1120-F Schedule P Instructions for Form 1120-F Schedule P

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2023

Instructions for Schedule P
(Form 1120-F)

Department of the Treasury
Internal Revenue Service

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List of Foreign Partner Interests in Partnerships
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Schedule P
(Form 1120-F) and its instructions, such
as legislation enacted after they were
published, go to IRS.gov/Form1120F.

General Instructions

Purpose of Schedule

Schedule P (Form 1120-F) is used to (1)
identify and reconcile the foreign
corporation's directly held partnership
interests with the distributive shares of
partnership effectively connected income
(ECI), or expenses allocable to ECI, and
the foreign corporation's effectively
connected outside tax basis in each
interest, and/or (2) report information
regarding a foreign corporate partner's
transfer of an interest in a partnership and
the calculation of gain or loss on the
transfer when the partnership directly or
indirectly either is engaged in the conduct
of a trade or business within the United
States or holds any U.S. real property
interests (see sections 864(c)(8) and
897(g)).

Part I is used to identify all partnership
interests the foreign corporation directly
owns from which it has a distributive share
of income or loss that is effectively
connected with a trade or business within
the United States.
Part II is used to reconcile the foreign
corporation's distributive share of ECI and
allocable expenses with the total income
and expenses reported to it on
Schedule K-3 (Form 1065), Partner's
Share of Income, Deductions, Credits, etc.
– International.
Part III is used as follows. The
corporation's outside basis in its directly
held partnership interests that include ECI
in the corporation's distributive share is
apportioned between ECI and non-ECI
under Regulations section 1.884-1(d)(3) to
determine the average value treated as a
U.S. asset for interest expense allocation
purposes under Regulations section
1.882-5. The apportionment of the outside
basis to ECI as of the current and prior tax
year end is also taken into account in
Dec 7, 2023

determining the average apportioned
value included in the corporation's U.S.
assets for purposes of computing the
branch profits tax. The U.S. assets and
partner share of booked liabilities and
interest expense of the partnership are
also coordinated with the interest expense
allocation computations reported on
Schedule I (Form 1120-F).
Parts IV and V are used to report
information regarding a foreign corporate
partner's transfer of an interest in a
partnership and the calculation of gain or
loss on the transfer when the partnership
directly or indirectly either is engaged in
the conduct of a trade or business within
the United States or holds any U.S. real
property interests. See sections 864(c)(8)
and 897(g).

Who Must Complete
Schedule P

A foreign corporation that is directly or
indirectly engaged in a trade or business
within the United States is required to file
Schedule P (Form 1120-F) for all directly
owned partnership interests that have
gross ECI, and/or expenses allocable to
gross ECI, included in its distributive share
of income reported to the corporation on
Schedule K-3 (Form 1065). If the foreign
corporation treats any of its distributive
share of partnership net income or loss
from a partnership that is not engaged in a
trade or business within the United States
as ECI with another trade or business of
the corporation, the corporation's entire
distributive share of items of income and
expense from any such partnership must
also be reconciled between ECI and
non-ECI and reported on Schedule P.
A foreign corporation may be engaged
in a trade or business within the United
States either directly through its own
non-partnership related activities or
indirectly, including through the activities
of one or more partnerships in which the
corporation owns a partnership interest. In
addition, if a corporation owns an interest
in a partnership that is itself deemed
engaged in a trade or business within the
United States as a result of the
partnership's own directly or indirectly
owned interest in another partnership
(“lower-tier partnership”), the corporation
is also treated as engaged in a trade or
business as a result of its direct and
Cat. No. 50608W

indirect ownership of such interests. See
section 875(1). The foreign corporation's
distributive share of income from a
domestic partnership and certain foreign
partnership interests is reported to the
partner on Schedule K-3 (Form 1065),
together with the corporation's allocable
share of partnership liabilities. If the
partnership is engaged in a trade or
business directly or indirectly through a
lower-tier partnership and has ECI to
report in the distributive share of a foreign
partner, it is responsible for making
quarterly installment payments of
withholding tax under section 1446 on the
foreign partner's allocable share of
estimated effectively connected taxable
income (ECTI) and reporting to the foreign
partner, on Form 8805, Foreign Partner’s
Information Statement of Section 1446
Withholding Tax, the amounts of ECTI and
section 1446(a) tax withheld for the tax
year.

