Instructions For Schedule P (Form 1120-F) - 2007 Page 4
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4Schedule K-1 (Form 1065) on this
proportion of U.S. assets to total assets of
need not file Schedule P and report its
Schedule P (Form 1120-F).
the partnership is determined as if the
distributive share of income and
partnership were a foreign corporation
expenses with its Form 1120-F. However,
Line 20. Outside Basis Election
engaged in trade or business within the
if it is later determined that the
Method. Enter “income” or “asset” on
United States. Generally, a partner’s
corporation’s distributive share of
line 20 to indicate the elective outside
proportionate share of a partnership asset
partnership income is ECI with a trade or
basis apportionment method used to
is the same as its proportionate share of
business of the corporation, the
determine the amount of the corporation’s
all items of income, gain, loss, and
corporation will have failed to make a
outside basis in its partnership interests
deduction that may be generated by the
timely income method or asset method
apportioned to ECI and reported on line
asset. See Regulations section
election with respect to such partnership
19. The allocation method is subject to a
1.884-1(d)(3)(ii)(B) for non-uniform
for outside basis apportionment purposes
five-year minimum period election that
treatment of certain partnership items.
if no other election disclosure is made. To
must be made in the first year the partner
preserve the right to allocate and
Income method. Under the income
has a distributive share of ECI included in
apportion its outside basis under a
method, a partner’s interest in a
the income reported on Schedule K-1
chosen method, the corporation may
partnership shall be treated as a U.S.
(Form 1065). The elective method chosen
make a protective election by filing
asset in the same proportion that its
must be used for both branch profits tax
Schedule P (Form 1120-F) and
distributive share of partnership ECI for
and interest expense allocation purposes
completing Part I and line 20 with the
the partnership’s tax year that ends with
during the same five-year minimum
protective return filing on Form 1120-F.
or within the partner’s tax year bears to its
period.
The protective election is effective only for
distributive share of all partnership
Asset method. In general, a
a year in which a Schedule P (Form
income for that tax year.
partner’s interest in a partnership shall be
1120-F) protective election attachment is
Protective election. If the
treated as a U.S. asset in the same
also the first year in which the
corporation files a protective tax return
proportion that the sum of the partner’s
corporation’s distributive share is in fact
under Regulations section
proportionate share of the adjusted bases
ECI with a trade or business of the
1.882-4(a)(3)(vi), and the partnership is
of all partnership assets as of the
corporation within the United States. The
not engaged in trade or business within
determination date, bears to the sum of
corporation need not complete Part II or
the United States or does not have
the partner’s proportionate share of the
Part III lines 15 through 19 with the
business profits attributable to a U.S.
adjusted bases of all partnership assets
protective election.
permanent establishment, the corporation
as of the determination date. The
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