What is the form 8865?

The Form 8865 reports information about foreign partnerships. It is purely informative, but it is necessary to file.

Who must file?

A U.S. person who qualifies under any of the following categories of filers must complete and file Form 8865. In addition, individuals in each category must file any additional schedules in their respective category.

·         Category 1: Any U.S. person with more than a 50% interest in a foreign partnership.

·         Category 2: a U.S. person who owned a 10% or greater interest in a majority US-owned foreign partnership.

·         Category 3: a U.S. person who contributed to a foreign partnership

o   If you own 10% or more of the partnership after the contribution

o   If you contribute at least $100,000.

·         Category 4: a U.S. person that had a reportable event:

o   Acquisition: The person acquires a 10% or greater direct interest in the partnership.

o   Disposition: The person owned a 10% before and now owns less than 10%.

o   Changes in proportional interests: the person's interest in the partnership has changed by at least 10%.

How to calculate interest:

50% Interest is defined as any of the following:

·         50% of the capital,

·         50% of the profits, or

·         50% of the deductions or losses

How to file:

Attach Form 8865 to your income tax return and file both by the due date. If you do not have to file an income tax return, you must file form 8865 separately with the IRS.

Penalties:

A $10,000 penalty is imposed for each failure to file on time and correctly. After 90 days, an additional $10,000 penalty is imposed per day.

Source:

IRS