Use Form 8865 to report the information required under section 6038 (reporting with respect to controlled foreign partnerships), section 6038B (reporting of transfers to foreign partnerships), or section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests).

A U.S. person qualifying under one or more of the Categories of Filers (see below) must complete and file Form 8865. These instructions and the Filing Requirements for Categories of Filers chart below explain the information, statements, and schedules required for each category of filer. If you qualify under more than one category for a particular foreign partnership, you must submit all the items required for each category under which you qualify.

Complete a separate Form 8865 and the applicable schedules for each foreign partnership.

File the 2006 Form 8865 with your income tax return for your tax year beginning in 2006.

If a foreign partnership files Form 1065, U.S. Return of Partnership Income, or Form 1065-B, U.S. Return of Income for Electing Large Partnerships, for its tax year, Category 1 and 2 filers may use a copy of the completed Form 1065 or 1065-B schedules in place of the equivalent schedules of Form 8865.

If you file Form 8865 with an electronically filed income tax return, see the electronic filing publications identified in the instructions for your income tax return for more information.

The following Form 1065/1065-B schedules are equivalent to the following Form 8865 schedules:

Attach Form 8865 to your income tax return (or, if applicable, partnership or exempt organization return) and file both by the due date (including extensions) for that return. If you do not have to file an income tax return, you must file Form 8865 separately with the IRS at the time and place you would be required to file an income tax return (or, if applicable, a partnership or exempt organization return). See below for penalties that may apply if you do not file Form 8865 on time.

Also, an individual is considered to own an interest owned directly or indirectly by or for his or her family. The family of an individual includes only that individual's spouse, brothers, sisters, ancestors, and lineal descendants. An interest will be attributed from a nonresident alien individual under the family attribution rules only if the person to whom the interest is attributed owns a direct or indirect interest in the foreign partnership under section 267(c)(1) or (5).

If you file a Form 8865 you later determine is incomplete or incorrect, file a corrected Form 8865 with an amended tax return following the instructions for the return with which you originally filed Form 8865. Write “corrected” at the top of the form and attach a statement identifying and explaining the changes.

Enter in the space below the title of Form 8865 the tax year of the foreign partnership that ended with or within the tax year of the person filing this form. Category 1 or 2 filers must report information for the tax year of the foreign partnership that ends with or within their tax years. A Category 3 or 4 filer must report on Schedules O or P, respectively, transactions that occurred during that filer's tax year (rather than during the partnership's tax year).

Enter the identifying number of the person filing this return. Use an employer identification number (EIN) to identify partnerships, corporations, and estates or trusts. For individuals, use a social security number (SSN) or individual taxpayer identification number (ITIN).

Include the suite, room, or other unit number after the street address. If the Post Office does not deliver mail to the street address and the U.S. person has a P.O. box, show the box number instead.

Check the box for each category that describes the person filing the form. If more than one category applies, check all boxes that apply. See Categories of Filers beginning on page 1.

Enter the filer's share of nonrecourse liabilities, partnership-level qualified nonrecourse financing, and other liabilities. Nonrecourse liabilities are those liabilities of the partnership for which no partner bears the economic risk of loss. The extent to which a partner bears the economic risk is determined under the rules of Regulations section 1.752-2.

"Qualified nonrecourse financing" generally includes financing:

See section 465(b)(6) for more information on qualified nonrecourse financing.

If the person filing the form is a member of a consolidated group, but not the parent, list the name, address, and EIN of the filer's common parent.

For the foreign partnership's address, enter the city, province or state, and the foreign country in that order. Follow the foreign country's practice in placing the postal code in the address. Do not abbreviate the country name. If the partnership receives its mail in care of a third party (such as an accountant or attorney), enter “C/O” followed by the third-party's name and street address or P.O. box.

Enter the foreign partnership's functional currency. See sections 985 through 989 and the regulations thereunder. If the partnership had more than one qualified business unit (QBU), attach a statement identifying each QBU, its country of operation, and its functional currency. A QBU is any separate and clearly identified unit of a trade or business of the partnership which maintains separate books and records.

When translating functional currency to U.S. dollars, you must use the method specified in sections 985 through 989 and the regulations thereunder. But, regardless of the specific method required, all exchange rates must be reported using a “divide-by convention” rounded to at least 4 places. That is, the exchange rate must be reported in terms of the amount by which the functional currency amount must be divided in order to reflect an equivalent amount of U.S. dollars. As such, the exchange rate must be reported as the units of foreign currency that equal one U.S. dollar, rounded to at least 4 places. Do not report the exchange rate as the number of U.S. dollars that equal one unit of foreign currency.

If the foreign partnership was required to file Form 1065 or Form 1065-B for the partnership's tax year listed at the top of page 1 (Form 8865), check the applicable box and enter the IRS Service Center where the form was or will be filed. Also, check the applicable box(es) if the foreign partnership was required to file Form 8804, Annual Return for Partnership Withholding Tax (Section 1446), or Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons (for the calendar year ending with or within the foreign partnership's tax year).

Enter the number of Forms 8858, Information Return of U.S. Persons With Respect To Foreign Disregarded Entities, attached to Form 8865. A disregarded entity is an entity that is disregarded as an entity separate from its owner under Regulations section 301.7701-3. The partnership is the tax owner of the foreign disregarded entity if it owns the assets and liabilities of the foreign disregarded entity for purposes of U.S. income tax law.

