Form 8865 — Return of U.S. Persons With Respect to Certain Foreign Partnerships
Form 8865 is filed by U.S. persons who have certain interests in foreign partnerships — specifically, those who control a foreign partnership (Category 1), own at least 10% of a foreign partnership (Category 2), contribute property to a foreign partnership (Category 3), or acquire/dispose of a 10%+ interest (Category 4). The penalties for failure to file are severe: $10,000 per year, plus 10% of the value of any property transferred to a foreign partnership.
Key Rules and Authority
| Rule | Detail |
|---|---|
| Category 1 Penalty | $10,000/year |
| Category 3 Penalty | 10% of property value |
| Category 1 | Controls foreign partnership (>50% interest) |
| Category 2 | Owns 10%+ of foreign partnership |
| Category 3 | Contributes property to foreign partnership |
| Category 4 | Acquires/disposes of 10%+ interest |
Who Must File Form 8865
Form 8865 is required for U.S. persons in four categories: Category 1 — U.S. persons who controlled a foreign partnership (owned more than 50% of the profits, losses, or capital interest) at any time during the year; Category 2 — U.S. persons who owned at least 10% of the foreign partnership while the partnership was controlled by U.S. persons; Category 3 — U.S. persons who contributed property to a foreign partnership in exchange for a partnership interest; and Category 4 — U.S. persons who acquired or disposed of an interest that changed their ownership to or from 10% or more.
Frequently Asked Questions
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