U.S. Individual Income Tax Return

Instructions for Form 8858
(Rev. December 2013)

Department of the Treasury
Internal Revenue Service

(Use with the December 2013 revision of Form 8858 and the December 2012
revision of Form 8858 (Schedule M).)
Information Return of U.S. Persons
With Respect To Foreign Disregarded Entities
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Form 8858,
Schedule M (Form 8858), and their
instructions, such as legislation enacted
after they were published, go to
www.irs.gov/form8858.

What's New

A foreign disregarded entity (FDE)
with multiple direct owners is now
required to attach a statement to Form
8858. See the instructions for line 4,
later.
The filing requirements for an owner
of a qualified business unit (QBU)
arising from the activities of an FDE
have been clarified. See the instructions
for Schedule C-1, later.

General Instructions
Purpose of Form

Form 8858 is used by certain U.S.
persons that own an FDE directly or, in
certain circumstances, indirectly or
constructively. See U.S. Person Filing
Form 8858, later. The form and
schedules are used to satisfy the
reporting requirements of sections
6011, 6012, 6031, and 6038, and
related regulations.

Who Must File

The following U.S. persons that are tax
owners of FDEs (see definitions
below), or that own certain interests in
foreign tax owners of FDEs, must file
Form 8858.
1. U.S. Persons That Are Tax Owners
of FDEs at any time during the U.S.
person's taxable year or annual
accounting period. Complete the entire
Form 8858, but do not complete the
separate Schedule M (Form 8858),
Transactions Between Foreign
Disregarded Entity of a Foreign Tax
Owner and the Filer or Other Related
Entities.

Nov 21, 2013

2. Certain U.S. Persons That Are Re­
quired To File Form 5471 With Re­
spect To a Controlled Foreign Cor­
poration (CFC) That is a Tax Owner
of an FDE at any time during the CFC's
annual accounting period:
Category 4 filers of Form 5471.
Complete the entire Form 8858 and the
separate Schedule M (Form 8858).
Category 5 filers of Form 5471.
Complete only the identifying
information on page 1 of Form 8858 (for
example, everything above Schedule C)
and Schedules G and H on page 2 of
Form 8858. Do not complete the
separate Schedule M (Form 8858).
3. Certain U.S. Persons That Are Re­
quired To File Form 8865 With Re­
spect To a Controlled Foreign Part­
nership (CFP) That is a Tax Owner of
an FDE at any time during the CFP's
annual accounting period:
Category 1 filers of Form 8865.
Complete the entire Form 8858 and the
separate Schedule M (Form 8858).
Category 2 filers of Form 8865.
Complete only the identifying
information on page 1 of Form 8858 (for
example, everything above Schedule C)
and Schedules G and H on page 2 of
Form 8858. Do not complete the
separate Schedule M (Form 8858). You
are not required to complete Form 8858
if there is a Category 1 filer of Form
8865 that completes the entire Form
8858 and separate Schedule M (Form
8858) with respect to the FDE.
Note. Complete a separate Form 8858
and all applicable schedules for each
FDE.

Exceptions To Filing Form 8858
Multiple filers of the same informa­
tion. In the case of Category 4 or 5
filers of Form 5471 or Category 1 filers
of Form 8865 who are also required to
file Form 8858, one person may file
Form 8858 and Schedule M (Form
8858), if applicable, for other persons
who have the same filing requirements
Cat. No. 38123Q

with respect to both Form 8858 and
Form 5471 or Form 8865. If you and one
or more other persons are required to
furnish information for the same FDE for
the same period, this information may
be included with or attached to, and
filed in the same manner as, the multiple
filer information provided with respect to
the CFC or the CFP. See Multiple filers
of same information in the Form 5471
instructions or Multiple Category 1 filers
in the Form 8865 instructions.

When and Where To File

Form 8858 is due when your income tax
return or information return is due,
including extensions. If you are the tax
owner of the FDE, attach Form 8858
and the separate Schedule M (Form
8858), if required, to your income tax
return or information return. If you are
not the tax owner of the FDE, attach
Form 8858 to any Form 5471 or Form
8865 you are filing with respect to the
CFC or the CFP that is the tax owner of
the FDE.

