U. S. Business Income Tax Return

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2025

Instructions for Schedule P
(Form 1120-F)
List of Foreign Partner’s 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
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 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).

Nov 13, 2025

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 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

Instructions for Schedule P (Form 1120-F) (2025) Catalog Number 50608W
Department of the Treasury Internal Revenue Service www.irs.gov

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Purpose of Schedule

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.

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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) and
attaches Form 8833. 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) and
attaches Form 8833. If you have ECI, or effectively connected
gain or loss, that is exempt pursuant to an applicable income tax
treaty, you must still complete Part I and attach Form 8833. See
also the instructions for Form 8833.
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.
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, Part II, 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, Part II, 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), Part II, line 11 (Total
column). The average value 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), Part II,
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, Part II, 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

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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 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.
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 classified as partnerships for tax purposes include
domestic or foreign limited liability partnerships (LLPs), limited
liability companies (LLCs), and publicly traded partnerships
(within the meaning of section 7704(c)(1)) that are not classified
as corporations for federal income tax purposes. Do not include
any interest in any entity classified as a disregarded entity as
described under Regulations section 301.7701-2(c)(2).
Instructions for Schedule P (Form 1120-F) (2025)

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When and Where To File

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).

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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.

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, Part II, 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, Part II, line 7: Interest expense directly allocable
under Regulations section 1.882-5(a)(1)(ii)(B).
• Schedule P, Part II, 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).

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.

Line 9. Section 705 Outside Basis

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.

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).

Line 6. Total Deductions and Losses Deductible
Against Gross ECI—Partner Determination

Lines 10a and 10b. Partner Liabilities Included
in the Corporation’s Outside Basis

Line 3. 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).

Instructions for Schedule P (Form 1120-F) (2025)

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

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

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 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.
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.

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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.
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).

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 to the extent
that the assets would be treated as U.S. assets if the partnership
were a foreign corporation, 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
4

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, Section 3, lines 2a and 2b, to calculate the asset ratio
that is applied to the Schedule P, Part II, 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.

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 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). Entities classified as partnerships for tax purposes
include domestic or foreign LLPs, LLCs, and publicly traded
partnerships (within the meaning of section 7704(c)(1)) that are
not classified as corporations for federal income tax purposes.
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.
Instructions for Schedule P (Form 1120-F) (2025)

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Line 13. Partner’s Outside Basis Allocable to ECI

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,
Part II, line 13, amount. See Regulations section 1.884-1(d)(3)(ii)
(B) for non-uniform treatment of certain partnership items.

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515, Withholding of Tax on Nonresident Aliens and Foreign
Entities; and Pub. 541, Partnerships.
Caution: Do not report on Part IV the transfer of any partnership
interest 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.

Line 1

Enter the amount realized from the transfer of the partnership
interest. The amount realized includes the amount of cash
received (or to be received), 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 sum of the amount of cash distributed (or to be
distributed) to the transferor, the fair market value of property
distributed (or to be distributed) to the transferor, and the
reduction in the transferor’s share of partnership liabilities.

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.

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.

Subtract line 2 from line 1.

Column (a)

Line 4

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 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 -0- in the relevant column for how the
interests are denominated.
Tip: The information you report in 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.

Instructions for Schedule P (Form 1120-F) (2025)

Line 3

Enter the amount from Schedule K-3 (Form 1065), Part XIII,
line 1.
Caution: If you are required to complete this schedule but didn’t
receive a 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 gain or loss on 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). 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).

5

DRAFT

DRAFT

Part IV—Foreign Partner’s Interests in
Partnerships Transferred During Tax
Year

Part V—Foreign Partner’s Gain or
Loss on Transfer of Partnership
Interests

TREASURY/IRS AND OMB USE ONLY DRAFT
Line 9

Enter the smaller of line 5 or line 7. When determining which
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.

If this is an installment sale, use Form 6252.

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 6 of Schedule K-3 (Form 1065), Part
XIII. Enter this amount on Form 8949, Form 4797, and
Schedule D as appropriate.

DRAFT

DRAFT

Report this portion of the gain or loss on the transfer on Form
8949 using: Part I and checking box (C) if it is short term gain or
loss; or Part II and checking box (F) if it is long term capital gain
or loss. 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 total 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).

6

Instructions for Schedule P (Form 1120-F) (2025)