
In addition to the new domestic filing exception discussed last week, the 2022 instructions for Schedules K-2 and K-3 added the following exceptions to completing Pa...
In addition to the new domestic filing exception discussed last week, the 2022 instructions for Schedules K-2 and K-3 added the following exceptions to completing Parts V, VI and VII:
- Part V of the Schedules K-2 and K-3 is not required to be completed with respect to distributions by a foreign corporation if the partnership knows that (i) none of the distributions by the foreign corporation are attributable to previously taxed earnings and profits (PTEP) in annual PTEP accounts of any direct or indirect partner, and (ii) none of the partnership’s direct or indirect partners are eligible to claim a deduction under Section 245A with respect to any distribution by the foreign corporation.
- Part VI of Schedules K-2 and K-3 does not need to be completed with respect to a controlled foreign corporation (CFC) if the partnership knows that it does not have a direct or indirect partner (through pass-through entities only) that is a U.S. shareholder of the CFC required to include in gross income a subpart F income inclusion and/or Section 951(a)(1)(B) inclusion with respect to the CFC, or figure Section 951A inclusions by taking into account global intangible low-taxed income (GILTI) items of the CFC.
- Part VII of Schedules K-2 and K-3 does not need to be completed if:
- A partnership that knows it has no direct or indirect partners that are U.S. persons, including U.S persons that own an indirect interest in the partnership through one or more foreign entities.
- A domestic partnership that has elected to treat a Passive Foreign Investment Corporation (PFIC) as a pedigreed qualified electing fund (QEF) or made a mark-to-market (MTM) election under Section 1296 with respect to a PFIC applicable to the partnership’s tax year.
- A partnership that owns stock of a foreign corporation that is treated as a qualifying insurance corporation.
- A partnership that knows that all of its direct and indirect partners that are U.S. persons are either (i) not subject to the PFIC rules with respect to the corporation because they are subject to the subpart F rules with respect to the corporation, (ii) tax-exempt entities that are not subject to the PFIC rules with respect to the corporation, or (iii) pass-through entities with no direct or indirect U.S. taxable owners
- A partnership that marks to market stock of a PFIC.
This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.
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