Definitions
U.S. Person

A U.S. person is:
A citizen or resident alien of the
United States (see Pub. 519, U.S. Tax
Guide for Aliens, for guidance on
determining resident alien status),
A domestic partnership,
A domestic corporation,
Any estate (other than a foreign
estate, within the meaning of section
7701(a)(31)(A)), and
Any domestic trust.
A domestic trust is any trust if:
1. A court within the United States is
able to exercise primary supervision
over the administration of the trust and
2. One or more U.S. persons have
the authority to control all substantial
decisions of the trust.

U.S. Person Filing Form 8858
The U.S. person filing Form 8858 is any
U.S. person that:

Is the tax owner of an FDE.
Owns a specified interest in an FDE
indirectly or constructively through a
CFC or a CFP. See items 2 and 3 of
Who Must File, earlier, for more detailed
information.
Throughout these instructions, when
the pronouns “you” and “your” are used,
they are used in reference to the U.S.
person filing Form 8858.

Foreign Disregarded Entity
(FDE)

An FDE is an entity that is not created or
organized in the United States and that
is disregarded as an entity separate
from its owner for U.S. income tax
purposes under Regulations sections
301.7701-2 and 301.7701-3. See the
instructions for Form 8832, Entity
Classification Election, for more
information.
An eligible entity uses Form 8832 to
elect how it will be classified for federal
tax purposes. A copy of Form 8832 is
attached to the entity's federal tax return
for the tax year of the election; however,
special rules apply if the entity is not
required to file a tax return. For more
information, see Where To File in the
instructions for Form 8832.
Note. Rules, effective September 28,
2009, allow an eligible entity to request
a late entity classification election. See
Rev. Proc. 2009-41, 2009-39 I.R.B. 439
for more information.

Tax Owner of FDE

The tax owner of the FDE is the person
that is treated as owning the assets and
liabilities of the FDE for purposes of
U.S. income tax law.

Direct Owner of FDE

The direct owner of an FDE is the legal
owner of the disregarded entity.
For example, assume A, a U.S.
individual, is a 60% partner of CFP, a
controlled foreign partnership. FDE 1 is
an FDE owned by CFP, and FDE 2 is an
FDE owned by FDE 1. In this example,
FDE 1 is the direct owner of FDE 2, and
CFP is the direct owner of FDE 1. CFP
is the tax owner with respect to both
FDE 1 and FDE 2. A would be required
to file the Forms 8858 relating to FDE 1
and FDE 2 with the Form 8865 it files
with respect to CFP.

Penalties
Failure to file information required
by section 6038(a) (Form 8858 and
Schedule M (Form 8858)).

A $10,000 penalty is imposed for
each annual accounting period of each
CFC or CFP for failure to furnish the
required information within the time
prescribed. If the information is not filed
within 90 days after the IRS has mailed
a notice of the failure to the U.S. person,
an additional $10,000 penalty (per CFC
or CFP) is charged for each 30-day
period, or fraction thereof, during which
the failure continues after the 90-day
period has expired. The additional
penalty is limited to a maximum of
$50,000 for each failure.
Any person who fails to file or report
all of the information required within the
time prescribed will be subject to a
reduction of 10% of the foreign taxes
available for credit under sections 901,
902, and 960. If the failure continues 90
days or more after the date the IRS
mails notice of the failure to the U.S.
person, an additional 5% reduction is
made for each 3-month period, or
fraction thereof, during which the failure
continues after the 90-day period has
expired. See section 6038(c)(2) for
limits on the amount of this penalty.
Criminal penalties. Criminal penalties
under sections 7203, 7206, and 7207
may apply for failure to file the
information required by section 6038.
Note. Any person required to file Form
8858 and Schedule M (Form 8858) who
agrees to have another person file the
form and schedules for him or her may
be subject to the above penalties if the
other person does not file a correct and
proper form and schedule.

Other Reporting
Requirements
Reporting Exchange Rates on
Form 8858

When translating amounts from
functional currency to U.S. dollars, you
must use the method specified in these
instructions. But, regardless of the
specific method required, all exchange
rates must be reported using a
“divide-by convention” rounded to at
least 4 places. That is, the exchange
rate must be reported in terms of the
amount by which the functional currency
amount must be divided in order to
reflect an equivalent amount of U.S.
dollars. As such, the exchange rate
must be reported as the units of foreign
currency that equal one U.S. dollar,
rounded to at least 4 places. Do not
report the exchange rate as the number
of U.S. dollars that equal one unit of
foreign currency.
­2­

Note. You must round the result to
more than 4 places if failure to do so
would materially distort the exchange
rate or the equivalent amount of U.S.
dollars.
Example. During its annual
accounting period, an FDE owned by a
U.S. person had current income of
30,255,400 Yen on Schedule H, line 6.
The Schedule H instructions specify that
the filer must translate these amounts
into U.S. dollars at the average
exchange rate for the tax year in
accordance with the rules of section
989(b). The average exchange rate is
118.5050 Japanese Yen to 1 U.S. dollar
(0.00843846 U.S. dollars to 1 Japanese
Yen). Divide 30,255,400 Yen by
118.5050 to determine the U.S. dollar
amount to enter on line 7 of Schedule H.
Enter 118.5050 after the flush language
following line 7.

