used under the

18.

section 884 regulations for branch profits

Note. Line 3 may exceed line 2 if losses

tax purposes. If the corporation is not

included in line 2 are non-ECI and the

Note. If interest expense is included on

exempt from the branch profits tax under

income and gains are ECI.

any line of Schedule K-1 (Form 1065)

an applicable income tax treaty, attach a

other than lines 1, 2, 3, 13, or 18, attach a

Non-interest expense. Enter on line

schedule showing the determination of

schedule indicating the line the interest is

4 the total amount of non-interest

the corporation’s outside basis in

included on and reclassify the interest

expense included on line 1. On line 5,

accordance with the requirements of lines

expense reported on such other line to

enter the amount of non-interest expense

15 through 19 for an averaging period

Schedule K-1 (Form 1065), line 13 or line

included on line 1 that is allocated and

that shows the apportioned outside basis

18, as appropriate, for purposes of

apportioned to ECI. Include on line 4 (and

for the beginning and ending

reporting the reclassified amount on line

line 5 if applicable), guaranteed payments

determination dates of the corporation’s

13 of Schedule P. The reclassification will

made by the partnership that are included

tax year.

require an adjustment to such other line

in the combined net income (loss)

to prevent double counting of total

Line 15. Section 705 Outside Basis.

reported on line 1. Interest expense

expenses.

Enter on line 15 the corporation’s average

included in line 1 is subject to allocation

value of the outside basis (otherwise

under Regulations section 1.882-5 and is

Line 14a. Total interest expense. Add

determined under section 705) of the

reported in a separate grouping of the

lines 12 and 13 and enter the result on

partnership in the column which

corporation’s distributive share of all

line 14a. This amount is the corporation’s

corresponds to the line in Part I on which

interest expense on Schedule P (Form

total distributive share of interest expense

the partnership interest is listed. The

1120-F), line 12.

from Schedule K-1 (Form 1065) that is

average value is determined using the

subject to allocation under Regulations

Lines 6 Through 9. Other Gross

most frequent averaging period for which

section 1.882-5.

Income and Other Non-Interest

data is reasonably available. See

Line 14b. Direct interest expense

Expenses

Regulations sections 1.882-5(b)(3) and

allocation. On line 14b, enter the

1.882-5(c)(2)(iv).

Other gross income. Enter on line 6 all

amount of interest expense included in

Line 16. Partner Liabilities Included in

other gross income from Schedule K-1

line 14a that is directly allocable to ECI

the Corporation’s Outside Basis. The

(Form 1065) that is not included on lines

under Regulations section

corporation’s outside basis reported on

1 through 3 of the Schedule K-1 (and is

1.882-5(a)(1)(ii)(B) and the applicable

line 15 is adjusted on line 16 to conform

not reportable on line 2 of Schedule P).

requirements of Temporary Regulations

the amount of liabilities the corporation

On line 7, enter the amount of gross

section 1.861-10T(b) or (c). The amount

includes in the determination of its outside

income from line 6 that is allocated and

entered on line 14b is also included on

basis to the proportionate amount of the

apportioned to ECI.

Schedule I (Form 1120-F), line 22.

corporation’s distributive share of interest

Note. The amount on line 7 may exceed

Line 14c. U.S. booked interest expense

expense with respect to the partnership’s

the amount on line 6 if losses included on

of the partnership. Subtract line 14b

liabilities. This adjustment is made only

line 6 are allocated to non-ECI and other

from line 14a and enter the amount on

for purposes of determining the

gross income and gains are allocated to

line 14c. This amount constitutes the

corporation’s outside basis included in the

ECI.

book interest expense of the partnership

interest expense allocation and branch

that is includible in the three-step formula

Other non-interest expense. Enter on

profits tax computations. The adjustment

under Regulations section 1.882-5(d) or

line 8 all other non-interest expense from

is not made for other federal income tax

1.882-5(e). The amount on line 14c

Schedule K-1 (Form 1065) that is not

purposes such as for determining the

(“Totals” column) is also required to be

included on lines 1 through 3 of the

corporation’s gain or loss from disposition

reported on Schedule I (Form 1120-F),

Schedule K-1 (and is not reportable on

of the partnership interest.

line 9, column (b). The line 14c amount is

lines 4 and 5 of Schedule P). On line 9,

Line 16a. Adjustment for directly

also taken into account on Form 1120-F,

enter the amount of non-interest expense

allocable interest. The outside basis is

Section III, Part II, line 8 in determining

from line 8 that is allocated and

reduced by the average amount of

the corporation’s branch interest under

apportioned to ECI. Include on line 8 (and

liabilities that give rise to directly allocable

Regulations section 1.884-4(b).

line 9 if applicable) guaranteed payments

interest expense in accordance with

made by the partnership that are not

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

Part III – Foreign Partner’s

included on lines 4 and 5.

Enter the portion of the partnership

Average Outside Basis

Lines 10 and 11. Summary of

liability that is subject to the direct interest

Gross Income

expense allocation rules under

Under Regulations

Temporary Regulations section

Line 10. Total Gross Income. Enter on

Sections 1.882-5(b) and

1.861-10T(b) or (c) and is subject to

line 10 the sum of the gross income

exclusion from the determination of the

1.884-1(d)(3)

amounts entered on line 2 and line 6. The

corporation’s average U.S. asset values

amount on line 10 is the total gross

Report in Part III the corporation’s outside

under Regulations section 1.882-5. See

income from Schedule K-1 (Form 1065).

basis for each partnership interest

Temporary Regulations section

Line 11. Total Gross Effectively

identified in Part I of this Schedule P

1.861-10T(d).

Connected Income. Enter on line 11 the

(Form 1120-F) for purposes of

Line 16b. Enter the average amount

sum of the ECI amounts entered on lines

determining the amount the corporation

of the corporation’s share of all other

3 and 7. The amount on line 11 is the

includes as a U.S. asset in Step 1 of the

partnership liabilities it otherwise takes

total gross ECI from Schedule K-1 (Form

interest expense allocation under

into account under section 752 in

1065).

Regulations section 1.882-5. The

determining its outside basis in its

corporation’s outside basis in its

Lines 12 Through 14. Interest

partnership interest.

partnership interests reported on

Expense Reconciliation

Schedule P is determined and adjusted

Line 16c. Add lines 16a and 16b and

Enter on line 12 the amount of interest

under the rules applicable to the

enter the result on line 16c. This is the

expense included in the net income (loss)

determination of the corporation’s outside

corporation’s combined average total

on lines 1 through 3 of Schedule K-1

basis in the partnership for branch profits

share of partnership liabilities for the year.

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Instructions For Schedule P (Form 1120-F) - 2009 Page 3

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