A foreign corporation must also
complete Schedule P if it transfers an
interest in a partnership that directly or
indirectly either is engaged in the conduct
of a trade or business within the United
States or holds any U.S. real property
interests. Unless an exception applies, the
transferee of that partnership interest must
withhold tax on the amount realized on the
transfer and report on Form 8288-A,
Statement of Withholding on Certain
Dispositions by Foreign Persons, the
amount realized and the amount of section
1446(f) tax withheld on the transfer.

Exceptions From Filing
Schedule P

Do not file Schedule P if none of the
distributive shares from any of the
corporation's partnership interests include
ECI, or expenses allocable to ECI, and
there has not been a transfer of an interest
in a partnership that directly or indirectly
either is engaged in the conduct of a trade
or business within the United States or
holds any U.S. real property interests. A
foreign corporation that has ECI reported
to it from a partnership is not required to
complete Parts II and III if, pursuant to an
applicable income tax treaty, none of the
corporation's business profits including its
ECI from the partnership are attributable to
a U.S. permanent establishment, and the
corporation files a protective tax return

under Regulations section 1.882-4(a)(3)
(vi). A foreign corporation that transfers an
interest in a partnership that directly or
indirectly is engaged in a U.S. trade or
business is not required to complete Parts
IV and V if, pursuant to an applicable
income tax treaty, all of the gain or loss
from the transfer of the partnership interest
is attributable to assets, other than real
property, that do not form part of a U.S.
permanent establishment, and the
corporation files a protective tax return
under Regulations section 1.882-4(a)(3)
(vi). If you have ECI, gain, or loss that is
exempt pursuant to an applicable income
tax treaty, you must still complete Part I.
See also the instructions for Form 8833.

of the partner's outside basis used to
determine the proportion of the
partnership interest treated as a U.S. asset
is reported on Schedule P (Form 1120-F),
line 13, and as a U.S. asset on Schedule I
(Form 1120-F), line 5, column (b).
Schedule H (Form 1120-F), Part I, Part
II, and Part IV. The corporation's
distributive share of non-interest expenses
included on Schedule P, line 4, is also
included in the corporation's overall
allocation and apportionment of expenses
on Schedule H (Form 1120-F), Part IV,
lines 38a through 41, if the partnership
books constitute a set(s) of books that are
also reportable on Form 1120-F,
Schedule L or the partnership interest is
recorded on the Schedule L books of the
corporation's own separate trade or
business within the United States. If the
partnership interest is not reported on
Schedule L, the distributive share of
partnership expenses allocable to the
corporation's distributive share of ECI is
included on Schedule H (Form 1120-F) in
Parts I and II. See the Instructions for
Schedule H (Form 1120-F).

distributive share as ECI with a separate
trade or business of its own within the
United States. Do not report on
Schedule P any indirectly owned
partnership interests (lower-tier
partnership interests) that have income
effectively connected with the lower-tier
partnership's own trade or business within
the United States unless the corporation
also owns a direct interest in the lower-tier
partnership. The corporation's distributive
share as ECI earned through lower-tier
partnership interests is includible on the
Schedule K-3 (Form 1065) reportable to
the corporation by the partnership in which
the corporation owns a direct interest,
whether or not the directly owned
partnership is itself directly engaged in a
trade or business within the United States.

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Protective election on Schedule P.
See Protective election, later, for
instructions for making a protective
partnership outside basis apportionment
election with a protective return filing of
Form 1120-F.

When and Where To File

Attach Schedule P (Form 1120-F) to the
foreign corporation's Form 1120-F income
tax return. See the Instructions for Form
1120-F for the time, place, and manner for
filing the foreign corporation's income tax
return.

Other Forms and
Schedules Related to
Schedule P

Form 1120-F, Section II. Gross ECI
includible in the corporation's distributive
share is reportable on Form 1120-F,
Section II, lines 3 through 10, in the
applicable category of income. Expenses
(other than interest expense) that are
deductions allocated and apportioned on
Schedule P (Form 1120-F) to the partner's
ECI are also reported on Form 1120-F,
Section II.
Schedule I (Form 1120-F). A portion of
the interest expense reportable on
Schedule P is includible in the
corporation's interest expense allocation
computation under Regulations section
1.882-5. The corporation's distributive
share of interest expense that is directly
allocable to ECI under Regulations section
1.882-5(a)(1)(ii)(B) is reported on
Schedule P, line 7, and on Schedule I
(Form 1120-F), line 22. A portion of the
corporation's distributive share of interest
expense that is reported on Schedule P,
line 8, is reported on Schedule I (Form
1120-F), line 9, column (b). The average
value of partnership liabilities the
corporation includes in the determination
of its outside basis for purposes of
determining the proportion of the
partnership interest treated as a U.S. asset
is reported on Schedule P (Form 1120-F),
line 11 (Total column). The average value

