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2024

Instructions for Schedule P

(Form 1120-F)

List of Foreign Partner’s Interests in Partnerships

Section references are to the Internal Revenue year end is also taken into account in        is also treated as engaged in a trade or 
Code unless otherwise noted.                   determining the average apportioned           business as a result of its direct and 
                                               value included in the corporation's U.S.      indirect ownership of such interests. See 
Future Developments                            assets for purposes of computing the          section 875(1). The foreign corporation's 
For the latest information about               branch profits tax. The U.S. assets and       distributive share of income from a 
developments related to Schedule P             partner share of booked liabilities and       domestic partnership and certain foreign 
(Form 1120-F) and its instructions, such       interest expense of the partnership are       partnership interests is reported to the 
as legislation enacted after they were         also coordinated with the interest expense    partner on Schedule K-3 (Form 1065), 
published, go to IRS.gov/Form1120F.            allocation computations reported on           together with the corporation's allocable 
                                               Schedule I (Form 1120-F).                     share of partnership liabilities. If the 
                                                                                             partnership is engaged in a trade or 
General Instructions                           Parts IV and V are used to report             business directly or indirectly through a 
                                               information regarding a foreign corporate     lower-tier partnership and has ECI to 
Purpose of Schedule                            partner's transfer of an interest in a        report in the distributive share of a foreign 
Schedule P (Form 1120-F) is used to (1)        partnership and the calculation of gain or    partner, it is responsible for making 
identify and reconcile the foreign             loss on the transfer when the partnership     quarterly installment payments of 
corporation's directly held partnership        directly or indirectly either is engaged in   withholding tax under section 1446 on the 
interests with the distributive shares of      the conduct of a trade or business within     foreign partner's allocable share of 
partnership effectively connected income       the United States or holds any U.S. real      estimated effectively connected taxable 
(ECI), or expenses allocable to ECI, and       property interests. See sections 864(c)(8)    income (ECTI) and reporting to the foreign 
the foreign corporation's effectively          and 897(g).                                   partner, on Form 8805, Foreign Partner’s 
connected outside tax basis in each                                                          Information Statement of Section 1446 
interest, and/or (2) report information        Who Must Complete                             Withholding Tax, the amounts of ECTI and 
regarding a foreign corporate partner's        Schedule P                                    section 1446(a) tax withheld for the tax 
transfer of an interest in a partnership and   A foreign corporation that is directly or     year.
the calculation of gain or loss on the         indirectly engaged in a trade or business     A foreign corporation must also 
transfer when the partnership directly or      within the United States is required to file  complete Schedule P if it transfers an 
indirectly either is engaged in the conduct    Schedule P (Form 1120-F) for all directly     interest in a partnership that directly or 
of a trade or business within the United       owned partnership interests that have         indirectly either is engaged in the conduct 
States or holds any U.S. real property         gross ECI, and/or expenses allocable to       of a trade or business within the United 
interests (see sections 864(c)(8) and          gross ECI, included in its distributive share States or holds any U.S. real property 
897(g)).                                       of income reported to the corporation on      interests. Unless an exception applies, the 
Part I is used to identify all partnership     Schedule K-3 (Form 1065). If the foreign      transferee of that partnership interest must 
interests the foreign corporation directly     corporation treats any of its distributive    withhold tax on the amount realized on the 
owns from which it has a distributive share    share of partnership net income or loss       transfer and report on Form 8288-A, 
of income or loss that is effectively          from a partnership that is not engaged in a   Statement of Withholding on Certain 
connected with a trade or business within      trade or business within the United States    Dispositions by Foreign Persons, the 
the United States.                             as ECI with another trade or business of      amount realized and the amount of section 
                                               the corporation, the corporation's entire     1446(f) tax withheld on the transfer.
