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Schedule P is includible in the

that has effectively connected income

level and not as a result of the

corporation's interest expense allocation

(ECI) included in the partner's distributive

partnership's activities.

computation under Regulations section

share on Schedule K-1 (Form 1065). Also

Part II – Foreign Partner

1.882-5. The corporation's distributive

include in the list of partnership interests

share of interest expense that is directly

any interest in a partnership that is not

Income and Expenses:

allocable to effectively connected income

engaged in trade or business within the

Reconciliation to

under Regulations section 1.882-5(a)(1)(ii)

United States if the corporation treats

Schedule K-1 (Form 1065)

(B) is reported on Schedule P, line 15b,

some or all of its distributive share as ECI

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

with a separate trade or business of its

Part II reconciles the partner's ECI and

A portion of the corporation's distributive

own within the United States. Do not

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

share of interest expense that is reported

report on Schedule P any indirectly

distributive share from each partnership

on Schedule P, line 15c, is reported on

owned partnership interests (lower-tier

listed in Part I. The Schedule K-1 lines are

Schedule I (Form 1120-F), line 9, column

partnership interests) that have income

grouped for reconciliation of their income

(b). The average value of partnership

effectively connected with the lower-tier

and expense in the following manner:

liabilities the corporation includes in the

partnership's own trade or business within

Schedule P, lines 1 through 5: ECI and

determination of its outside basis for

the United States unless the corporation

non-ECI reconciliation of income and

purposes of determining the proportion of

also owns a direct interest in the lower-tier

non-interest expenses from Schedule K-1

the partnership interest treated as a U.S.

partnership. The corporation's distributive

(Form 1065), lines 1 through 3.

asset is reported on Schedule P (Form

share of ECI earned through lower-tier

Schedule P, lines 6 through 10:

1120-F), line 18 (Total column). The

partnership interests is includable on the

Reconciliation of other income and other

average value of the partner's outside

Schedule K-1 (Form 1065) reportable to

non-interest expenses from Schedule K-1

basis used to determine the proportion of

the corporation by the partnership in which

(Form 1065).

the partnership interest treated as a U.S.

the corporation owns a direct interest,

Schedule P, lines 11 and 12: Total

asset is reported on Schedule P (Form

whether or not the directly owned

gross income and total gross ECI from

1120-F), line 20, and as a U.S. asset on

partnership is itself directly engaged in

Schedule K-1 (Form 1065).

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

trade or business within the United States.

Schedule P, lines 13 through 15c:

(b).

Reconciliation of total interest expense

Schedule P (Form 1120-F)

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

from Schedule K-1 (Form 1065).

accommodates reporting for four

II, and Part IV. The corporation's

directly-owned partnership interests.

distributive share of non-interest expenses

Note. The information needed to

Complete a separate line in Part I, and the

included on Schedule P, lines 4 and 5 is

complete Schedule P (Form 1120-F)

corresponding columns in Parts II and III,

also included in the corporation's overall

generally should appear on a statement

for each directly owned partnership

allocation and apportionment of expenses

attached to the partner's Schedule K-1

interest. If the corporation directly owns

on Schedule H (Form 1120-F), Part IV,

(Form 1065). Also note that if you are

more than four partnership interests which

lines 38a through 41, if the partnership

reconciling the foreign corporation's

are required to be reported on Schedule P

books constitute set(s) of books that are

distributive share of ECI and allocable

(Form 1120-F), report the required

also reportable on Form 1120-F,

expenses with the total income and

information for those additional

Schedule L or the partnership interest is

expenses reported to the corporation on

partnership interests on attached separate

recorded on Schedule L books of the

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

sheets using the same size and format as

corporation's own separate trade or

information will be located in box 9 of the

shown on the schedule. Also, in the

business within the United States. If the

Schedule K-1 (Form 1065-B) or in an

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

partnership interest is not reported on

attachment for box 9. Specifically, the

line item, enter the sum for all directly

Schedule L, the distributive share of

lines on Schedule K-1 (Form 1065) noted

owned partnership interests, including

partnership expenses allocable to the

throughout these instructions correspond

those interests reported on attached

corporation's distributive share of ECI is

to the box 9 information on Schedule K-1

sheets.

included on Schedule H (Form 1120-F) in

(Form 1065-B) as follows:

Parts I and II. See the Instructions for

Entities treated as partnerships for tax

Schedule K-1 (Form 1065), line 1

Schedule H (Form 1120-F).

purposes include Limited Liability

corresponds to the information reported

Partnerships (LLPs) and Limited Liability

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

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

Companies (LLCs) that are not classified

using code A1.

The corporation's distributive share of

as corporations for federal income tax

Schedule K-1 (Form 1065), line 2

partnership income or loss may be

purposes and may be domestic or foreign.

corresponds to the information reported

reported on Schedule M-3 (Form 1120-F),

Do not include any interest in any entity

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

Part II, line 9 (domestic partnerships) and

treated as a disregarded entity as

using code B1.

line 10 (certain foreign partnerships) in

described under Regulations section

Schedule K-1 (Form 1065), line 3

accordance with the corporation's

301.7701-2(c)(2).

corresponds to the information reported

reporting on its applicable financial

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

statements for Schedule M-3 (Form

Column (d). With respect to each

using code C1.

1120-F) purposes. See the Instructions for

partnership interest, check the “Yes” box if

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

Finally, note that other interest expense

the foreign corporation's distributive share

9 and 10 for the specific reporting

reported on Schedule K-1 (Form 1065),

is ECI, or treated as ECI, in whole or in

requirements.

lines 13 and 18 corresponds to the

part, with a U.S. trade or business

information reported on Schedule K-1

determined under section 875.

Part I – List of Foreign

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

Accordingly, with respect to each

Partner Interests in

(nondeductible expenses) and/or code U

partnership interest, check the “Yes” box if

(other information).

the foreign corporation is engaged in a

Partnerships

U.S. trade or business indirectly through

In Part I, list the name, address, and

the activities of the partnership. Check the

Employer Identification Number (EIN) of

“No” box if the foreign corporation has

each directly owned partnership interest

applied ECI principles solely at the partner

Instructions for Schedule P (Form 1120-F) (2014)

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Form 1120-F - Instructions For Schedule P - List Of Foreign Partner Interests In Partnerships - 2014 Page 2

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