If the foreign partnership is the tax owner of a foreign disregarded entity and you are a Category 1 or 2 filer of Form 8865, complete and attach Form 8858 to Form 8865. For more information, see the instructions for Form 8858.

Indicate whether the partnership owned any interest in a separate unit. In general, a separate unit is:

See Regulations section 1.1503-2(c)(3) and (4) for more information on separate units. Attach a statement identifying each separate unit and its country of operation.

Answer “Yes” to Item G9 if the partnership meets both of the requirements shown on the form. Total receipts is defined as the sum of gross receipts or sales (Schedule B, line 1a); all other income reported on Schedule B (lines 4 through 7); income reported on Schedule K, lines 3a, 5, 6a, and 7; income or net gain reported on Schedule K, lines 8, 9a, 10 and 11; and income or net gain reported on Form 8825, lines 2, 19, and 20a.

For specific instructions for Schedule B, see the Instructions for Form 1065. Use the specific instructions for Page 1 of Form 1065, Income and Deductions. If the foreign partnership files Form 1065-B, use the specific instructions for Parts I and II of Form 1065-B in the Instructions for Form 1065-B.

For the specific instructions for Schedule D, see Schedule D (Form 1065), Capital Gains and Losses. Schedule D and its instructions are a separate product for Form 1065. If the foreign partnership files Form 1065-B, use the instructions for Schedule D in the Instructions for Form 1065-B.

Schedule K is a summary schedule of all of the partners' shares of the partnership income, credits, deductions, etc. Only Category 1 filers must complete Schedule K.

Schedule K-1 is used to report a specific partner's share of the partnership income, deductions, credits, etc.

All Category 1 and 2 filers must complete Schedule K-1 for any direct interest they hold in the partnership. A Category 1 or 2 filer that does not own a direct interest is not required to complete Schedule K-1.

Category 1 filers must also complete Schedule K-1 for each U.S. person that directly owns a 10% or greater direct interest in the partnership.

Provide the partner's beginning and year-end percentage interest in partnership profits, losses, capital, or deductions. These percentages should include any interest constructively owned by the filer.

Complete boxes 1 through 20 for any direct interest that the partner owns in the partnership.

Although the partnership is not subject to income tax, the partners are liable for tax on their shares of the partnership income, whether or not distributed, and must include their share of such items on their tax returns.

Allocations of income, gains, losses, deductions, or credits among the partners generally should be made according to the partnership agreement. See section 704 and the regulations thereunder.

For the specific instructions for Schedules K and K-1, see the Instructions for Form 1065. If the foreign partnership files Form 1065-B, use the specific instructions for Schedules K and K-1 of Form 1065-B in the Instructions for Form 1065-B.

For the specific instructions for Schedule M-1, see the Instructions for Form 1065. If the foreign partnership files Form 1065-B, use the specific instructions for Schedule M-1 of Form 1065-B in the Instructions for Form 1065-B.

For the specific instructions for Schedule M-2, see the Instructions for Form 1065. If the foreign partnership files Form 1065-B, use the specific instructions for Schedule M-2 of Form 1065-B in the Instructions for Form 1065-B.

Part I is used to report the transfer of property to a foreign partnership. Provide the information required in columns (a) through (g) with respect to each contribution of property to the foreign partnership that must be reported. If you contributed property with a FMV greater than its tax basis (appreciated property), or intangible property, provide the information required in columns (a) through (g) separately with respect to each item of property transferred (except to the extent you are allowed to aggregate the property under Regulations section 1.704-3(e)(2), (3), and (4)). Provide a general description of each item of property in the Supplemental Information Required To Be Reported section. For all other property contributed, aggregate by the categories listed in Part I.

Use Part II to report certain dispositions by a foreign partnership. If you were required to report a transfer of appreciated property to the partnership, and the partnership disposes of the property while you are still a direct or constructive partner, you must report that disposition in Part II. If the partnership disposes of the property in a nonrecognition transaction and receives in exchange substituted basis property, report the subsequent disposition of the substituted basis property in the same manner as provided for the contributed property. See section 7701(a)(42) for the definition of substituted basis property and Regulations section 1.704-3(a)(8) for more information.

If gain recognition was required with respect to any transfer reported in Part I under section 904(f)(3) and (f)(5)(F), attach a statement identifying the transfer and the amount of gain recognized.

Part I is completed by Category 4 filers required to report an acquisition of an interest in a foreign partnership. See Categories of Filers beginning on page 1 for more details about which types of acquisitions must be reported.

This section is completed by U.S. persons who are Category 4 filers because they disposed of an interest in a foreign partnership. See Categories of Filers beginning on page 1 for more details about what types of dispositions must be reported. For each disposition reported in Part II, indicate in Part IV whether a statement is required by Regulations section 1.751-1(a)(3) to be filed with respect to the disposition.

This section is completed by U.S. persons who are Category 4 filers because their direct proportional interest in the foreign partnership changed. See Categories of Filers beginning on page 1 for more details about which changes in proportional interest must be reported.

Enter any information asked for in Part I, Part II, or Part III that must be reported in detail. Identify the applicable part number and column next to the information entered in Part IV.