Instructions For Forms 8804, 8805, And 8813

increased to $100 or, if greater, 10% of

A publicly traded partnership that has

address. If the Post Office does not

the aggregate amount of items required to

effectively connected income, gain, or

deliver mail to the street address and the

be reported and the $100,000 maximum

loss, generally must withhold tax on

partnership (or withholding agent) has a

penalty does not apply. For more

distributions of that income made to its

P.O. box, show the box number instead of

information, see sections 6722 and 6724.

foreign partners. The rate is 38.6% for

the street address.

2002 and 2003. In this situation, the

When providing a foreign address on

Late Payment of Tax

partnership uses Form 1042, Annual

Form 8804, 8805, or 8813, enter the

The penalty for not paying tax when due

Withholding Tax Return for U.S. Source

number and street, city, province or state,

is usually

of 1% of the unpaid tax for

Income of Foreign Persons; Form

and the name of the country. Follow the

each month or part of a month the tax is

1042-S, Foreign Person’s U.S. Source

foreign country’s practice in placing the

unpaid. The penalty cannot exceed 25%

Income Subject to Withholding; and Form

postal code in the address. Do not

of the unpaid tax.

1042-T, Annual Summary and Transmittal

abbreviate the country name.

of Forms 1042-S, to report withholding

Failure To Withhold and Pay

from distributions instead of following

Form 8804

Over Tax

these instructions. It also must comply

with the regulations under section 1461

Any person required to withhold, account

Lines 4a and 5a

and Regulations section 1.6302-2.

for, and pay over the withholding tax

Figure the partnership’s effectively

under section 1446, but who fails to do

However, such a partnership may elect

connected taxable income using the

so, may be subject to a civil penalty under

instead to pay a withholding tax based on

definition on page 2. Enter the effectively

section 6672. The civil penalty is equal to

effectively connected taxable income

connected taxable income allocable to

the amount that should have been

allocable to its foreign partners. To do

noncorporate foreign partners on line 4a.

withheld and paid over.

this, the partnership must comply with the

Enter the effectively connected taxable

payment and reporting requirements of

income allocable to corporate foreign

Other Penalties

these instructions by the date on which

partners on line 5a.

Penalties can also be imposed for

Form 8804 is due for the partnership’s

Partnership effectively connected

negligence, substantial understatement of

first tax year. Also, the partnership must

taxable income on which a foreign partner

tax, and fraud. See sections 6662 and

attach a statement to its first Form 8804

is exempt from U.S. tax by a treaty or

6663.

indicating that it is a publicly traded

other reciprocal agreement is not

partnership that is electing not to withhold

allocable to that partner and is exempt

Treatment of Partners

on distributions. Once made, the election

from withholding under section 1446.

may be revoked only with IRS consent.

A partnership’s payment of section 1446

However, this exemption from section

withholding tax on effectively connected

1446 withholding must be reported on

Tiered Partnerships

taxable income allocable to a foreign

Form 8805. See instructions for line 8b of

partner relates to the partner’s U.S.

The term “tiered partnership” describes

Form 8805 on page 6.

income tax liability for the partner’s tax

the situation in which a partnership owns

Line 7b

year in which the partner is subject to

an interest in another partnership. The

U.S. tax on that income.

Enter on line 7b the amount of section

latter is a “subsidiary partnership.” A

1446 tax withheld by the subsidiary

partnership that directly or indirectly owns

Amounts paid by the partnership under

partnership (see Tiered Partnerships

a partnership interest in a subsidiary

section 1446 on effectively connected

above). The amount withheld will be

partnership is allowed a credit against its

taxable income allocable to a partner are

shown on line 11 of the Form 8805 the

own section 1446 liability for any section

allowed to the partner as a credit under

partnership receives from the subsidiary

1446 tax paid by the subsidiary

section 33. The partner may not claim an

partnership. If the partnership receives a

partnership for that partnership interest.

early refund of withholding tax paid under

Form 1042-S from a subsidiary PTP, the

A partnership that is a direct or indirect

section 1446.

amount withheld will be shown in box 7 of

partner in a subsidiary partnership and

Amounts paid by a partnership under

the Form 1042-S. (Box 1 of the Form

that has had section 1446 tax payments

section 1446 for a partner are to be

1042-S will show income code 27.)

made on its behalf will receive a copy of

treated as distributions made to that

Form 1042-S or Form 8805 from the

Line 7c

partner on the earliest of the following:

subsidiary partnership. The partnership

Line 7c applies only to partnerships

1. The day on which this tax was paid

that is the direct or indirect partner must

treated as foreign persons and subject to

by the partnership.

in turn file these forms with its Form 8804

withholding under section 1445(a) or

2. The last day of the partnership’s tax

and treat the amount withheld by the

1445(e)(1) upon the disposition of a U.S.

year for which the amount was paid.

subsidiary partnership as a credit against

real property interest.

3. The last day on which the partner

its own liability to withhold under section

owned an interest in the partnership

Enter on line 7c the amount of tax

1446. This credit is allowed on line 7b of

during that year.

withheld under section 1445(a) and

the Form 8804 filed by the partnership

shown on Form 8288-A, Statement of

that is the direct or indirect partner. The

A partner that wishes to claim a credit

Withholding on Dispositions by Foreign

partnership that is a direct or indirect

against its U.S. income tax liability for

Persons of U.S. Real Property Interests,

partner must also provide a copy of the

amounts withheld and paid over under

for the tax year in which the partnership

forms it receives to its partners, along

section 1446 must attach Copy C of Form

disposed of the U.S. real property

with the information described in

8805 to its U.S. income tax return for the

interest.

Reporting to Partners on page 3. These

tax year in which it claims the credit.

statements and forms will enable those

Also enter on line 7c the amount of

partners to obtain appropriate credit for

section 1446(e)(1) tax withheld on a

Publicly Traded

distribution by a domestic trust to the

tax withheld under section 1446.

Partnerships

partnership with respect to the disposition

of a U.S. real property interest by the

A “publicly traded partnership” is any

trust. The amount withheld will be shown

Specific Instructions

partnership whose interests are regularly

in box 7 of the Form 1042-S the

traded on an established securities

partnership receives from the trust. (Box 1

market (regardless of the number of its

Address

of the Form 1042-S will show income

partners). However, it does not include a

code 25 or 26.)

publicly traded partnership treated as a

When providing a U.S. address on Form

corporation under the general rule of

8804, 8805, or 8813, include the suite,

For both of the situations described

section 7704(a).

room, or other unit number after the street

above, do not enter more than the

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Instructions for Forms 8804, 8805, and 8813

Instructions For Forms 8804, 8805, And 8813 - 2002 Page 5

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