Electronic Filing of Form 8858
If you file your income tax return
electronically, see the instructions for
your income tax return for general
information about electronic filing.

Note. If you are filing Form 1120 or
1065 electronically, you must attach
Form 8858 electronically (as an
attachment to your electronically filed
Form 5471, Form 8865, Form 1120, or
Form 1065). If you are filing Form 1040
or Form 1041 electronically (with or
without a Form 5471 or Form 8865),
attach Form 8858 to the applicable
Form 8453.

Computer­Generated Form
8858 and Schedules

A computer-generated Form 8858 and
its schedules may be filed if they
conform to and do not deviate from the
official form and schedules. Generally,
all computer-generated forms must
receive prior approval from the IRS and
are subject to an annual review.
Submit all requests for approval to:
Internal Revenue Service
Attention: Substitute Forms
Program, SE:W:CAR:MP:T:M:S
1111 Constitution Avenue NW
IR-6526 Washington, DC 20224
Important: Be sure to attach the
approval letter to Form 8858.
Every year, the IRS issues a revenue
procedure to provide guidance for filers
of computer-generated forms. In
addition, every year the IRS issues Pub.
1167, General Rules and Specifications
For Substitute Forms and Schedules,
which reprints the most recent

Instructions for Form 8858 (Rev. 12­2013)

applicable revenue procedure. Pub.
1167 is available at www.irs.gov/
pub1167, or can be ordered by calling
1-800-TAX-FORM (1-800-829-3676).

Dormant FDEs

Announcement 2004-4, 2004-4 I.R.B.
357, provides for a summary filing
procedure for filing Form 8858 for a
dormant FDE. A dormant FDE is an
FDE that would be a dormant CFC if it
were treated as a foreign corporation for
U.S. tax purposes.

If you elect the summary procedure,
complete only the identifying information
above Schedule C on page 1 of Form
8858 for each dormant FDE as follows:
The top margin of the summary return
must be labeled “Filed Pursuant to
Announcement 2004-4 for Dormant
FDE.”
Include the name, address,
identifying number, and tax year of the
U.S. person filing Form 8858 (see
definition, earlier).
Include the annual accounting period
of the dormant FDE (below the title of
the form) and complete items 1a
through 1e and 1g.
Complete items 3a through 3d, if
applicable.
Complete items 4a through 4c, if
applicable.
File this summary return in the
manner described in When and Where
To File, earlier.

Specific Instructions
Important: If the information required
in a given section exceeds the space
provided within that section, do not
write “see attached” in the section and
then attach all of the information on
additional sheets. Instead, complete all
entry spaces in the section and attach
the remaining information on additional
sheets. The additional sheets must
conform with the IRS version of that
section.

Identifying Information
Annual Accounting Period

Enter, in the space provided below the
title of Form 8858, the annual
accounting period of the FDE for which
you are furnishing information. The
annual accounting period of an FDE is
the annual accounting period or taxable
year of the tax owner. Therefore, in the
case of a U.S. tax owner, the annual
accounting period of the FDE is the
taxable year of the U.S. tax owner; and
in the case of a CFC or CFP that is a tax

Instructions for Form 8858 (Rev. 12­2013)

owner, the annual accounting period of
the FDE is the annual accounting period
of the CFC or CFP.

Person Filing This Return

In the spaces provided at the top of
page 1 of Form 8858, provide the
identifying information for the U.S.
person filing Form 8858 (see definition,
earlier).
If a U.S. corporation is the U.S.
person filing Form 8858 and is a
member of a consolidated group, list the
common parent as the person filing the
return and enter its identifying
information in the spaces provided at
the top of page 1 of the form.

Name Change

If the name of the person filing the
return, the tax owner, the direct owner,
or the FDE whose activities are being
reported changed within the past 3
years, show the prior name(s) in
parentheses after the current name.

