Schedules K-2 and K-3 are used to replace, supplement, and clarify the former line 16, Partners’ Distributive Share Items, Foreign Transactions, of Schedule K, Form 1065, and line 16, Foreign Transactions, of Schedule K-1 (Form 1065).
The following information, in combination with other information known to the partners, including Form 5471, Schedule P, is relevant for certain partners to exclude from gross income, distributions to the extent that they are attributable to PTEP in their annual PTEP accounts and report foreign currency gain or loss with respect to the PTEP on Forms 1040 and 1120. If eligible, partners use this information for purposes of a dividends received deduction under section 245A on Form 1120. To enter this in the TaxSlayer Program from the main menu of the Partnership Return select;
- Schedule K
- Foreign Transactions (K-2)
- Part V - Distributions from Foreign Corporations to Partnership - Click New.
- Distributing Foreign Corporation Name - Enter the name of the Foreign Corporation
-
EIN or
Reference ID Number - Enter the EIN or reference ID number of the distributing foreign corporation. Do not enter "FOREIGNUS or APPLIED FOR." - Date of Distribution - Enter the year, month, and day on which the distribution was made using the format YYYYMMDD.
- Functional Currency Code of Distributing Foreign Corporation - Enter the applicable three-character alphabet code for the foreign corporation’s functional currency using the ISO 4217 standard.
- Amount of Distribution in Functional Currency - This represents the partnership's share of the amount distributed in functional currency.
- Amount of E&P Distribution in Functional Currency - This represents the partnership's share of the amount of E&P distributed in functional currency.
- Spot Rate (Functional Currency to U.S. Dollars) - Enter the exchange rate on the date of distribution used to translate the amount of the distribution in functional currency to U.S. dollars.
- Amount of Distribution in U.S. Dollars - Enter the amount of the distribution in U.S. dollars.
- Amount of E&P Distribution in U.S. Dollars - Enter the amount of E&P distributed in U.S. dollars.
- Qualified Foreign Corporation (check box) - If the distributing foreign corporation is a qualified foreign corporation, determined without regard to section 1(h)(11)(C)(iii)(I), check the box.
Note: This is a guide to entering information into Part V of Schedule K-2 (Form 1065) in the partnership tax return. It is not intended as tax advice.
Additional Information:
IRS: Instructions for Schedule K-2 and K-3
IRS: Instructions for Form 1065 U.S. Return of Partnership Income
Desktop: Form 1065 - Schedule K-2 and Schedule K-3
Schedule K-2 and Schedule K-3 Part VII - Information to Complete Form 8621