Part II is used to reconcile the foreign       distributive share of items of income and 
corporation's distributive share of ECI and    expense from any such partnership must        Exceptions From Filing 
allocable expenses with the total income       also be reconciled between ECI and 
and expenses reported to it on                 non-ECI and reported on Schedule P.           Schedule P
Schedule K-3 (Form 1065), Partner's                                                          Do not file Schedule P if none of the 
Share of Income, Deductions, Credits, etc.     A foreign corporation may be engaged          distributive shares from any of the 
– International.                               in a trade or business within the United      corporation's partnership interests include 
                                               States either directly through its own        ECI, or expenses allocable to ECI, and 
Part III is used as follows. The               non-partnership related activities or         there has not been a transfer of an interest 
corporation's outside basis in its directly    indirectly, including through the activities  in a partnership that directly or indirectly 
held partnership interests that include ECI    of one or more partnerships in which the      either is engaged in the conduct of a trade 
in the corporation's distributive share is     corporation owns a partnership interest. In   or business within the United States or 
apportioned between ECI and non-ECI            addition, if a corporation owns an interest   holds any U.S. real property interests. A 
under Regulations section 1.884-1(d)(3) to     in a partnership that is itself deemed        foreign corporation that has ECI reported 
determine the average value treated as a       engaged in a trade or business within the     to it from a partnership is not required to 
U.S. asset for interest expense allocation     United States as a result of the              complete Parts II and III if, pursuant to an 
purposes under Regulations section             partnership's own directly or indirectly      applicable income tax treaty, none of the 
1.882-5. The apportionment of the outside      owned interest in another partnership         corporation's business profits including its 
basis to ECI as of the current and prior tax   (“lower-tier partnership”), the corporation   ECI from the partnership are attributable to 
                                       Instructions for Form 1120FSCHP (2024)  Catalog Number 50608W
Nov 29, 2024                          Department of the Treasury  Internal Revenue Service  www.irs.gov

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a U.S. permanent establishment, and the      of its outside basis for purposes of         1065). Also include in the list of 
corporation files a protective tax return    determining the proportion of the            partnership interests any interest in a 
under Regulations section 1.882-4(a)(3)      partnership interest treated as a U.S. asset partnership that is not engaged in a trade 
(vi) and attaches Form 8833. A foreign       is reported on Schedule P (Form 1120-F),     or business within the United States if the 
corporation that transfers an interest in a  line 11 (Total column). The average value    corporation treats some or all of its 
partnership that directly or indirectly is   of the partner's outside basis used to       distributive share as ECI with a separate 
engaged in a U.S. trade or business is not   determine the proportion of the              trade or business of its own within the 
required to complete Parts IV and V if,      partnership interest treated as a U.S. asset United States. Do not report on 
pursuant to an applicable income tax         is reported on Schedule P (Form 1120-F),     Schedule P any indirectly owned 
treaty, all of the gain or loss from the     line 13, and as a U.S. asset on Schedule I   partnership interests (lower-tier 
transfer of the partnership interest is      (Form 1120-F), line 5, column (b).           partnership interests) that have income 
attributable to assets, other than real                                                   effectively connected with the lower-tier 
                                             Schedule H (Form 1120-F), Part I, Part 
property, that do not form part of a U.S.                                                 partnership's own trade or business within 
                                             II, and Part IV. The corporation's 
permanent establishment, and the                                                          the United States unless the corporation 
                                             distributive share of non-interest expenses 
corporation files a protective tax return                                                 also owns a direct interest in the lower-tier 
                                             included on Schedule P, line 4, is also 
under Regulations section 1.882-4(a)(3)                                                   partnership. The corporation's distributive 
                                             included in the corporation's overall 
(vi) and attaches Form 8833. If you have                                                  share as ECI earned through lower-tier 
                                             allocation and apportionment of expenses 
ECI, or effectively connected gain or loss,                                               partnership interests is includible on the 
                                             on Schedule H (Form 1120-F), Part IV, 
                                                                                          Schedule K-3 (Form 1065) reportable to 
that is exempt pursuant to an applicable     lines 38a through 41, if the partnership 
                                                                                          the corporation by the partnership in which 
income tax treaty, you must still complete   books constitute a set(s) of books that are 
Part I and attach Form 8833. See also the                                                 the corporation owns a direct interest, 
                                             also reportable on Form 1120-F, 
instructions for Form 8833.                                                               whether or not the directly owned 
                                             Schedule L or the partnership interest is 
                                                                                          partnership is itself directly engaged in a 
  Protective election on Schedule P.         recorded on the Schedule L books of the 
                                                                                          trade or business within the United States.