Addresses

Use the following instructions to
complete lines 1a, 2a, 2b, 3a, 4a, and
the entry spaces at the top of page 1 of
the form for the filer's address.
U.S. Addresses. Include the suite,
room, or other unit number after the
street address. If the Post Office does
not deliver mail to the street address
and the U.S. person has a P.O. box,
show the box number instead.
Foreign Addresses. Enter the
information in the following order: city,
province or state, and country. Follow
the country's practice for entering the
postal code, if any. Do not abbreviate
the country name. However, if you are
filing Form 8858 electronically, enter a
valid country code posted on the IRS
website www.irs.gov/countrycodes
instead of the country name.

Identifying Numbers

Use the following instruction to
complete lines 1b, 3c, 4c, and the entry
space at the top of page 1 of the form
for the filer's identifying number. The
identifying number of an individual is his
or her social security number (SSN).
The identifying number of all others is
their employer identification number
(EIN).
If a U.S. corporation is the U.S.
person filing Form 8858 and is a
member of a consolidated group, see
Person Filing This Return, earlier.

­3­

Functional Currency

Use the following instruction to
complete lines 1i, 3e, and 4d.
Enter the entity's functional currency.
See sections 985 and 989, and
Regulations sections 1.985-1(a) through
(c) and 1.989(a)-1(b) for rules for
determining the functional currency of a
QBU and the definition of a QBU.
Hyperinflationary exception. An
entity that otherwise would be required
to use a hyperinflationary currency as its
functional currency must use the U.S.
dollar as its functional currency and
compute income or loss or earnings and
profits using the U.S. dollar approximate
separate transactions method of
accounting (DASTM) under the special
rules of Regulations section 1.985-3.
See Regulations section 1.985-1(b)(2).

Line 1b(2)—Reference ID
Number

A reference ID number (defined below)
is required on line 1b(2) only in cases
where no EIN was entered on line 1b(1)
for the FDE. However, filers are
permitted to enter both an EIN on
line 1b(1) and a reference ID number on
line 1b(2). If applicable, enter the
reference ID number you have assigned
to the FDE identified on line 1a.
A "reference ID number" is a number
established by or on behalf of the U.S.
person identified at the top of page 1 of
the form that is assigned to an FDE with
respect to which Form 8858 reporting is
required. These numbers are used to
uniquely identify the FDE in order to
keep track of the FDE from tax year to
tax year.
The reference ID number must meet
the requirements set forth below.
Note. Because reference ID numbers
are established by or on behalf of the
U.S. person filing Form 8858, there is no
need to apply to the IRS to request a
reference ID number or for permission
to use these numbers.

Requirements

The reference ID number that is entered
in item 1b(2) must be alphanumeric
(defined below) and no special
characters or spaces are permitted. The
length of a given reference ID number is
limited to 50 characters.
For these purposes, the term
"alphanumeric" means the entry can be
alphabetical, numeric, or any
combination of the two.

The same reference ID number must
be used consistently from tax year to tax
year with respect to a given FDE or tax
owner. If for any reason a reference ID
number falls out of use (for example, the
FDE or tax owner no longer exists due
to disposition or liquidation), the
reference ID number used for that FDE
or tax owner cannot be used again for
another FDE or tax owner for purposes
of Form 8858 reporting.
There are some situations that
warrant correlation of a new reference
ID number with a previous reference ID
number when assigning a new
reference ID number to an FDE or tax
owner partnership. For example:
In the case of a merger or acquisition,
a Form 8858 filer must use a reference
ID number which correlates the previous
reference ID number with the new
reference ID number assigned to the
FDE or tax owner.
Under Regulations section
301.6109-1(b)(2)(v), a foreign entity that
makes an entity classification election
on Form 8832 to become an FDE must
have an EIN. For the first year that Form
8858 is required to be filed after an
entity classification election is made on
behalf of the foreign entity on Form
8832, the new EIN must be entered on
line 1b(1) of Form 8858 and the old
reference ID number must be entered
on line 1b(2) of Form 8858. In
subsequent years, a filer may continue
to enter both the EIN on line 1b(1) and
the reference ID number on line 1b(2),
but must enter at least the EIN on
line 1b(1).

section 1.6038-2(e)). If the tax owner is
a CFP, enter the annual accounting
period covered by Form 8865 (as
described in Regulations section
1.6038-3(f)).

