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                                                                                                        Department of the Treasury
                                                                                                        Internal Revenue Service
2023

Instructions for Schedule P

(Form 1120-F)

List of Foreign Partner Interests in Partnerships

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

Jan 12, 2024                                               Cat. No. 50608W

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

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

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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) (2023)                                                                                         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). For more information, 
to be identified and reconciled to            establishment, the corporation need not         see Partner's Instructions for 
Schedule K-3 (Form 1065) on Schedule P        file Schedule P and report its distributive     Schedule K-3 (Form 1065), Part XIII, 
(Form 1120-F).                                share of income and expenses with its           Foreign Partner's Distributive Share of 
                                              Form 1120-F for purposes of outside basis       Deemed Sale Items on Transfer of 
Line 14. Outside basis election meth-         apportionment. However, if it is later          Partnership Interest; Pub. 515, 
od.  Check either the "income" box or the     determined that the corporation's               Withholding of Tax on Nonresident Aliens 
"asset" box on line 14 to indicate the        distributive share of partnership income is     and Foreign Entities; and Pub. 541, 
elective outside basis apportionment          ECI with respect to a trade or business of      Partnerships.
method used to determine the amount of        the corporation, the corporation will have              Do not report on Part IV the 
the corporation's outside basis in its        failed to make a timely income method or        !       transfer of any partnership interest 
partnership interests apportioned to ECI      asset method election with respect to such      CAUTION listed in Part I for which the “No” 
and reported on line 13. The allocation       partnership for outside basis                   box was checked in column (d). The 
method is subject to a 5-year minimum         apportionment purposes if no other              transfer of that partnership interest may, 
period election that must be made in the      election disclosure is made. To preserve        however, be subject to tax under another 
first year the partner has a distributive     the right to allocate and apportion its         provision of the Internal Revenue Code.
share of ECI included in the income           outside basis under a chosen method, the 
reported on Schedule K-3 (Form 1065).         corporation may make a protective 
                                                                                              Complete a separate set of entries in Parts 
The elective method chosen must be used       election by completing Part I, and Part III, 
                                                                                              IV and V for each such transfer. When 
for both branch profits tax and interest      line 14, of Schedule P, and including it with 
                                                                                              completing Parts IV and V, the foreign 
expense allocation purposes during the        the protective return filing of Form 1120-F. 
                                                                                              corporation should use the information 
same 5-year minimum period. See               The protective election is effective only for 
                                                                                              from Part XIII of the Schedule K-3 (Form 
Regulations section 1.884-1(d)(3)(iv).        the year in which the protective election is 
                                                                                              1065) that was issued by the partnership. 
  Asset method.    In general, a partner's    also the first year in which the 
                                                                                              If the corporation did not receive a 
interest in a partnership shall be treated as corporation's distributive share is in fact 
                                                                                              Schedule K-3 (Form 1065), Part XIII from 
a U.S. asset in the same proportion that      ECI with a trade or business of the 
                                                                                              the partnership, the corporation will need 
the sum of the partner's proportionate        corporation within the United States. The 
                                                                                              to contact the partnership to receive the 
share of the adjusted bases of all            corporation need not complete Part II, or 
                                                                                              relevant information to complete lines 4, 
partnership assets as of the determination    Part III, lines 9 through 13, with the 
                                                                                              6 ,7, and 10 of Part V.
date bears to the sum of the partner's        protective election.
proportionate share of the adjusted bases                                                     If the corporation is taking a treaty-based 
of all partnership assets as of the           Parts IV and V                                  return position with respect to any amount 
determination date. The proportion of U.S.    Section 864(c)(8) provides that if a foreign    reported on Part V, it must attach Form 
assets to total assets of the partnership is  transferor owns, directly or indirectly, an     8833 to Form 1120-F and provide a 
determined as if the partnership were a       interest in a partnership that is engaged in    detailed explanation.
foreign corporation engaged in a trade or     the conduct of a trade or business within 
business within the United States.            the United States, gain or loss recognized      Part IV—Foreign Partner’s 
Generally, a partner's proportionate share    by the foreign transferor on the transfer of    Interests in Partnerships 
of a partnership asset is the same as its     all (or any portion) of the interest is treated 
proportionate share of all items of income,   as effectively connected gain or effectively    Transferred During Tax 
gain, loss, and deduction that may be         connected loss, limited to the partner’s        Year
generated by the asset. Use amounts from      allocable share of gain or loss on a 
Schedule K-3 (Form 1065), Part X,             deemed sale gain or loss of the                 Use a separate line for each partnership 
Section 3, lines 2a and 2b to calculate the   partnership’s U.S. trade or business            interest transferred during the year. If 
asset ratio that is applied to the            assets. A transfer means a sale,                multiple interests in the same partnership 
Schedule P, line 13 amount. See               exchange, or other disposition, and             were transferred during the year, report 
Regulations section 1.884-1(d)(3)(ii)(B) for  includes a distribution from a partnership      each on a separate line. For each entry in 
non-uniform treatment of certain              to a partner to the extent that gain or loss    Part IV, complete an entry in Part V. Report 
partnership items.                            is recognized on the distribution, as well      the following information in each column of 
                                              as a transfer treated as a sale or exchange     Part IV.
  Income method.   Under the income           under section 707(a)(2)(B). This                Column (a).  Before completing column 
method, a partner's interest in a             requirement applies to transfers that           (a), complete a separate line on Part I for 
partnership shall be treated as a U.S.        occurred on or after November 27, 2017.         each partnership whose interest was not 
asset in the same proportion that its 
                                                                                              otherwise required to be reported under 
distributive share of partnership ECI for     Similarly, section 897(g) requires that if      those instructions if (1) the transfer of the 
the partnership's tax year that ends with or  a foreign corporation disposes of an            interest resulted in gain or loss under 
within the partner's tax year bears to its    interest in a partnership that directly or      section 864(c)(8) or Regulations section 
distributive share of all partnership income  indirectly holds U.S. real property             1.864(c)(8)-1, or (2) the transfer of the 
for that tax year. Use amounts from           interests, the amount received that is          interest resulted in gain or loss solely 
Schedule K-3 (Form 1065), Part X,             attributable to the partnership’s U.S. real     under section 897(g). Enter the letter 

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

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

Instructions for Schedule P (Form 1120-F) (2023)                                                                                        5