Instructions For Forms 8804, 8805, And 8813

If the partnership intentionally

publicly traded partnership treated as a

street address and the partnership (or

disregards the requirement to report

corporation under the general rule of

withholding agent) has a P.O. box, show

correct information, the penalty is

section 7704(a).

the box number instead of the street

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

address.

A publicly traded partnership that has

the aggregate amount of items required to

effectively connected income, gain, or

If the partnership has a foreign

be reported and the $100,000 maximum

loss, generally must withhold tax on

address, enter the number and street,

penalty does not apply. For more

distributions made to foreign partners.

city, province or state, and the name of

information, see sections 6722 and 6724.

The rate is 39.1% for 2001 and 38.6% for

the country. Follow the foreign country’s

2002. In this situation, the partnership

Late Payment of Tax

practice in placing the postal code in the

uses Form 1042, Annual Withholding Tax

address. Do not abbreviate the country

The penalty for not paying tax when due

Return for U.S. Source Income of Foreign

name.

is usually

of 1% of the unpaid tax for

Persons, and Form 1042-S, Foreign

each month or part of a month the tax is

Person’s U.S. Source Income Subject to

Form 8804

unpaid. The penalty cannot exceed 25%

Withholding, to report withholding from

of the unpaid tax.

distributions instead of following these

Lines 4a and 5a

Failure To Withhold and Pay

instructions. It also must comply with the

Figure the partnership’s effectively

regulations under section 1461 and

Over Tax

connected taxable income based on the

Regulations section 1.6302-2.

Any person required to withhold, account

definition on page 2. Enter the effectively

However, such a partnership may elect

for, and pay over the withholding tax

connected taxable income allocable to

instead to pay a withholding tax based on

under section 1446, but who fails to do

noncorporate foreign partners in the

effectively connected taxable income

so, may be subject to a civil penalty under

designated space on line 4a. Enter the

allocable to its foreign partners. To do

section 6672. The civil penalty is equal to

effectively connected taxable income

this, the partnership must comply with the

the amount that should have been

allocable to corporate foreign partners in

payment and reporting requirements of

withheld and paid over.

the designated space on line 5a.

these instructions by the date on which

Other Penalties

Partnership effectively connected

Form 8804 is due for the partnership’s

taxable income on which a foreign partner

first tax year. Also, the partnership must

Penalties can also be imposed for

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

attach a statement to its first Form 8804

negligence, substantial understatement of

other reciprocal agreement is not

indicating that it is a publicly traded

tax, and fraud. See sections 6662 and

allocable to that partner and is exempt

6663.

partnership that is electing not to withhold

from withholding under section 1446.

on distributions. Once made, the election

However, this exemption from section

Treatment of Partners

may be revoked only with IRS consent.

1446 withholding must be reported on

A partnership’s payment of section 1446

Form 8805. See instructions for line 8b of

Tiered Partnerships

withholding tax on effectively connected

Form 8805 on page 6.

taxable income allocable to a foreign

The term “tiered partnership” describes

partner relates to the partner’s U.S.

the situation in which a partnership owns

Line 7b

income tax liability for the partner’s tax

an interest in another partnership. The

A foreign partnership must enter the

year in which the partner is subject to

latter is a “subsidiary partnership.” A

amount of section 1446 tax withheld

U.S. tax on that income.

partnership that directly or indirectly owns

shown on Form 8805 or under Income

a partnership interest in a subsidiary

Amounts paid by the partnership under

Code 27 on Form 1042-S received from

partnership is allowed a credit against its

section 1446 on effectively connected

another partnership in which it owns an

own section 1446 liability for any section

taxable income allocable to a partner may

interest during its tax year. The

1446 tax paid by the subsidiary

be claimed as a credit under section 33.

partnership may credit this amount

partnership for that partnership interest.

The partner may not claim an early refund

against its section 1446 liability for that

of withholding tax paid under section

tax year.

A partnership that is a direct or indirect

1446.

partner in a subsidiary partnership and

Line 7c

that has had section 1446 tax payments

Amounts paid by a partnership under

made on its behalf will receive a copy of

Line 7c applies only to partnerships

section 1446 for a partner are to be

Form 1042-S or Form 8805. The

treated as foreign persons and subject to

treated as distributions made to that

partnership that is the direct or indirect

withholding under section 1445(a) or

partner on the earliest of the following:

partner must in turn file these forms with

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

1. The day on which this tax was paid

its Form 8804 and treat the amount

real property interest. Enter on line 7c the

by the partnership.

withheld by the subsidiary partnership as

amount of tax withheld under section

2. The last day of the partnership’s tax

a credit against its own liability to withhold

1445(a) and shown on Form 8288-A,

year for which the amount was paid.

under section 1446. The partnership that

Statement of Withholding on Dispositions

3. The last day on which the partner

is a direct or indirect partner must also

by Foreign Persons of U.S. Real Property

owned an interest in the partnership

provide a copy of the forms it receives to

Interests, for the tax year in which the

during that year.

its partners, along with the information

partnership disposed of the U.S. real

described in Reporting to Partners on

A partner that wishes to claim a credit

property tax interest. Also enter the

page 3. These statements and forms will

against its U.S. income tax liability for

amount of section 1445(e)(1) tax shown

enable those partners to obtain

amounts withheld and paid over under

under Income Code 25 or 26 on Form

appropriate credit for tax withheld under

section 1446 must attach Copy C of Form

1042-S for the tax year in which the trust

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

section 1446.

made the distribution to the partnership

tax year in which it claims the credit.

from which tax was withheld because of

the disposition of a U.S. real property

Publicly Traded

interest. Do not enter more than the

Specific Instructions

amount allocable to foreign partners (as

Partnerships

defined in section 1446(e)). Enter

A “publicly traded partnership” is any

amounts allocable to U.S. partners on line

Address

partnership whose interests are regularly

13 of Schedules K and K-1 (Form 1065).

traded on an established securities

Include the suite, room, or other unit

For Form 1065-B, enter amounts on line

market (regardless of the number of its

number after the street address. If the

16 of Schedule K and in box 9 of

partners). However, it does not include a

Post Office does not deliver mail to the

Schedule K-1.

-5-

Instructions for Forms 8804, 8805, and 8813

Instructions For Forms 8804, 8805, And 8813 - 2001 Page 5

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