Form 8865 is used by U.S. persons to report their ownership interests in certain foreign partnerships. This form provides the IRS with detailed information about the foreign partnership’s structure, operations, financial position, and transactions involving U.S. partners. It helps the IRS monitor foreign partnership income and ensures U.S. taxpayers properly disclose and report their foreign business interests.
Form 8865, titled “Return of U.S. Persons With Respect to Certain Foreign Partnerships,” is required under Internal Revenue Code (IRC) Sections 6038, 6038B, and 6046A. U.S. persons must file this form when they have a reportable ownership interest, control, or certain transactions involving a non-U.S. partnership.
Form 8865 is commonly required when a U.S. person owns a significant interest in a foreign partnership or exercises control over the partnership. The form allows the IRS to track foreign income, capital contributions, distributions, and ownership changes involving U.S. taxpayers.
Key Requirements for Filing Form 8865
A U.S. person may be required to file Form 8865 if they:
• Own 10% or more of a foreign partnership.
• Control a foreign partnership (more than 50% ownership, directly or indirectly).
• Contribute property to a foreign partnership.
• Acquire or dispose of an interest in a foreign partnership.
Types of Foreign Partnerships Subject to Form 8865 Filing
Form 8865 applies to:
• Controlled Foreign Partnerships: Foreign partnerships in which U.S. persons collectively own more than 50%.
• Foreign partnerships with significant U.S. ownership, even if not controlled.
• Partnerships involved in reportable transactions with U.S. partners.
Who Must File Form 8865?
Filing requirements depend on the filer’s category:
• Category 1: U.S. persons who control a foreign partnership.
• Category 2: U.S. persons who own at least 10% of a foreign partnership.
• Category 3: U.S. persons who contribute property to a foreign partnership.
• Category 4: U.S. persons who acquire, dispose of, or change their ownership interest.
Key Information Reported on Form 8865
Form 8865 requires extensive disclosures, including:
• Partnership Structure: Ownership percentages and partner information.
• Income and Expenses: Detailed profit and loss information.
• Balance Sheet: Assets, liabilities, and capital accounts.
• Partner Transactions: Contributions, distributions, and loans.
• Foreign Taxes: Taxes paid or accrued by the partnership for foreign tax credit purposes.
