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

Line 17. Enter the corporation’s average

ECI and non-ECI also applies to lower-tier

partnership shall be treated as a U.S.

partnership liabilities, or portion thereof,

partnership interests that are not required

asset in the same proportion that its

for the year for which the corporation

to be identified and reconciled to

distributive share of partnership ECI for

receives a distributive share of interest

Schedule K-1 (Form 1065) on this

the partnership’s tax year that ends with

expense for the year. See Regulations

Schedule P (Form 1120-F).

or within the partner’s tax year bears to its

section 1.884-1(d)(3)(vi). Also, enter this

distributive share of all partnership

Line 20. Outside Basis Election

line 17 amount on Schedule I (Form

income for that tax year.

Method. Enter “income” or “asset” on

1120-F), line 8, column (b), to the extent

Protective election. If the

line 20 to indicate the elective outside

applicable in determining the

corporation files a protective tax return

basis apportionment method used to

corporation’s interest expense deduction

under Regulations section

determine the amount of the corporation’s

under Regulations section 1.882-5.

1.882-4(a)(3)(vi), and the partnership is

outside basis in its partnership interests

Line 18. Partner’s Adjusted Average

not engaged in trade or business within

apportioned to ECI and reported on line

Outside Basis in Partnership. Add

the United States or does not have

19. The allocation method is subject to a

lines 16d and 17 and enter the amount on

business profits attributable to a U.S.

five-year minimum period election that

line 18. The amount reported on line 18 is

permanent establishment, the corporation

must be made in the first year the partner

the corporation’s adjusted outside basis

need not file Schedule P and report its

has a distributive share of ECI included in

that is eligible for apportionment between

distributive share of income and

the income reported on Schedule K-1

ECI and non-ECI.

expenses with its Form 1120-F. However,

(Form 1065). The elective method chosen

if it is later determined that the

must be used for both branch profits tax

Line 19. Partner’s Outside Basis

corporation’s distributive share of

and interest expense allocation purposes

Allocable to ECI. Enter on line 19 the

partnership income is ECI with a trade or

during the same five-year minimum

corporation’s average outside basis

business of the corporation, the

period.

reported on line 18 that is apportioned to

corporation will have failed to make a

ECI. Also enter this line 19 amount on

Asset method. In general, a

timely income method or asset method

Schedule I (Form 1120-F), line 5, column

partner’s interest in a partnership shall be

election with respect to such partnership

(b). See Regulations section

treated as a U.S. asset in the same

for outside basis apportionment purposes

1.884-1(d)(3)(i) for the elective

proportion that the sum of the partner’s

if no other election disclosure is made. To

requirements for apportioning outside

proportionate share of the adjusted bases

preserve the right to allocate and

basis on the mandatory proportionate

of all partnership assets as of the

apportion its outside basis under a

income or asset method. For purposes of

determination date, bears to the sum of

chosen method, the corporation may

determining the proportion of the

the partner’s proportionate share of the

make a protective election by filing

partnership interest that is a U.S. asset, a

adjusted bases of all partnership assets

Schedule P (Form 1120-F) and

foreign corporation may elect separately

as of the determination date. The

completing Part I and line 20 with the

for each partnership interest to use either

proportion of U.S. assets to total assets of

protective return filing on Form 1120-F.

the asset method or the income method

the partnership is determined as if the

The protective election is effective only for

described in Regulations sections

partnership were a foreign corporation

a year in which a Schedule P (Form

1.884-1(d)(3) (ii) and (iii). If the

engaged in trade or business within the

1120-F) protective election attachment is

corporation does not timely elect either

United States. Generally, a partner’s

also the first year in which the

method in the first year the corporation

proportionate share of a partnership asset

corporation’s distributive share is in fact

has a distributive share of ECI from the

is the same as its proportionate share of

ECI with a trade or business of the

partnership, the Director of Field

all items of income, gain, loss, and

corporation within the United States. The

Operations may make the election on

deduction that may be generated by the

corporation need not complete Part II or

behalf of the corporation. See

asset. See Regulations section

Part III, lines 15 through 19 with the

Regulations section 1.884-1(d)(3)(iv) and

1.884-1(d)(3)(ii)(B) for non-uniform

protective election.

the instructions for line 20 below.

treatment of certain partnership items.

Note. The required timely-filed election

Income method. Under the income

under Regulations section 1.884-1(d)(3)

method, a partner’s interest in a

for apportioning outside basis between

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Instructions For Schedule P (Form 1120-F) - 2009 Page 4

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