See Protective election, later, for          corporation's own separate trade or 
instructions for making a protective         business within the United States. If the    Schedule P (Form 1120-F) 
partnership outside basis apportionment      partnership interest is not reported on      accommodates reporting for four directly 
election with a protective return filing of  Schedule L, the distributive share of        owned partnership interests. Complete a 
Form 1120-F.                                 partnership expenses allocable to the        separate line in Part I, and the 
                                             corporation's distributive share of ECI is   corresponding columns in Parts II and III, 
When and Where To File                       included on Schedule H (Form 1120-F) in      for each directly owned partnership 
Attach Schedule P (Form 1120-F) to the       Parts I and II. See the Instructions for     interest. If the corporation directly owns 
foreign corporation's Form 1120-F income     Schedule H (Form 1120-F).                    more than four partnership interests which 
                                                                                          are required to be reported on Schedule P 
tax return. See the Instructions for Form    Schedule M-3 (Form 1120-F), Part II.         (Form 1120-F), report the required 
1120-F for the time, place, and manner for   The corporation's distributive share of      information for those additional 
filing the foreign corporation's income tax  partnership income or loss may be            partnership interests on attached separate 
return.                                      reported on Schedule M-3 (Form 1120-F),      sheets using the same size and format as 
                                             Part II, line 9 (domestic partnerships) and  shown on the schedule. Also, in the 
Other Forms and                              line 10 (certain foreign partnerships), in   “Totals” column of Parts II and III, for each 
                                             accordance with the corporation's            line item, enter the sum for all directly 
Schedules Related to                         reporting on its applicable financial        owned partnership interests, including 
Schedule P                                   statements for Schedule M-3 (Form            those interests reported on attached 
Form 1120-F, Section II. Gross ECI           1120-F) purposes. See the instructions for   sheets.
includible in the corporation's distributive Schedule M-3 (Form 1120-F), Part II, lines 
share is reportable on Form 1120-F,          9 and 10, for the specific reporting         Entities classified as partnerships for 
Section II, lines 3 through 10, in the       requirements.                                tax purposes include domestic or foreign 
                                                                                          limited liability partnerships (LLPs), limited 
applicable category of income. Expenses      Form 8990, Limitation on Business In-        liability companies (LLCs), and publicly 
(other than interest expense) that are       terest Expense Under Section 163(j).         traded partnerships (within the meaning of 
deductions allocated and apportioned on      Business interest expense includes any       section 7704(c)(1)) that are not classified 
Schedule P (Form 1120-F) to the partner's    interest paid or accrued on indebtedness     as corporations for federal income tax 
ECI are also reported on Form 1120-F,        properly allocable to a trade or business.   purposes. Do not include any interest in 
Section II.                                  Business interest expense is generally       any entity classified as a disregarded 
Schedule I (Form 1120-F).   A portion of     limited to the sum of business interest      entity as described under Regulations 
the interest expense reportable on           income, 30% of the adjusted taxable          section 301.7701-2(c)(2).
Schedule P is includible in the              income, and floor plan financing interest. 
corporation's interest expense allocation    Form 8990 is required, unless an             Column (d). With respect to each 
computation under Regulations section        exception for filing is met. For more        partnership interest, check the “Yes” box if 
1.882-5. The corporation's distributive      information, see section 163(j), Form        the foreign corporation's distributive share 
share of interest expense that is directly   8990, and the Instructions for Form 8990.    is ECI, or treated as ECI, in whole or in 
                                                                                          part, with a U.S. trade or business 
allocable to ECI under Regulations section                                                determined under section 875. 