Schedule M-3 (Form 1120-F), Part II.
The corporation's distributive share of
partnership income or loss may be
reported on Schedule M-3 (Form 1120-F),
Part II, line 9 (domestic partnerships) and
line 10 (certain foreign partnerships), in
accordance with the corporation's
reporting on its applicable financial
statements for Schedule M-3 (Form
1120-F) purposes. See the instructions for
Schedule M-3 (Form 1120-F), Part II, lines
9 and 10, for the specific reporting
requirements.
Form 8990, Limitation on Business Interest Expense Under Section 163(j).
Business interest expense includes any
interest paid or accrued on indebtedness
properly allocable to a trade or business.
Business interest expense is generally
limited to the sum of business interest
income, 30% of the adjusted taxable
income, and floor plan financing interest.
Form 8990 is required, unless an
exception for filing is met. For more
information, see section 163(j), Form
8990, and the Instructions for Form 8990.

Part I—List of Foreign
Partner’s Interests in
Partnerships

In Part I, list the name, address, and
employer identification number (EIN) of
each directly owned partnership interest
that has ECI included in the partner's
distributive share on Schedule K-3 (Form
1065). Also include in the list of
partnership interests any interest in a
partnership that is not engaged in a trade
or business within the United States if the
corporation treats some or all of its
-2-

Schedule P (Form 1120-F)
accommodates reporting for four directly
owned partnership interests. Complete a
separate line in Part I, and the
corresponding columns in Parts II and III,
for each directly owned partnership
interest. If the corporation directly owns
more than four partnership interests which
are required to be reported on Schedule P
(Form 1120-F), report the required
information for those additional
partnership interests on attached separate
sheets using the same size and format as
shown on the schedule. Also, in the
“Totals” column of Parts II and III, for each
line item, enter the sum for all directly
owned partnership interests, including
those interests reported on attached
sheets.
Entities treated as partnerships for tax
purposes include limited liability
partnerships (LLPs) and limited liability
companies (LLCs) that are not classified
as corporations for federal income tax
purposes and may be domestic or foreign.
Do not include any interest in any entity
treated as a disregarded entity as
described under Regulations section
301.7701-2(c)(2).

Column (d). With respect to each
partnership interest, check the “Yes” box if
the foreign corporation's distributive share
is ECI, or treated as ECI, in whole or in
part, with a U.S. trade or business
determined under section 875.
Accordingly, with respect to each
partnership interest, check the “Yes” box if
the foreign corporation is engaged in a
U.S. trade or business indirectly through
the activities of the partnership. Check the
“No” box if the foreign corporation has
applied ECI principles solely at the partner
level and not as a result of the
partnership's activities.

Instructions for Schedule P (Form 1120-F) (2023)

Part II—Foreign Partner’s
Income and Expenses:
Reconciliation to
Schedule K-3 (Form 1065)

Part II reconciles the partner's ECI to its
Schedule K-3 (Form 1065) distributive
share from each partnership listed in Part
I. The Schedule K-3 lines are grouped for
reconciliation of their income and expense
in the following manner.
• Schedule P, lines 1 through 6: Total
gross income and gross ECI, and related
deductions and losses, from Schedule K-3
(Form 1065), Part X.
• Schedule P, line 7: Interest expense
directly allocable under Regulations
section 1.882-5(a)(1)(ii)(B).
• Schedule P, line 8: Interest expense on
U.S.-booked liabilities as described under
Regulations section 1.882-5(d)(2)(vii) from
Schedule K-3 (Form 1065), Part X,
Section 2, line 7, column (b).

