Instructions For Forms 8804, 8805, And 8813

partner and may demand a certification

U.S. tax for that partner by a treaty or

under the requirements of sections 1441

of nonforeign status.

reciprocal agreement, or a provision of

and 1442 and their regulations.

the Code.

Real property gains.—

Effectively Connected

Domestic partnerships. Domestic

Amount of Withholding Tax

Taxable Income

partnerships subject to the withholding

Figuring the Tax Payments

requirements of section 1446 are not

Definition

also subject to the payment and

Under section 1446, a partnership must

The term “effectively connected taxable

reporting requirements of section

make four installment payments of

income” means the excess of the gross

1445(e)(1) and its regulations for income

withholding tax during the tax year.

income of the partnership that is

from the disposition of a U.S. real

Amount of each installment payment

effectively connected under section

property interest. A domestic

of withholding tax.—In general, the

864(c), or treated as effectively

partnership’s compliance with the

amount of a partnership’s installment

connected with the conduct of a U.S.

requirement to pay a withholding tax

payment is equal to the sum of the

trade or business, over the allowable

under section 1446 satisfies the

installment payments for each of the

deductions that are connected to such

requirements under section 1445(e)(1) for

partnership’s foreign partners. For a

income. Figure this income with the

dispositions of U.S. real property

foreign partner, the amount of an

following adjustments:

interests. However, a domestic

installment of the section 1446

partnership that would otherwise be

1. Paragraph (1) of section 703(a)

withholding tax is correct if figured by

exempt from section 1445 withholding

does not apply;

applying the principles of section

by operation of a nonrecognition

2. The partnership is allowed a

6655(e)(2). To figure installment

provision must continue to comply with

deduction for depletion of oil and gas

payments of section 1446 tax for a

the requirement of Regulations section

wells, determined without regard to

foreign partner under this method, use

1.1445-5(b)(2).

sections 613 and 613A;

the worksheet on page 6.

Foreign partnerships. A foreign

3. The partnership may not take into

Alternatively, each installment

partnership subject to withholding under

account items of income, gain, loss, or

payment during the tax year may be

section 1445(a) during a tax year will be

deduction allocable to any partner that

made in an amount equal to 25% of the

allowed to credit the amount withheld

is not a foreign partner; AND

withholding tax that would be payable

under section 1445(a) against its liability

4. The partnership may not deduct

on the amount of its effectively

to pay the section 1446 withholding tax

any net operating loss carryovers or

connected taxable income allocable to

for that year.

charitable contributions.

foreign partners for the prior year if the

A partnership’s effectively connected

following three conditions are met:

Reporting to Partners

taxable income includes partnership

1. The prior tax year consisted of 12

When making a payment of withholding

income subject to a partner’s election

months,

tax to the IRS under section 1446, a

under section 871(d) or 882(d) (election

2. The partnership filed Form 1065 for

partnership must notify all foreign

to treat real property income as income

the prior year, AND

partners of their allocable shares of any

connected with a U.S. business). It also

3. The amount of effectively

section 1446 tax paid to the IRS by the

includes any partnership income treated

connected taxable income for the prior

partnership. The partners use this

as effectively connected with the

year was not less than 50% of the

information to adjust the amount of

conduct of a U.S. trade or business

effectively connected taxable income on

estimated tax that they must otherwise

under section 897 (disposition of

the current year’s Form 8804.

pay to the IRS.

investment in U.S. real property), and

Applicable percentage.—For partners

other items of partnership income

A partnership must annually provide

taxed as corporations, the section 1446

treated as effectively connected under

foreign partners with a copy of Form

applicable percentage is 35%. For

other provisions of the Internal Revenue

8805 even if no section 1446

partners not taxable as corporations

Code, regardless of whether those

withholding tax is paid. Send Form 8805

(e.g., partnerships, individuals, estates),

amounts are taxable to the partner.

to the foreign partner by the due date of

the applicable percentage is 39.6%.

the partnership return (including

Amount Allocable to Foreign

When to make the payments.—Make

extensions).

Partners

payments of the withholding tax under

section 1446 with Form 8813 by its due

Interest and Penalties

The amount of a partnership’s effectively

date during the tax year of the

connected taxable income for the

Interest and penalties are described

partnership in which the income is

partnership’s tax year allocable to a

below. If the partnership files Form 8804

earned. Generally, pay any additional

foreign partner under section 704 equals

or Forms 8805 late, fails to furnish

amounts due when filing Form 8804.

(a) the foreign partner’s distributive share

correct Forms 8805, or fails to pay the

However, if the partnership files Form

of effectively connected gross income of

tax when due, it may be liable for

2758 to request an extension of time to

the partnership for the partnership’s tax

penalties and interest unless it can show

file Form 8804, pay the balance of

year that is properly allocable to the

that failure to file or pay was due to

section 1446 withholding tax estimated

partner under section 704, minus (b) the

reasonable cause and not willful neglect.

to be due with Form 2758.

foreign partner’s distributive share of

deductions of the partnership for that

Interest

Coordination With Other

year that are connected with that

Withholding Rules

Interest is charged on taxes not paid by

income under section 873 or section

the due date, even if an extension of

882(c)(1). This income will be figured to

Interest, dividends, etc.—Fixed or

time to file is granted. Interest is also

take into account any adjustments to

determinable, annual or periodical

charged on penalties imposed for failure

the basis of the partnership property

income subject to tax under section

to file, negligence, fraud, and substantial

described in section 743 according to

871(a) or 881 is not included in the

understatements of tax from the due

the partnership’s election under section

partnership’s effectively connected

date (including extensions) to the date of

754. Also, a partnership’s effectively

taxable income under section 1446.

payment. The interest charge is figured

connected taxable income will not be

However, these amounts are

at a rate determined under section 6621.

allocable to a foreign partner to the

independently subject to withholding

extent the amounts are exempt from

Page 3

Instructions For Forms 8804, 8805, And 8813 - 1994 Page 3

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