1.882-5(a)(1)(ii)(B) is reported on          Part I—List of Foreign                       Accordingly, with respect to each 
Schedule P, line 7, and on Schedule I        Partner’s Interests in                       partnership interest, check the “Yes” box if 
(Form 1120-F), line 22. A portion of the                                                  the foreign corporation is engaged in a 
corporation's distributive share of interest Partnerships
expense that is reported on Schedule P,      In Part I, list the name, address, and       U.S. trade or business indirectly through 
line 8, is reported on Schedule I (Form      employer identification number (EIN) of      the activities of the partnership. Check the 
1120-F), line 9, column (b). The average     each directly owned partnership interest     “No” box if the foreign corporation has 
value of partnership liabilities the         that has ECI included in the partner's       applied ECI principles solely at the partner 
corporation includes in the determination    distributive share on Schedule K-3 (Form     level and not as a result of the 
                                                                                          partnership's activities.

2                                                                                 Instructions for Schedule P (Form 1120-F) (2024)

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Part II—Foreign Partner’s                    Part III—Foreign Partner's                     gain or loss from disposition of the 
                                                                                            partnership interest.
Income and Expenses:                         Average Outside Basis 
                                                                                            Line 10a. Adjustment for directly 
Reconciliation to                            Under Regulations                              allocable interest.  The outside basis is 
Schedule K-3 (Form 1065)                     Sections 1.882-5(b) and                        reduced by the average amount of 
Part II reconciles the partner's ECI to its  1.884-1(d)(3)                                  liabilities that give rise to directly allocable 
Schedule K-3 (Form 1065) distributive        Report in Part III the corporation's outside   interest expense in accordance with 
share from each partnership listed in Part   basis for each partnership interest            Regulations section 1.882-5(a)(1)(ii)(B). 
I. The Schedule K-3 lines are grouped for    identified in Part I of this Schedule P (Form  Enter the portion of the partnership liability 
reconciliation of their income and expense   1120-F) for purposes of determining the        that is subject to the direct interest 
in the following manner.                     amount the corporation includes as a U.S.      expense allocation rules under Temporary 
• Schedule P, lines 1 through 6: Total       asset in Step 1 of the interest expense        Regulations section 1.861-10T(b) or (c) 
gross income and gross ECI, and related      allocation under Regulations section           and is subject to exclusion from the 
deductions and losses, from Schedule K-3     1.882-5. The corporation's outside basis in    determination of the corporation's average 
(Form 1065), Part X.                         its partnership interests reported on          U.S. asset values under Regulations 
• Schedule P, line 7: Interest expense       Schedule P is determined and adjusted          section 1.882-5. See Temporary 
directly allocable under Regulations         under the rules applicable to the              Regulations section 1.861-10T(d). Be sure 
section 1.882-5(a)(1)(ii)(B).                determination of the corporation's outside     to include amounts from Schedule K-3 
• Schedule P, line 8: Interest expense on    basis in the partnership for branch profits    (Form 1065), Part X, Section 3, line 3b.
U.S.-booked liabilities as described under   tax purposes under Regulations section         Line 10b.   Enter the average amount 
Regulations section 1.882-5(d)(2)(vii) from  1.884-1(d)(3), except that the amounts         of the corporation's share of all other 
Schedule K-3 (Form 1065), Part X,            entered on lines 9 through 13 are the          partnership liabilities it otherwise takes 
Section 2, line 7, column (b).               average values rather than the                 into account under section 752 in 
Line 3. Gross ECI - Partner determina-       determination dates used under the             determining its outside basis in its 
tion. See the Instructions for               section 884 regulations for branch profits     partnership interest.
Schedule K-3 (Form 1065), Part X,            tax purposes. If the corporation is not 
Section 1, column (b) for information the    exempt from the branch profits tax under       Line 11.  Enter the corporation's average 
foreign corporate partner can use to         an applicable income tax treaty, attach a      partnership liabilities, or portion thereof, 
determine the amounts to include on          statement showing the determination of         for the year for which the corporation 
Schedule P (Form 1120-F), Part II, line 3.   the corporation's outside basis in             receives a distributive share of interest 
                                             accordance with the requirements of lines      expense for the year. See Regulations 
Line 6. Total deductions and losses de-      9 through 13 for an averaging period that      section 1.884-1(d)(3)(vi). The amount on 
ductible against gross ECI - Partner         shows the apportioned outside basis for        line 11 should generally be the same 
determination.  See the Instructions for     the beginning and ending determination         amount reported on Schedule K-3 (Form 
Schedule K-3 (Form 1065), Part X,            dates of the corporation's tax year. See       1065), Part X, Section 3, line 3a. Also, 
Section 2, column (b) for information the    also section 163(j) for rules on how the       enter this line 11 amount on Schedule I 
foreign corporate partner can use to         trade or business interest limitation may      (Form 1120-F), line 8, column (b), to the 
determine the amounts to include on          affect outside basis.                          extent applicable in determining the 
Schedule P (Form 1120-F), Part II, line 6.                                                  corporation's interest expense deduction 
                                             Line 9. Section 705 outside basis.             under Regulations section 1.882-5.
