IRS Updates Schedules K-2 and K-3 FAQs
The IRS recently updated its frequently asked questions and answers (FAQs) on the new Schedules K-2 and K-3 forms in response to input from stakeholders.
Eight sets of FAQs, Questions 19 through 26, were added in the update. Topics covered include whether a partnership or S corporation is required to complete all parts of Schedules K-2 and K-3 if they do not qualify for an exception, and if the filer does qualify for one, whether they must complete Forms 5471, 8865 and/or 8858. Another question addresses when a filer needs to complete Section 1 of Part III, Schedules K-2 and K-3 (Forms 1065, 1120-S and 8865).
Additional topics of note are whether a partnership should report its accrued original issue discount (OID) and OID income taxable on a gross basis to a foreign partner, whether Part VIII (Form 1065) and Part VII (1120-S) of Schedules K-2 and K-3 are required to be completed for dormant foreign corporations and what must be reported by foreign partnerships that have passive foreign investment companies and have made a mark-to-market election.