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Form 8865 - for reporting foreign partnerships

 

A U.S. person who owns an interest in a foreign partnership and meets one or more of the Categories of Filers below, must complete and file Form 8865. Brenner & Elsea-Mandojana, LLC can assist with preparing partnership financial statements in accordance with U.S. accounting principles and Form 8865.

  • Category 1 -  A Category 1 filer is a U.S. person who controlled the foreign partnership at any time during the partnership's tax year.  Control of a partnership is ownership of more than a 50% interest in the partnership.

  • Category 2  -  A Category 2 filer is a U.S. person who, at any time during the tax year of the foreign partnership, owned a 10% or greater interest in the partnership while the partnership was controlled by U.S. persons each owning at least a 10% interest.

  • Category 3 -  A Category 3 filer is a U.S. person who contributed cash and/or property during that person's tax year to a foreign partnership in exchange for an interest in the partnership (a section 721 transfer), if that person either:

    • Owned directly or constructively at least a 10% interest in the foreign partnership immediately after the contribution or

    • The value of the property contributed (when added to the value of any other property contributed to the partnership by such person, or any related person, during the 12 month period ending on the date of transfer) exceeds $100,000.

  • Category 4 -  A Category 4 filer is a U.S. person that had a reportable event under section 6046A during that person's tax year.  There are three categories of reportable events under section 6046A: acquisitions, dispositions, and changes in proportional interests. 

 

The Form 8865 requires the foreign partnership's income statement and balance sheet to be reported in U.S. dollars translated from functional foreign currency in accordance with U.S. GAAP.  Certain transactions between the U.S. person filing the Form 8865 or certain related parties and the foreign partnership are also required to be reported on the Form 8865.

 

A $10,000 penalty may be imposed for each tax year the foreign partnership fails to furnish the required information within the time prescribed.