Line 3c(2)—Reference ID
Number

A reference ID number (defined earlier)
is required on line 3c(2) only in cases
where no EIN was entered on line 3c(1).
However, filers are permitted to enter
both an EIN on line 3c(1) and a
reference ID number on line 3c(2). If this
tax owner is a CFC, enter the reference
ID number for the CFC from Form 5471
Item 1b(2). If this tax owner is a CFP,
enter the reference ID number for the
CFP from Form 8865 Item F2(b). See
the instructions for line 1b(2) for more
information about the requirements for
the reference ID number.

Line 4

If the FDE has more than one direct
owner, attach a statement to Form 8858
that includes the information requested
on line 4 for each additional direct
owner.

Line 5

You must attach an organizational chart
that includes the following information
with respect to the chain of ownership
between the tax owner and the FDE
and the chain of ownership between the
FDE and all entities in which the FDE
has a 10% or more direct or indirect
interest:

You must correlate the reference ID
numbers as follows: New reference ID
number (space) Old reference ID
number. If there is more than one old
reference ID number, you must enter a
space between each such number. As
indicated above, the length of a given
reference ID number is limited to 50
characters and each number must be
alphanumeric and no special characters
are permitted.

The name and percentage of
ownership of all entities in the chain of
ownership, including partnerships and
entities disregarded as separate from
their owners.
The FDE's position in the chain of
ownership.
The tax classification of all entities in
the chain of ownership (see Form 8832
instructions for tax classification rules
and related definitions).
The country under whose law each
entity is organized.

Note. This correlation requirement
applies only to the first year the new
reference ID number is used.

For these purposes, the rules of
section 958(a) (relating to “direct and
indirect ownership”) apply.

Line 1h—Principal Business
Activity

Each filer of Form 8858 that is
required to file an organizational chart
with respect to more than one FDE may
satisfy this requirement by filing a single
organizational chart that includes the
required information with respect to all
FDEs.

Enter a brief description of the FDE's
principal business activity.

Line 3b

If the tax owner is a CFC, enter the
annual accounting period covered by
Form 5471 (as described in Regulations

­4­

Schedule C

Use Schedule C to report a summary
income statement for the FDE
computed in the FDE's functional
currency in accordance with U.S.
generally accepted accounting
principles (GAAP). Enter in the U.S.
dollar column each line item functional
currency amount translated into dollars
using U.S. GAAP translation rules. If the
FDE does not maintain U.S. GAAP
income statements in U.S. dollars, you
can use the average exchange rate as
determined under section 989(b). The
rate used should be the rate stated on
line 7, Schedule H. If you choose to use
the average exchange rate rather than
the U.S. GAAP translation rules, check
the box above line 1 on Schedule C.
Special rules for DASTM. If the FDE
uses DASTM, the functional currency
column should reflect local
hyperinflationary currency amounts
computed in accordance with U.S.
GAAP. The U.S. dollar column should
reflect such amounts translated into
dollars under U.S. GAAP translation
rules. Differences between this U.S.
dollar GAAP column and the U.S. dollar
income or loss figured for tax purposes
under Regulations section 1.985-3(c)
should be accounted for on Schedule H.
See Special rules for DASTM, under
Schedule H, later.
Line 7. Include on line 7 adjustments
for extraordinary items, prior period
adjustments, and the provision for
income, war profits, and excess profits
taxes deducted in accordance with U.S.
GAAP. The terms “extraordinary items”
and “prior period adjustments” have the
same meaning given to them by U.S.
GAAP (see Opinion No. 30 of the
Accounting Principles Board and
Statement No. 16 of the Financial
Accounting Standards Board).
Important: Differences between this
functional currency amount and the
amount of taxes that reduce E&P (in the
case of an FDE of a CFC) or are
deductible in computing U.S. taxable
income (in the case of an FDE of a U.S.
person or a CFP) should be accounted
for on line 2 or 3 of Schedule H.