Line 7.  Interest expense directly           Enter on line 9 the corporation's average 
allocable under Regulations section          value of the outside basis (otherwise          Line 12. Partner's adjusted average 
1.882-5(a)(1)(ii)(B). On line 7, enter the   determined under section 705) of the           outside basis in partnership.    Add lines 
amount of interest expense that is directly  partnership in the column which                10d and 11 and enter the amount on 
allocable to ECI under Regulations section   corresponds to the line in Part I on which     line 12. The amount reported on line 12 is 
1.882-5(a)(1)(ii)(B) and the applicable      the partnership interest is listed. The        the corporation's adjusted outside basis 
requirements of Temporary Regulations        average value is determined using the          that is eligible for apportionment between 
section 1.861-10T(b) or (c). The amount      most frequent averaging period for which       ECI and non-ECI.
entered on line 7 is also included on        data is reasonably available. See              Line 13. Partner's outside basis alloca-
Schedule I (Form 1120-F), line 22.           Regulations sections 1.882-5(b)(3) and         ble to ECI. Enter on line 13 the 
Line 8.  Interest expense on                 1.882-5(c)(2)(iv).                             corporation's average outside basis 
U.S.-booked liabilities as described         Lines 10a and 10b. Partner liabilities         reported on line 12 that is treated as a U.S. 
under Regulations section 1.882-5(d)         included in the corporation's outside          asset under Regulations sections 
(2)(vii). On line 8, enter the amount of     basis. The corporation's outside basis         1.884-1(d)(3) and 1.882-5. Also enter this 
interest expense that arises from U.S.-      reported on line 9 is adjusted on lines 10a    line 13 amount on Schedule I (Form 
booked liabilities as described in           and 10b to conform the amount of               1120-F), line 5, column (b). See 
Regulations section 1.882-5(d)(2). The       liabilities the corporation includes in the    Regulations section 1.884-1(d)(3)(i) for the 
amount on line 8 should generally be the     determination of its outside basis to the      elective requirements for apportioning 
same amount reported on Schedule K-3         proportionate amount of the corporation's      outside basis on the income or asset 
(Form 1065), Part X, Section 2, line 7,      distributive share of interest expense with    method. For purposes of determining the 
column (b). The amount entered on line 8     respect to the partnership's liabilities. This proportion of the partnership interest that 
is also reported on Schedule I (Form         adjustment is made only for purposes of        is a U.S. asset, a foreign corporation may 
1120-F), line 9, column (b). A portion of    determining the corporation's outside          elect separately for each partnership 
the line 8 amount is also taken into         basis included in the interest expense         interest to use either the asset method or 
account on Form 1120-F, Section III, Part    allocation and branch profits tax              the income method described in 
II, line 8, in determining the corporation's computations. The adjustment is not made       Regulations sections 1.884-1(d)(3)(ii) and 
branch interest under Regulations section    for other federal income tax purposes          (iii). See the instructions for line 14 below. 
1.884-4(b).                                  such as for determining the corporation's      If the corporation does not timely elect 
                                                                                            either method in the first year the 

Instructions for Schedule P (Form 1120-F) (2024)                                                                                         3

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corporation has a distributive share of ECI   Section 3, lines 2a and 2b to calculate the     property interests is considered received 
from the partnership, the Director of Field   asset ratio that is applied to the              from the sale or exchange of U.S. real 
Operations may make the election on           Schedule P, line 13 amount.                     property interests. As a result, that portion 
behalf of the corporation. See Regulations                                                    of the gain or loss must be included in 
section 1.884-1(d)(3)(v).                     Protective election.  If the                    determining the foreign corporation’s U.S. 