Part III—Foreign Partner's
Average Outside Basis
Under Regulations
Sections 1.882-5(b) and
1.884-1(d)(3)

Report in Part III the corporation's outside
basis for each partnership interest
identified in Part I of this Schedule P (Form
1120-F) for purposes of determining the
amount the corporation includes as a U.S.
asset in Step 1 of the interest expense
allocation under Regulations section
1.882-5. The corporation's outside basis in
its partnership interests reported on
Schedule P is determined and adjusted
under the rules applicable to the
determination of the corporation's outside
basis in the partnership for branch profits
tax purposes under Regulations section
1.884-1(d)(3), except that the amounts
entered on lines 9 through 13 are the
average values rather than the
determination dates used under the
section 884 regulations for branch profits
tax purposes. If the corporation is not
exempt from the branch profits tax under
an applicable income tax treaty, attach a
statement showing the determination of
the corporation's outside basis in
accordance with the requirements of lines
9 through 13 for an averaging period that
shows the apportioned outside basis for
the beginning and ending determination
dates of the corporation's tax year. See
also section 163(j) for rules on how the
trade or business interest limitation may
affect outside basis.

gain or loss from disposition of the
partnership interest.
Line 10a. Adjustment for directly
allocable interest. The outside basis is
reduced by the average amount of
liabilities that give rise to directly allocable
interest expense in accordance with
Regulations section 1.882-5(a)(1)(ii)(B).
Enter the portion of the partnership liability
that is subject to the direct interest
expense allocation rules under Temporary
Regulations section 1.861-10T(b) or (c)
and is subject to exclusion from the
determination of the corporation's average
U.S. asset values under Regulations
section 1.882-5. See Temporary
Regulations section 1.861-10T(d). Be sure
to include amounts from Schedule K-3
(Form 1065), Part X, Section 3, line 3b.

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Line 3. Gross ECI - Partner determination. See the Instructions for
Schedule K-3 (Form 1065), Part X,
Section 1, column (b) for information the
foreign corporate partner can use to
determine the amounts to include on
Schedule P (Form 1120-F), Part II, line 3.

Line 6. Total deductions and losses deductible against gross ECI - Partner
determination. See the Instructions for
Schedule K-3 (Form 1065), Part X,
Section 2, column (b) for information the
foreign corporate partner can use to
determine the amounts to include on
Schedule P (Form 1120-F), Part II, line 6.
Line 7. Interest expense directly
allocable under Regulations section
1.882-5(a)(1)(ii)(B). On line 7, enter the
amount of interest expense that is directly
allocable to ECI under Regulations section
1.882-5(a)(1)(ii)(B) and the applicable
requirements of Temporary Regulations
section 1.861-10T(b) or (c). The amount
entered on line 7 is also included on
Schedule I (Form 1120-F), line 22.
Line 8. Interest expense on
U.S.-booked liabilities as described
under Regulations section 1.882-5(d)
(2)(vii). On line 8, enter the amount of
interest expense that arises from U.S.booked liabilities as described in
Regulations section 1.882-5(d)(2). The
amount on line 8 should generally be the
same amount reported on Schedule K-3
(Form 1065), Part X, Section 2, line 7,
column (b). The amount entered on line 8
is also reported on Schedule I (Form
1120-F), line 9, column (b). A portion of
the line 8 amount is also taken into
account on Form 1120-F, Section III, Part
II, line 8, in determining the corporation's
branch interest under Regulations section
1.884-4(b).

Line 9. Section 705 outside basis.
Enter on line 9 the corporation's average
value of the outside basis (otherwise
determined under section 705) of the
partnership in the column which
corresponds to the line in Part I on which
the partnership interest is listed. The
average value is determined using the
most frequent averaging period for which
data is reasonably available. See
Regulations sections 1.882-5(b)(3) and
1.882-5(c)(2)(iv).
Lines 10a and 10b. Partner liabilities
included in the corporation's outside
basis. The corporation's outside basis
reported on line 9 is adjusted on lines 10a
and 10b to conform the amount of
liabilities the corporation includes in the
determination of its outside basis to the
proportionate amount of the corporation's
distributive share of interest expense with
respect to the partnership's liabilities. This
adjustment is made only for purposes of
determining the corporation's outside
basis included in the interest expense
allocation and branch profits tax
computations. The adjustment is not made
for other federal income tax purposes
such as for determining the corporation's

Instructions for Schedule P (Form 1120-F) (2023)

-3-

Line 10b. Enter the average amount
of the corporation's share of all other
partnership liabilities it otherwise takes
into account under section 752 in
determining its outside basis in its
partnership interest.

