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Lines 1 Through 5. ECI and

Lines 7 and 8. Other gross income.

Line 15b. Direct interest expense allo-

Non-ECI Reconciliation of

Enter on line 7 all other gross income from

cation. On line 15b, enter the amount of

Schedule K-1 (Form 1065) that is not

interest expense included in line 15a that

Income and Non-Interest

included on lines 1 through 3 of the

is directly allocable to ECI under

Expenses

Schedule K-1 (and is not reportable on

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

line 2 of Schedule P). On line 8, enter the

and the applicable requirements of

Line 1. Net income (loss). Enter on

amount of gross income from line 7 that is

Temporary Regulations section

line 1 the combined total income (loss)

allocated and apportioned to ECI.

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

from Schedule K-1 (Form 1065), Part III,

on line 15b is also included on Schedule I

line 1, Ordinary business income (loss);

Lines 9 and 10. Other non-interest ex-

(Form 1120-F), line 22.

line 2, Net rental real estate income (loss);

penses. Enter on line 9 all other

and line 3, Other net rental income (loss).

non-interest expense from Schedule K-1

Line 15c. U.S.-booked interest ex-

Enter the combined amount in the column

(Form 1065) that is not included on lines 1

pense of the partnership. Subtract

in Part II which corresponds to the

through 3 of the Schedule K-1 (and is not

line 15b from line 15a and enter the

partnership listed in Part I. The amount

reportable on lines 4 and 5 of Schedule P).

amount on line 15c. The portion of this

entered on line 1 is grouped into its gross

On line 10, enter the amount of

expense amount that arises from U.S.

income and gross expense components

non-interest expense from line 9 that is

booked liabilities is required to be reported

for allocation and apportionment to ECI

allocated and apportioned to ECI. Include

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

and non-ECI under sections 864(c) and

on line 9 (and line 10 if applicable)

column (b). See Regulations section

882(c). The gross income apportionments

guaranteed payments made by the

1.882-5(d)(4). A portion of the line 15c

are shown on line 3, and the allocation

partnership that are not included on lines 4

amount is also taken into account on Form

and apportionments of non-interest

and 5.

1120-F, Section III, Part II, line 8 in

expenses shown on line 5 are determined

determining the corporation's branch

Lines 11 and 12. Summary of

under Regulations sections 1.861-8 and

interest under Regulations section

Gross Income

1.861-17 and Temporary Regulations

1.884-4(b).

section 1.861-8T(c). See Regulations

Line 11. Total Gross Income. Enter on

Part III – Foreign Partner's

section 1.861-17 for the allocation and ECI

line 11 the sum of the gross income

apportionment treatment of research and

Average Outside Basis

amounts entered on line 2 and line 7. The

experimentation expenditures that are

amount on line 11 is the total gross

Under Regulations

included in trade or business income on

income from Schedule K-1 (Form 1065).

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

Sections 1.882-5(b) and

also reportable on Schedule P (Form

Line 12. Total Gross Effectively Con-

1.884-1(d)(3)

1120-F), lines 4 and 5.

nected Income. Enter on line 12 the sum

Report in Part III the corporation's outside

of the ECI amounts entered on lines 3 and

Lines 2 and 3. Gross income. Enter on

basis for each partnership interest

8. The amount on line 12 is the total gross

line 2 the total gross income included in

identified in Part I of this Schedule P (Form

ECI from Schedule K-1 (Form 1065).

Schedule P (Form 1120-F), line 1. On

1120-F) for purposes of determining the

line 3, enter the amount of ECI included in

Lines 13 Through 15c. Interest

amount the corporation includes as a U.S.

the gross income reported on line 2. If all

Expense Reconciliation

asset in Step 1 of the interest expense

of the gross income reported on line 2 is

allocation under Regulations section

Enter on line 13 the amount of interest

ECI, then report the same number on

1.882-5. The corporation's outside basis in

expense included in the net income (loss)

line 3.

its partnership interests reported on

on lines 1 through 3 of Schedule K-1

Lines 4 and 5. Non-interest expense.

Schedule P is determined and adjusted

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

Enter on line 4 the total amount of

under the rules applicable to the

reported on line 1 of Schedule P (Form

non-interest expense included on line 1.

determination of the corporation's outside

1120-F). On line 14, enter the sum of the

On line 5, enter the amount of non-interest

basis in the partnership for branch profits

other interest expense reported on

expense included on line 1 that is

tax purposes under Regulations section

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

allocated and apportioned to gross ECI.

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

18.

Include on line 4 (and line 5 if applicable),

entered on lines 16 through 20 are the

guaranteed payments made by the

average values rather than the

Note. If interest expense is included on

partnership that are included in the

determination dates used under the

any line of Schedule K-1 (Form 1065)

combined net income (loss) reported on

section 884 regulations for branch profits

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

line 1. Interest expense included in line 1

tax purposes. If the corporation is not

statement indicating the line the interest is

is subject to allocation under Regulations

exempt from the branch profits tax under

included on and reclassify the interest

section 1.882-5 and is reported in a

an applicable income tax treaty, attach a

expense reported on such other line to

separate grouping of the corporation's

statement showing the determination of

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

distributive share of all interest expense

the corporation's outside basis in

line 18, as appropriate, for purposes of

on Schedule P (Form 1120-F), line 13.

accordance with the requirements of lines

reporting the reclassified amount on

16 through 20 for an averaging period that

line 14 of Schedule P. The reclassification

Lines 6 Through 10. Other

shows the apportioned outside basis for

will require an adjustment to such other

Gross Income and Other

the beginning and ending determination

line to prevent double counting of total

Non-Interest Expenses

dates of the corporation's tax year.

expenses.

Line 16. Section 705 Outside Basis.

Line 15a. Total interest expense. Add

Line 6. Net income (loss). Enter on

Enter on line 16 the corporation's average

line 6 the combined total income (loss)

lines 13 and 14 and enter the result on

value of the outside basis (otherwise

from Schedule K-1 (Form 1065) that is not

line 15a. This amount is the corporation's

determined under section 705) of the

included on lines 1 through 3 of the

total distributive share of interest expense

partnership in the column which

Schedule K-1 (and is not reportable on

from Schedule K-1 (Form 1065) that is

corresponds to the line in Part I on which

subject to allocation under Regulations

line 2 of Schedule P).

the partnership interest is listed. The

section 1.882-5.

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

-3-

Form 1120-F - Instructions For Schedule P - List Of Foreign Partner Interests In Partnerships - 2014 Page 3

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