Schedule C­1

The activities of an FDE may give rise to
one or more QBUs. Under section 987,
the person treated as the owner of a
QBU arising from the FDE’s activities
may not be the tax owner of the FDE. In
addition, a QBU arising from the
activities of an FDE may be treated as
having multiple owners. For example,
Instructions for Form 8858 (Rev. 12­2013)

the partners of a partnership may, in
certain cases, be treated as owning the
QBU arising from the activities of the
partnership. For further discussion, see
Proposed Regulations section
1.987-1(b).
Complete a separate Schedule C-1
for each owner of each QBU arising
from the activities of the FDE and attach
it to Form 8858. Provide the name and
identifying number of the owner of each
QBU. If an owner would be treated as
owning multiple QBUs, complete a
separate Schedule C-1 with respect to
each QBU of the owner.
However, if the U.S. person filing
Form 8858 knows that the owner of a
QBU has the same functional currency
as a QBU owned by that person, the
U.S. person filing Form 8858 is not
required to complete Schedule C-1 with
respect to that owner’s interest in the
QBU.
If the U.S. person filing Form 8858
does not know and does not have
reason to know the functional currency
of the owner of a QBU, leave column (b)
of lines 1 and 2 blank.

Question 5a

Subject to certain exceptions, a
domestic use of a dual consolidated
loss is not permitted (“domestic use
limitation rule”). A domestic use is
deemed to occur in the year the dual
consolidated loss is included in the
computation of the taxable income of a
consolidated group, unaffiliated dual
resident corporation, or unaffiliated
domestic owner, as applicable. See
Regulations section 1.1503(d)-2.

Question 5b

A domestic use of a dual consolidated
loss is permitted if an exception to the
domestic use limitation rule applies. See
Regulations section 1.1503(d)-6 for
exceptions. For example, a domestic
use election made pursuant to
Regulations section 1.1503(d)-6(d) is
such an exception. If you check “Yes,”
you may need to include a domestic use
election with your U.S. income tax
return.

Question 5c

Special rule for DASTM. If the FDE
uses DASTM, Schedule F should be
prepared and translated into U.S.
dollars according to Regulations section
1.985-3(d), rather than U.S. GAAP.

If a separate unit, as defined under
Regulations section 1.1503(d)-1(b)(4),
incurs a dual consolidated loss after
having contributed to consolidated
taxable income of a group in prior years,
the dual consolidated loss may be used
to offset income of domestic affiliates in
the year of the dual consolidated loss
(limited by the amount of the separate
unit’s prior contribution to the cumulative
consolidated taxable income of the
group (“cumulative register”)). See
Regulations sections 1.1503(d)-4(c)
and 1.1502-21(c).

Schedule G

Schedule H

Schedule F

Use Schedule F to report a summary
balance sheet for the FDE computed
and translated into U.S. dollars in
accordance with U.S. GAAP.

Question 3

If the tax owner of the FDE is claiming a
section 165 loss with respect to
worthless stock or with respect to
certain obligations, see Regulations
section 1.6011-4 for information relating
to a disclosure statement that must be
attached to Form 8858 if certain
requirements are met.

Question 4

If the interest in the FDE is not treated
as a separate unit or as part of a
combined separate unit or the interest in
the FDE is treated as a separate unit or
as part of a combined separate unit but
the separate unit or combined separate
unit does not have a dual consolidated
loss, check “No” to indicate that the
question is not applicable. Otherwise, if
you check “Yes,” enter the amount of
the dual consolidated loss and answer
question 5a.
Instructions for Form 8858 (Rev. 12­2013)

Use Schedule H to report the FDE's
current earnings and profits (E&P) (if the
tax owner is a CFC) or taxable income
(if the tax owner is a U.S. person or a
CFP). Generally, enter the amounts on
lines 1 through 6 in functional currency.

Special rules for DASTM. If the FDE
uses DASTM, enter on line 1 the dollar
GAAP income or (loss) from line 8 of
Schedule C. Enter on lines 2 and 3 the
adjustments made in figuring current
E&P or taxable income for U.S. tax
purposes. Report these amounts in U.S.
dollars. Enter on line 5 the DASTM gain
or loss figured under Regulations
section 1.985-3(d).
Lines 2 and 3. Certain adjustments
must be made to the FDE's line 1 net
book income or (loss) to determine its
current E&P or taxable income. The
adjustments may include those needed
to conform the foreign book income to
­5­