Line 11. Enter the corporation's average
partnership liabilities, or portion thereof,
for the year for which the corporation
receives a distributive share of interest
expense for the year. See Regulations
section 1.884-1(d)(3)(vi). The amount on
line 11 should generally be the same
amount reported on Schedule K-3 (Form
1065), Part X, Section 3, line 3a. Also,
enter this line 11 amount on Schedule I
(Form 1120-F), line 8, column (b), to the
extent applicable in determining the
corporation's interest expense deduction
under Regulations section 1.882-5.

Line 12. Partner's adjusted average
outside basis in partnership. Add lines
10d and 11 and enter the amount on
line 12. The amount reported on line 12 is
the corporation's adjusted outside basis
that is eligible for apportionment between
ECI and non-ECI.
Line 13. Partner's outside basis allocable to ECI. Enter on line 13 the
corporation's average outside basis
reported on line 12 that is treated as a U.S.
asset under Regulations sections
1.884-1(d)(3) and 1.882-5. Also enter this
line 13 amount on Schedule I (Form
1120-F), line 5, column (b). See
Regulations section 1.884-1(d)(3)(i) for the
elective requirements for apportioning
outside basis on the income or asset
method. For purposes of determining the
proportion of the partnership interest that
is a U.S. asset, a foreign corporation may
elect separately for each partnership
interest to use either the asset method or
the income method described in
Regulations sections 1.884-1(d)(3)(ii) and
(iii). See the instructions for line 14 below.
If the corporation does not timely elect
either method in the first year the

corporation has a distributive share of ECI
from the partnership, the Director of Field
Operations may make the election on
behalf of the corporation. See Regulations
section 1.884-1(d)(3)(v).
Note. The required timely filed election
under Regulations section 1.884-1(d)(3)
(iv) for apportioning outside basis between
ECI and non-ECI also applies to lower-tier
partnership interests that are not required
to be identified and reconciled to
Schedule K-3 (Form 1065) on Schedule P
(Form 1120-F).

Section 3, lines 2a and 2b to calculate the
asset ratio that is applied to the
Schedule P, line 13 amount.
Protective election. If the
corporation files a protective tax return
under Regulations section 1.882-4(a)(3)
(vi), and the partnership is not engaged in
a trade or business within the United
States or does not have business profits
attributable to a U.S. permanent
establishment, the corporation need not
file Schedule P and report its distributive
share of income and expenses with its
Form 1120-F for purposes of outside basis
apportionment. However, if it is later
determined that the corporation's
distributive share of partnership income is
ECI with respect to a trade or business of
the corporation, the corporation will have
failed to make a timely income method or
asset method election with respect to such
partnership for outside basis
apportionment purposes if no other
election disclosure is made. To preserve
the right to allocate and apportion its
outside basis under a chosen method, the
corporation may make a protective
election by completing Part I, and Part III,
line 14, of Schedule P, and including it with
the protective return filing of Form 1120-F.
The protective election is effective only for
the year in which the protective election is
also the first year in which the
corporation's distributive share is in fact
ECI with a trade or business of the
corporation within the United States. The
corporation need not complete Part II, or
Part III, lines 9 through 13, with the
protective election.

property interests is considered received
from the sale or exchange of U.S. real
property interests. As a result, that portion
of the gain or loss must be included in
determining the foreign corporation’s U.S.
trade or business income.
Complete Parts IV and V only if the
foreign corporation transferred a
partnership interest subject to section
864(c)(8) or 897(g). For more information,
see Partner's Instructions for
Schedule K-3 (Form 1065), Part XIII,
Foreign Partner's Distributive Share of
Deemed Sale Items on Transfer of
Partnership Interest; Pub. 515,
Withholding of Tax on Nonresident Aliens
and Foreign Entities; and Pub. 541,
Partnerships.

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Line 14. Outside basis election method. Check either the "income" box or the
"asset" box on line 14 to indicate the
elective outside basis apportionment
method used to determine the amount of
the corporation's outside basis in its
partnership interests apportioned to ECI
and reported on line 13. The allocation
method is subject to a 5-year minimum
period election that must be made in the
first year the partner has a distributive
share of ECI included in the income
reported on Schedule K-3 (Form 1065).
The elective method chosen must be used
for both branch profits tax and interest
expense allocation purposes during the
same 5-year minimum period. See
Regulations section 1.884-1(d)(3)(iv).