                                              corporation files a protective tax return       trade or business income.
Note.  The required timely filed election     under Regulations section 1.882-4(a)(3)
under Regulations section 1.884-1(d)(3)       (vi), and the partnership is not engaged in     Complete Parts IV and V only if the 
(iv) for apportioning outside basis between   a trade or business within the United           foreign corporation transferred a 
ECI and non-ECI also applies to lower-tier    States or does not have business profits        partnership interest subject to section 
partnership interests that are not required   attributable to a U.S. permanent                864(c)(8) or 897(g). Entities classified as 
to be identified and reconciled to            establishment, the corporation need not         partnerships for tax purposes include 
Schedule K-3 (Form 1065) on Schedule P        file Schedule P and report its distributive     domestic or foreign limited liability 
(Form 1120-F).                                share of income and expenses with its           partnerships (LLPs), limited liability 
                                              Form 1120-F for purposes of outside basis       companies (LLCs), and publicly traded 
Line 14. Outside basis election meth-         apportionment. However, if it is later          partnerships (within the meaning of 
od.  Check either the "income" box or the     determined that the corporation's               section 7704(c)(1)) that are not classified 
"asset" box on line 14 to indicate the        distributive share of partnership income is     as corporations for federal income tax 
elective outside basis apportionment          ECI with respect to a trade or business of      purposes. For more information, see 
method used to determine the amount of        the corporation, the corporation will have      Partner's Instructions for Schedule K-3 
the corporation's outside basis in its        failed to make a timely income method or        (Form 1065), Part XIII, Foreign Partner's 
partnership interests apportioned to ECI      asset method election with respect to such      Distributive Share of Deemed Sale Items 
and reported on line 13. The allocation       partnership for outside basis                   on Transfer of Partnership Interest; Pub. 
method is subject to a 5-year minimum         apportionment purposes if no other              515, Withholding of Tax on Nonresident 
period election that must be made in the      election disclosure is made. To preserve        Aliens and Foreign Entities; and Pub. 541, 
first year the partner has a distributive     the right to allocate and apportion its         Partnerships.
share of ECI included in the income           outside basis under a chosen method, the                Do not report on Part IV the 
reported on Schedule K-3 (Form 1065).         corporation may make a protective               !       transfer of any partnership interest 
The elective method chosen must be used       election by completing Part I, and Part III,    CAUTION listed in Part I for which the “No” 
for both branch profits tax and interest      line 14, of Schedule P, and including it with   box was checked in column (d). The 
expense allocation purposes during the        the protective return filing of Form 1120-F.    transfer of that partnership interest may, 
same 5-year minimum period. See               The protective election is effective only for   however, be subject to tax under another 
Regulations section 1.884-1(d)(3)(iv).        the year in which the protective election is    provision of the Internal Revenue Code.
  Asset method.    In general, a partner's    also the first year in which the 
interest in a partnership shall be treated as corporation's distributive share is in fact 
                                                                                              Complete a separate set of entries in Parts 
a U.S. asset in the same proportion that      ECI with a trade or business of the 
                                                                                              IV and V for each such transfer. When 
the sum of the partner's proportionate        corporation within the United States. The 
                                                                                              completing Parts IV and V, the foreign 
share of the adjusted bases of all            corporation need not complete Part II, or 
                                                                                              corporation should use the information 
partnership assets as of the determination    Part III, lines 9 through 13, with the 
                                                                                              from Part XIII of the Schedule K-3 (Form 
date bears to the sum of the partner's        protective election.