U.S. GAAP and to U.S. tax accounting
principles. If the FDE's books are
maintained in functional currency in
accordance with U.S. GAAP, enter on
line 1 the functional currency GAAP
income or (loss) from line 8 of
Schedule C, rather than starting with
foreign book income, and show
GAAP-to-tax adjustments on lines 2 and
3.
The adjustments may include the
following:
Capital gains and losses.
Depreciation, amortization, and
depletion.
Investment or incentive allowance.
Charges to statutory reserves.
Inventory adjustments. Inventories
must be taken into account according to
the rules of sections 471 (incorporating
the provisions of section 263A) and 472
and the related regulations.
Taxes. See the instructions for
Schedule C, line 7.
Attach a separate schedule that lists
each applicable adjustment item. For
each adjustment item, indicate the
adjustment amount and whether the
amount is a net addition or net
subtraction. The separate schedule
should also show two totals, the total
net additions amount to be entered on
line 2, and the total net subtractions
amount to be entered on line 3.
Line 5. DASTM gain or (loss),
reflecting unrealized exchange gain or
loss, should be entered on line 5 only for
FDEs that use DASTM.
Line 7. Enter the line 6 functional
currency amount translated into U.S.
dollars at the average exchange rate for
the FDE's tax year. See section 989(b).
Report the exchange rate using the
“divide-by convention” specified under
Reporting Exchange Rates on Form
8858, earlier. If the FDE uses DASTM,
enter on line 7 the same amount
entered on line 6.
Blocked income. The E&P or taxable
income of the FDE, as reflected on
Schedule H, must not be reduced by all
or any part of such E&P or taxable
income that could not have been
distributed by the FDE due to currency
or other restrictions or limitations
imposed under the laws of any foreign
country.

Schedule M

Important: In translating the amounts
from functional currency to U.S. dollars,
use the average exchange rate for the
FDE's tax year. See section 989(b).
Report the exchange rate in the entry

space provided at the top of
Schedule M (Form 8858) using the
“divide-by convention” specified under
Reporting Exchange Rates on Form
8858, earlier.
Every U.S. person that is required to
file Schedule M (Form 8858) (see Who
Must File, earlier) must file the schedule
to report the transactions that occurred
during the FDE's annual accounting
period ending with or within the U.S.
person's tax year.
If a U.S. corporation is the U.S.
person filing Schedule M (Form 8858)
and is a member of a consolidated
group, list the common parent as the
U.S. person filing Schedule M (Form
8858).
Reference ID number. A reference ID
number for the FDE identified on
Schedule M (Form 8858), is required if
no EIN is provided. However, filers are
permitted to provide both an EIN and
reference ID number. For more
information on the reference ID number,

see the instructions for line 1b(2) of
Form 8858, earlier.
Column headings. There are 2 sets of
column headings above lines 1 through
19. The first set of column headings is to
be used in cases where the tax owner is
a CFP. The second set of column
headings is to be used in cases where
the tax owner is a CFC. If you are
completing Schedule M (Form 8858) for
an FDE for which the tax owner is a
CFP, check the box for CFPs and
complete lines 1 through 19 using the
headings in columns (a) through (e) of
the CFP set of columns. If you are
completing Schedule M (Form 8858) for
an FDE for which the tax owner is a
CFC, check the box for CFCs and
complete lines 1 through 19 using the
headings in columns (a) through (f) of
the CFC set of columns.
Column (e). Use column (e) to report
transactions between the FDE and any
U.S. person with a 10% or more direct
interest in the CFP or any 10% or more

U.S. shareholder of any corporation
controlling the CFC. If you are a
Category 1 filer of Form 8865, or a
Category 4 filer of Form 5471, do not
report transactions between yourself
and the FDE under column (e). Report
the transactions only under column (b).
Line 6. Report on line 6 dividends
received by the FDE that were not
previously taxed under subpart F in the
current year or in any prior year.
Lines 18 and 19. Report on lines 18
and 19 the largest outstanding balances
during the year of gross amounts
borrowed from, and gross amounts
loaned to, the related parties described
in columns (b) through (f). Do not enter
aggregate cash flows, year-end loan
balances, average balances, or net
balances. Do not include open account
balances resulting from sales and
purchases reported under other items
listed on Schedule M (Form 8858) that
arise and are collected in full in the
ordinary course of business.

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the
United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to
allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless
the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long
as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.
The time needed to complete and file this form and related schedules will vary depending on individual circumstances. The
estimated burden for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in
the estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers who
file this form is shown below.
Learning about the
law or the form

Preparing and sending
the form to the IRS

Form

Recordkeeping

8858

17 hr., 56 min.

4 hr., 10 min.

4 hr., 38 min.

24 hr., 9 min.

6 min.

30 min.

Sch. M (Form 8858)

If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related
schedules simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

­6­

Instructions for Form 8858 (Rev. 12­2013)