Asset method. In general, a partner's
interest in a partnership shall be treated as
a U.S. asset in the same proportion that
the sum of the partner's proportionate
share of the adjusted bases of all
partnership assets as of the determination
date bears to the sum of the partner's
proportionate share of the adjusted bases
of all partnership assets as of the
determination date. The proportion of U.S.
assets to total assets of the partnership is
determined as if the partnership were a
foreign corporation engaged in a trade or
business within the United States.
Generally, a partner's proportionate share
of a partnership asset is the same as its
proportionate share of all items of income,
gain, loss, and deduction that may be
generated by the asset. Use amounts from
Schedule K-3 (Form 1065), Part X,
Section 3, lines 2a and 2b to calculate the
asset ratio that is applied to the
Schedule P, line 13 amount. See
Regulations section 1.884-1(d)(3)(ii)(B) for
non-uniform treatment of certain
partnership items.
Income method. Under the income
method, a partner's interest in a
partnership shall be treated as a U.S.
asset in the same proportion that its
distributive share of partnership ECI for
the partnership's tax year that ends with or
within the partner's tax year bears to its
distributive share of all partnership income
for that tax year. Use amounts from
Schedule K-3 (Form 1065), Part X,

Parts IV and V

Section 864(c)(8) provides that if a foreign
transferor owns, directly or indirectly, an
interest in a partnership that is engaged in
the conduct of a trade or business within
the United States, gain or loss recognized
by the foreign transferor on the transfer of
all (or any portion) of the interest is treated
as effectively connected gain or effectively
connected loss, limited to the partner’s
allocable share of gain or loss on a
deemed sale gain or loss of the
partnership’s U.S. trade or business
assets. A transfer means a sale,
exchange, or other disposition, and
includes a distribution from a partnership
to a partner to the extent that gain or loss
is recognized on the distribution, as well
as a transfer treated as a sale or exchange
under section 707(a)(2)(B). This
requirement applies to transfers that
occurred on or after November 27, 2017.
Similarly, section 897(g) requires that if
a foreign corporation disposes of an
interest in a partnership that directly or
indirectly holds U.S. real property
interests, the amount received that is
attributable to the partnership’s U.S. real
-4-

Do not report on Part IV the
transfer of any partnership interest
CAUTION listed in Part I for which the “No”
box was checked in column (d). The
transfer of that partnership interest may,
however, be subject to tax under another
provision of the Internal Revenue Code.

!

Complete a separate set of entries in Parts
IV and V for each such transfer. When
completing Parts IV and V, the foreign
corporation should use the information
from Part XIII of the Schedule K-3 (Form
1065) that was issued by the partnership.
If the corporation did not receive a
Schedule K-3 (Form 1065), Part XIII from
the partnership, the corporation will need
to contact the partnership to receive the
relevant information to complete lines 4,
6 ,7, and 10 of Part V.
If the corporation is taking a treaty-based
return position with respect to any amount
reported on Part V, it must attach Form
8833 to Form 1120-F and provide a
detailed explanation.

Part IV—Foreign Partner’s
Interests in Partnerships
Transferred During Tax
Year
Use a separate line for each partnership
interest transferred during the year. If
multiple interests in the same partnership
were transferred during the year, report
each on a separate line. For each entry in
Part IV, complete an entry in Part V. Report
the following information in each column of
Part IV.
Column (a). Before completing column
(a), complete a separate line on Part I for
each partnership whose interest was not
otherwise required to be reported under
those instructions if (1) the transfer of the
interest resulted in gain or loss under
section 864(c)(8) or Regulations section
1.864(c)(8)-1, or (2) the transfer of the
interest resulted in gain or loss solely
under section 897(g). Enter the letter

Instructions for Schedule P (Form 1120-F) (2023)

corresponding to the name of the
partnership from Part I whose interest was
transferred.
Columns (b)(1) and (b)(2). Enter either
the percentage interest in the partnership
or the number of units in the partnership
that the partner transferred in (b)(1) or (b)
(2), respectively. If the foreign corporation
is treated as transferring an interest in the
partnership because it received a
distribution but its ownership interest in the
partnership remains unchanged, enter
zero in the relevant column for how the
interests are denominated.

sum of the amount of cash distributed (or
to be distributed), the fair market value of
property distributed (or to be distributed),
and the reduction in the transferor’s share
of partnership liabilities.

Enter the information from Part IV, columns
(c) and (d), on Form 4797, line 10,
columns (b) and (c), respectively. Enter
the amount from Part V, line 8, on Form
4797, line 10, column (g).