                                                                                              1065) that was issued by the partnership. 
proportionate share of the adjusted bases                                                     If the corporation did not receive a 
of all partnership assets as of the           Parts IV and V                                  Schedule K-3 (Form 1065), Part XIII from 
determination date. The proportion of U.S.    Section 864(c)(8) provides that if a foreign    the partnership, the corporation will need 
assets to total assets of the partnership is  transferor owns, directly or indirectly, an     to contact the partnership to receive the 
determined as if the partnership were a       interest in a partnership that is engaged in    relevant information to complete lines 4, 
foreign corporation engaged in a trade or     the conduct of a trade or business within       6 ,7, and 10 of Part V.
business within the United States.            the United States, gain or loss recognized 
Generally, a partner's proportionate share    by the foreign transferor on the transfer of    If the corporation is taking a treaty-based 
of a partnership asset is the same as its     all (or any portion) of the interest is treated return position with respect to any amount 
proportionate share of all items of income,   as effectively connected gain or effectively    reported on Part V, it must attach Form 
gain, loss, and deduction that may be         connected loss, limited to the partner’s        8833 to Form 1120-F and provide a 
generated by the asset. Use amounts from      allocable share of gain or loss on a            detailed explanation.
Schedule K-3 (Form 1065), Part X,             deemed sale gain or loss of the 
Section 3, lines 2a and 2b to calculate the   partnership’s U.S. trade or business            Part IV—Foreign Partner’s 
asset ratio that is applied to the            assets. A transfer means a sale,                Interests in Partnerships 
Schedule P, line 13 amount. See               exchange, or other disposition, and 
Regulations section 1.884-1(d)(3)(ii)(B) for  includes a distribution from a partnership      Transferred During Tax 
non-uniform treatment of certain              to a partner to the extent that gain or loss    Year
partnership items.                            is recognized on the distribution, as well 
                                              as a transfer treated as a sale or exchange     Use a separate line for each partnership 
  Income method.   Under the income           under section 707(a)(2)(B). This                interest transferred during the year. If 
method, a partner's interest in a             requirement applies to transfers that           multiple interests in the same partnership 
partnership shall be treated as a U.S.        occurred on or after November 27, 2017.         were transferred during the year, report 
asset in the same proportion that its                                                         each on a separate line. For each entry in 
distributive share of partnership ECI for     Similarly, section 897(g) requires that if      Part IV, complete an entry in Part V. Report 
the partnership's tax year that ends with or  a foreign corporation disposes of an            the following information in each column of 
within the partner's tax year bears to its    interest in a partnership that directly or      Part IV.
distributive share of all partnership income  indirectly holds U.S. real property             Column (a).  Before completing column 
for that tax year. Use amounts from           interests, the amount received that is          (a), complete a separate line on Part I for 
Schedule K-3 (Form 1065), Part X,             attributable to the partnership’s U.S. real     each partnership whose interest was not 

4                                                                                    Instructions for Schedule P (Form 1120-F) (2024)

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otherwise required to be reported under        liabilities assumed by the transferee or to      Report this portion of the gain or loss 
those instructions if (1) the transfer of the  which the partnership interest is subject,     on the transfer on Form 4797, Part II, 
interest resulted in gain or loss under        and the reduction in the transferor’s share    line 10. Enter the information from Part I, 
section 864(c)(8) or Regulations section       of partnership liabilities. In the case of a   columns (a) and (c), on Form 4797, 
1.864(c)(8)-1, or (2) the transfer of the      distribution, the amount realized is the       line 10, column (a). Enter the information 
interest resulted in gain or loss solely       sum of the amount of cash distributed (or      from Part IV, columns (c) and (d), on Form 
under section 897(g). Enter the letter         to be distributed) to the transferor, the fair 4797, line 10, columns (b) and (c), 
corresponding to the name of the               market value of property distributed (or to    respectively. Enter the amount from Part V, 
partnership from Part I whose interest was     be distributed) to the transferor, and the     line 8, on Form 4797, line 10, column (g).
transferred.                                   reduction in the transferor’s share of 
                                                                                              Line 9.  Enter the smaller of line 5 or 
                                               partnership liabilities.
Columns (b)(1) and (b)(2). Enter either                                                       line 7. When determining which amount is 
the percentage interest in the partnership     Line 2.  Enter the corporation’s outside       smaller, treat both amounts as positive 
or the number of units in the partnership      adjusted basis, as defined under section       numbers. However, enter zero on line 9 if 
that the partner transferred in (b)(1) or (b)  705(a), in its partnership interest as of the  either of the following is true.
