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Lines 1 Through 5. ECI and

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

subject to allocation under Regulations

reportable on line 2 of Schedule P). On

section 1.882-5.

Non-ECI Reconciliation of

line 7, enter the amount of gross income

Income and Non-Interest

Line 14b. Direct interest expense allo-

from line 6 that is allocated and

cation. On line 14b, enter the amount of

Expenses

apportioned to ECI.

interest expense included in line 14a that

is directly allocable to ECI under

Line 1. Enter on line 1 the combined total

Note. The amount on line 7 may exceed

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

income (loss) from Schedule K-1 (Form

the amount on line 6 if losses included on

and the applicable requirements of

1065), Part III, line 1, Ordinary business

line 6 are allocated to non-ECI and other

Temporary Regulations section

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

gross income and gains are allocated to

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

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

ECI.

on line 14b is also included on Schedule I

income (loss). Enter the combined amount

Other non-interest expense. Enter on

(Form 1120-F), line 22.

in the column in Part II which corresponds

line 8 all other non-interest expense from

to the partnership listed in Part I. The

Line 14c. U.S.-booked interest ex-

Schedule K-1 (Form 1065) that is not

amount entered on line 1 is grouped into

pense of the partnership. Subtract

included on lines 1 through 3 of the

its gross income and gross expense

line 14b from line 14a and enter the

Schedule K-1 (and is not reportable on

components for allocation and

amount on line 14c. This amount

lines 4 and 5 of Schedule P). On line 9,

apportionment to ECI and non-ECI under

constitutes the book interest expense of

enter the amount of non-interest expense

sections 864(c) and 882(c). The gross

the partnership that is includible in the

from line 8 that is allocated and

income apportionments are shown on

three-step formula under Regulations

apportioned to ECI. Include on line 8 (and

line 3, and the allocation and

section 1.882-5(d) or 1.882-5(e). The

line 9 if applicable) guaranteed payments

apportionments of non-interest expenses

amount on line 14c (“Totals” column) is

made by the partnership that are not

shown on line 5 are determined under

also required to be reported on Schedule I

included on lines 4 and 5.

Regulations sections 1.861-8 and

(Form 1120-F), line 9, column (b). The

1.861-17 and Temporary Regulations

Lines 10 and 11. Summary of

line 14c amount is also taken into account

section 1.861-8T(c). See Regulations

on Form 1120-F, Section III, Part II, line 8

Gross Income

section 1.861-17 for the allocation and ECI

in determining the corporation's branch

apportionment treatment of research and

Line 10. Total Gross Income. Enter on

interest under Regulations section

experimentation expenditures that are

line 10 the sum of the gross income

1.884-4(b).

included in trade or business income on

amounts entered on line 2 and line 6. The

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

Part III – Foreign Partner's

amount on line 10 is the total gross

also reportable on Schedule P (Form

income from Schedule K-1 (Form 1065).

Average Outside Basis

1120-F), lines 4 and 5.

Line 11. Total Gross Effectively Con-

Under Regulations

Lines 2 and 3. Gross income. Enter on

nected Income. Enter on line 11 the sum

Sections 1.882-5(b) and

line 2 the total gross income included in

of the ECI amounts entered on lines 3 and

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

1.884-1(d)(3)

7. The amount on line 11 is the total gross

line 3, enter the amount of ECI included in

ECI from Schedule K-1 (Form 1065).

Report in Part III the corporation's outside

the gross income reported on line 2. If all

Lines 12 Through 14. Interest

basis for each partnership interest

of the gross income reported on line 2 is

identified in Part I of this Schedule P (Form

Expense Reconciliation

ECI, then report the same number on

1120-F) for purposes of determining the

line 3.

Enter on line 12 the amount of interest

amount the corporation includes as a U.S.

expense included in the net income (loss)

asset in Step 1 of the interest expense

Note. Line 3 may exceed line 2 if losses

on lines 1 through 3 of Schedule K-1

allocation under Regulations section

included in line 2 are non-ECI and the

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

1.882-5. The corporation's outside basis in

income and gains are ECI.

reported on line 1 of Schedule P (Form

its partnership interests reported on

Lines 4 and 5. Non-interest expense.

1120-F). On line 13, enter the sum of the

Schedule P is determined and adjusted

Enter on line 4 the total amount of

other interest expense reported on

under the rules applicable to the

non-interest expense included on line 1.

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

determination of the corporation's outside

On line 5, enter the amount of non-interest

18.

basis in the partnership for branch profits

expense included on line 1 that is

tax purposes under Regulations section

allocated and apportioned to gross ECI.

Note. If interest expense is included on

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

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

any line of Schedule K-1 (Form 1065)

entered on lines 15 through 19 are the

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

guaranteed payments made by the

average values rather than the

schedule indicating the line the interest is

partnership that are included in the

determination dates used under the

included on and reclassify the interest

combined net income (loss) reported on

section 884 regulations for branch profits

line 1. Interest expense included in line 1

expense reported on such other line to

tax purposes. If the corporation is not

is subject to allocation under Regulations

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

exempt from the branch profits tax under

line 18, as appropriate, for purposes of

section 1.882-5 and is reported in a

an applicable income tax treaty, attach a

reporting the reclassified amount on

separate grouping of the corporation's

schedule showing the determination of the

line 13 of Schedule P. The reclassification

distributive share of all interest expense

corporation's outside basis in accordance

on Schedule P (Form 1120-F), line 12.

will require an adjustment to such other

with the requirements of lines 15 through

line to prevent double counting of total

Lines 6 Through 9. Other Gross

19 for an averaging period that shows the

expenses.

apportioned outside basis for the

Income and Other Non-Interest

beginning and ending determination dates

Line 14a. Total interest expense. Add

Expenses

of the corporation's tax year.

lines 12 and 13 and enter the result on

line 14a. This amount is the corporation's

Other gross income. Enter on line 6 all

Line 15. Section 705 Outside Basis.

total distributive share of interest expense

other gross income from Schedule K-1

Enter on line 15 the corporation's average

from Schedule K-1 (Form 1065) that is

(Form 1065) that is not included on lines 1

value of the outside basis (otherwise

-3-

Instructions For Schedule P (Form 1120-F) - List Of Foreign Partner Interests In Partnerships - 2012 Page 3

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