Instructions For Schedule P (Form 1120-F) - 2007 (Page 2 of 4) in pdf

share of interest expense is reported on

the United States unless the corporation

(Form 1065), Part III, line 1, Ordinary

Schedule P (Form 1120-F), line 17 (Total

also owns a direct interest in the

business income (loss); line 2, Net rental

column), and on Schedule I (Form

lower-tier partnership. The corporation’s

real estate income (loss); and line 3,

1120-F), line 8, column (b). The average

distributive share of ECI earned through

Other net rental income (loss). Enter the

value of partnership liabilities reported on

lower-tier partnership interests is

combined amount in the column in Part II

Schedule P (Form 1120-F) and Schedule

includable on the Schedule K-1 (Form

which corresponds to the line in Part I on

I (Form 1120-F) does not include the

1065) reportable to the corporation by the

which the partnership is listed. The

partnership liabilities that give rise to

partnership in which the corporation owns

amount entered on line 1 is grouped into

directly allocable interest expense under

a direct interest, whether or not the

its gross income and gross expense

Temporary Regulations section

directly owned partnership is itself directly

components for allocation and

1.882-5T(a)(1)(ii)(B), reportable on

engaged in trade or business within the

apportionment to ECI and non-ECI under

Schedule P (Form 1120-F), line 14b. The

United States.

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

average value of the partner’s outside

income apportionments are shown on line

Schedule P (Form 1120-F)

basis apportioned to ECI is reported on

3, and the allocation and apportionments

accommodates reporting for four

Schedule P (Form 1120-F), line 19, and

of non-interest expenses are determined

directly-owned partnership interests.

as a U.S. asset on Schedule I (Form

under Regulations sections 1.861-8 and

Complete a separate line in Part I, and

1120-F), line 5, column (b).

1.861-17 and Temporary Regulations

the corresponding columns in Parts II and

section 1.861-8T(c). See Regulations

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

III, for each directly owned partnership

section 1.861-17 for the allocation and

interest. If the corporation directly owns

II and Part IV. The corporation’s

ECI apportionment treatment of research

more than four partnership interests

distributive share of non-interest

and experimentation expenditures that

expenses included on Schedule P, lines 4

which are required to be reported on

are included in trade or business income

Schedule P (Form 1120-F), report the

and 5 is also included in the corporation’s

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

overall allocation and apportionment of

required information for those additional

are also reportable on Schedule P (Form

expenses on Schedule H (Form 1120-F),

partnership interests on attached

1120-F), lines 4 and 5.

separate sheets using the same size and

Part IV, lines 39 through 42, if the

partnership books constitute set(s) of

format as shown on the schedule. Also, in

Lines 2 through 5. Gross income

the “Totals” column of Parts II and III,

(loss). Enter on line 2 the total gross

books that are also reportable on Form

enter the sum of all directly owned

1120-F, Schedule L or the partnership

income included in Schedule P (Form

interest is recorded on Schedule L books

partnership interests, including those

1120-F), line 1. On line 3, enter the

interests reported on attached sheets.

of the corporation’s own separate trade or

amount of ECI included in the gross

business within the United States. If the

income reported on line 2. If all of the

Entities treated as partnerships for tax

gross income reported on line 2 is ECI,

partnership interest is not reported on

purposes include Limited Liability

Schedule L, the distributive share of

then report the same number on line 3.

Partnerships (LLPs) and Limited Liability

partnership expenses allocable to the

Companies (LLCs) that are not classified

Note. Line 3 may exceed line 2 if losses

corporation’s distributive share of ECI is

as corporations for federal income tax

included in line 2 are non-ECI and the

included on Schedule H (Form 1120-F) in

purposes. Do not include any interest in

income and gains are ECI.

Parts I and Part II. See the instructions for

any entity treated as a disregarded entity

Non-interest expense. Enter on line

Schedule H (Form 1120-F).

as described under Regulations section

4 the total amount of non-interest

301.7701-2(c)(2).

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

expense included on line 1. On line 5,

The corporation’s distributive share of

enter the amount of non-interest expense

Part II – Foreign Partner

partnership income may be reported on

included on line 1 that is allocated and

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

Income and Expenses:

apportioned to ECI. Include on line 4 (and

9 (domestic partnerships) and line 10

line 5 if applicable), guaranteed payments

Reconciliation to Schedule

(foreign partnerships) in accordance with

made by the partnership that are included

the corporation’s reporting on its

in the combined net income (loss)

K-1 (Form 1065)

applicable financial statements for

reported on line 1. Interest expense

Schedule M-3 (Form 1120-F) purposes.

Part II reconciles the partner’s ECI and

included in line 1 is subject to allocation

See the instructions for Schedule M-3

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

under Regulations section 1.882-5 and is

(Form 1120-F), Part II, lines 9 and 10 for

distributive share from each partnership

reported in a separate grouping of the

determining the applicable financial

listed in Part I. The Schedule K-1 lines

corporation’s distributive share of all

statement.

are grouped for reconciliation of their

interest expense on Schedule P (Form

income and expense in the following

1120-F), line 12.

Part I – List of Foreign

manner:

•

Lines 6 Through 9. Other Gross

Schedule P, lines 1 through 5: ECI and

Partner Interests in

non-ECI reconciliation of income and

Income and Other Non-Interest

Partnerships

non-interest expenses from Schedule K-1

Expenses

(Form 1065), lines 1 through 3.

In Part I, list the name, address and

•

Other gross income. Enter on line 6 all

Schedule P, lines 6 through 9:

Employer Identification Number of each

other gross income from Schedule K-1

Reconciliation of other income and other

directly owned partnership interest that

(Form 1065) that is not included on lines

non-interest expenses from Schedule K-1

has effectively connected income

1 through 3 of the Schedule K-1 (and is

(Form 1065).

included in the partner’s distributive share

•

not reportable on line 2 of Schedule P).

Schedule P, lines 10 and 11: Total

on Schedule K-1 (Form 1065). Also

On line 7, enter the amount of gross

gross income and total gross ECI from

include in the list of partnership interests

income from line 6 that is allocated and

Schedule K-1 (Form 1065).

any interest in a partnership that is not

•

apportioned to ECI.

Schedule P, lines 12 through 14:

engaged in trade or business within the

Reconciliation of total interest expense

Note. The amount on line 7 may exceed

United States if the corporation treats

from Schedule K-1 (Form 1065).

the amount on line 6 if losses included on

some or all of its distributive share as ECI

line 6 are allocated to non-ECI and other

Lines 1 Through 5. ECI and

with a separate trade or business of its

gross income and gains are allocated to

own within the United States. Do not

Non-ECI Reconciliation of

ECI.

report on Schedule P any indirectly

Income and Non-Interest

owned partnership interests (lower-tier

Other non-interest expense. Enter on

Expenses

partnership interests) that have income

line 8 all other non-interest expense from

effectively connected with the lower-tier

Line 1. Enter on line 1 the combined

Schedule K-1 (Form 1065) that is not

partnership’s own trade or business within

total income (loss) from Schedule K-1

included on lines 1 through 3 of the

-2-

Instructions For Schedule P (Form 1120-F) - 2007 Page 2

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