Line 2. Enter the corporation’s outside
adjusted basis, as defined under section
705(a), in its partnership interest as of the
date of the transfer. See section 705 for
the determination of the adjusted basis of
a partnership interest. If the corporation
did not transfer its entire interest in the
partnership, enter the corporation’s
adjusted basis in the portion of the
partnership interest that was transferred.

Line 9. Enter the smaller of line 5 or
line 7. When determining which is amount
is smaller, treat both amounts as positive
numbers. However, enter zero on line 9 if
either of the following is true.
• Line 5 is zero or less and line 7 is
greater than zero.
• Line 5 is greater than zero and line 7 is
zero or less.
Report this portion of the transfer on
Form 8949, Part I, if short term capital gain
or loss and Part II, if long term capital gain
or loss, checking box (C) on Part I or box
(F) on Part II, as applicable. Enter:
• “From Schedule P (Form 1120-F)” on
Form 8949, column (a);
• The information from Part IV, columns
(c) and (d), on Form 8949, columns (b)
and (c), respectively;
• The amounts from Part V, lines 1 and 2,
on Form 8949, columns (d) and (e),
respectively;
• The amount from Part V, line 9, on Form
8949, column (h);
• On Form 8949, column (g), as an
adjustment the difference between outside
gain or loss (column (d) minus column (e))
and recognized capital gain or loss
(column (h)), if applicable; and
• Code "P" on Form 8949, column (f), if
you entered an amount on Form 8949,
column (g).
If this is an installment sale, use Form
6252.

TREASURY/IRS
AND OMB USE
ONLY DRAFT
December 11, 2023
The information you report in

TIP column (b)(1) or (b)(2) for

ownership transferred should be
the same as that reported to you for that
transfer on Schedule K-3 (Form 1065),
Part XIII, Item B1 or B2.

Column (c). Enter the date(s) the
partnership interest was acquired. If the
partnership interest you transferred was
obtained through multiple acquisitions,
you must report the transfer of each
acquired interest with its respective
acquisition date in column (c) on a
separate line. Thus, each reported transfer
may result in recognized short-term gain
(or loss) and long-term gain (or loss), as
appropriate.

Column (d). Enter the date the
partnership interest was transferred. Also,
complete the information required in Part V
of Schedule P.

Part V—Foreign Partner’s
Gain or Loss on Transfer
of Partnership Interests
Line 1. Enter the amount realized from
the transfer of the partnership interest. The
amount realized includes the amount of
cash paid (or to be paid), the fair market
value of other property transferred (or to
be transferred), the amount of any
liabilities assumed by the transferee or to
which the partnership interest is subject,
and the reduction in the transferor’s share
of partnership liabilities. In the case of a
distribution, the amount realized is the

Line 3. Subtract line 2 from line 1.

Line 4. Enter the amount from
Schedule K-3 (Form 1065), Part XIII,
line 1.

If you are required to complete this
schedule but didn't receive a
CAUTION Schedule K-3 (Form 1065), you'll
need to contact the partnership to obtain a
copy.

!

Line 5. Subtract line 4 from line 3. If
line 4 is less than zero (that is, a loss),
treat the number entered on line 4 as
positive and add that number to the
amount reported on line 3. Enter the result
on line 5.
Line 6. Enter the amount from
Schedule K-3 (Form 1065), Part XIII,
line 2.
Line 7. Enter the amount from
Schedule K-3 (Form 1065), Part XIII,
line 3.

Line 8. Enter the smaller of line 4 or
line 6. When figuring which amount is
smaller, treat both amounts as positive
numbers. However, enter zero on line 8 if
either of the following is true.
• Line 4 is zero or less and line 6 is
greater than zero.
• Line 4 is greater than zero and line 6 is
zero or less.
Report this portion of the transfer on
Form 4797, Part II, line 10. Enter the
information from Part I, columns (a) and
(c), on Form 4797, line 10, column (a).

Instructions for Schedule P (Form 1120-F) (2023)

-5-

Line 10. Enter the amount from
Schedule K-3 (Form 1065), Part XIII,
line 7. Complete this line if the partnership
is deemed to have sold only U.S. real
property interest(s) as defined under
section 897(c)(1). Under these
circumstances there should be no entries
on lines 1 through 3 of Schedule K-3
(Form 1065), Part XIII. Enter this amount
on Form 8949, Form 4797, and
Schedule D as appropriate.