(2), respectively. If the foreign corporation  date of the transfer. See section 705 for      • Line 5 is zero or less and line 7 is 
is treated as transferring an interest in the  the determination of the adjusted basis of     greater than zero.
partnership because it received a              a partnership interest. If the corporation     • Line 5 is greater than zero and line 7 is 
distribution but its ownership interest in the did not transfer its entire interest in the    zero or less.
partnership remains unchanged, enter           partnership, enter the corporation’s             Report this portion of the gain or loss 
zero in the relevant column for how the        adjusted basis in the portion of the           on the transfer on Form 8949 using: Part I 
interests are denominated.                     partnership interest that was transferred.     and checking box (C) if it is short term gain 
        The information you report in          Line 3.  Subtract line 2 from line 1.          or loss; or Part II and checking box (F) if it 
                                                                                              is long term capital gain or loss. Enter:
TIP     column (b)(1) or (b)(2) for            Line 4.  Enter the amount from                 • “From Schedule P (Form 1120-F)” on 
        ownership transferred should be 
                                               Schedule K-3 (Form 1065), Part XIII, 
the same as that reported to you for that                                                     Form 8949, column (a);
                                               line 1.
transfer on Schedule K-3 (Form 1065),                                                         • The information from Part IV, columns 
Part XIII, Item B1 or B2.                               If you are required to complete this  (c) and (d), on Form 8949, columns (b) 
                                                        schedule but didn't receive a         and (c), respectively;
Column (c).  Enter the date(s) the             CAUTION! Schedule K-3 (Form 1065), you'll      • The amounts from Part V, lines 1 and 2, 
partnership interest was acquired. If the      need to contact the partnership to obtain a    on Form 8949, columns (d) and (e), 
partnership interest you transferred was       copy.                                          respectively;
obtained through multiple acquisitions,                                                       • The amount from Part V, line 9, on Form 
you must report the transfer of each           Line 5.  Subtract line 4 from line 3. If       8949, column (h);
acquired interest with its respective          line 4 is less than zero (that is, a loss),    • On Form 8949, column (g), as an 
acquisition date in column (c) on a            treat the number entered on line 4 as          adjustment the difference between total 
separate line. Thus, each reported transfer    positive and add that number to the            outside gain or loss (column (d) minus 
may result in recognized short-term gain       amount reported on line 3. Enter the result    column (e)) and recognized capital gain or 
(or loss) and long-term gain (or loss), as     on line 5.                                     loss (column (h)), if applicable; and
                                                                                              • Code "P" on Form 8949, column (f), if 
appropriate.                                   Line 6.  Enter the amount from                 you entered an amount on Form 8949, 
Column (d).  Enter the date the                Schedule K-3 (Form 1065), Part XIII,           column (g).
partnership interest was transferred. Also,    line 2.
                                                                                                If this is an installment sale, use Form 
complete the information required in Part V    Line 7.  Enter the amount from                 6252.
of Schedule P.                                 Schedule K-3 (Form 1065), Part XIII, 
                                               line 3.                                        Line 10.  Enter the amount from 
Part V—Foreign Partner’s                                                                      Schedule K-3 (Form 1065), Part XIII, 
                                               Line 8.  Enter the smaller of line 4 or        line 7. Complete this line if the partnership 
Gain or Loss on Transfer                       line 6. When figuring which amount is          is deemed to have sold only U.S. real 
of Partnership Interests                       smaller, treat both amounts as positive        property interest(s) as defined under 
                                               numbers. However, enter zero on line 8 if      section 897(c)(1). Under these 
Line 1. Enter the amount realized from         either of the following is true.               circumstances there should be no entries 
amount realized includes the amount of         •
the transfer of the partnership interest. The   Line 4 is zero or less and line 6 is          on lines 1 through 6 of Schedule K-3 
                                               greater than zero.                             (Form 1065), Part XIII. Enter this amount 
market value of other property transferred     •
cash received (or to be received), the fair     Line 4 is greater than zero and line 6 is     on Form 8949, Form 4797, and 
                                               zero or less.
(or to be transferred), the amount of any                                                     Schedule D as appropriate.

Instructions for Schedule P (Form 1120-F) (2024)                                                                                          5