Entity Classification Election

Use Form 8832 to make a change in classification. Except for certain business entities always classified as corporations, a business entity with at least two members may choose to be classified either as a partnership or an association taxable as a

10 Instructions for Form 1065 (2025)

6. Regulations section 1.1411-10(g) (section 1411 election regarding controlled foreign corporations (CFCs) and qualified electing fund (QEF)).

A domestic partnership that directly or indirectly owns stock of a CFC (within the meaning of section 953(c)(1)(B) or 957(a)) or a passive foreign investment company (PFIC) (within the meaning of section 1297(a)) that the domestic partnership treats as a QEF under section 1293 may make the election provided in Regulations section 1.1411-10(g). The election must be made no later than the first tax year beginning after 2013 during which the partnership:

a. Includes an amount in gross income for chapter 1

purposes under section 951(a) or section 1293(a)(1)(A) for the CFC or QEF, and

b. Has a direct or indirect owner that is subject to tax under

section 1411 or would have been if the election were made.

This election must be made on an entity-by-entity basis, and applies only to the particular CFCs and QEFs for which an election is made. In general, for purposes of section 1411, if an election is in effect for a CFC or QEF, the amounts included in income under sections 951 and 1293 derived from the CFC or QEF are included in net investment income, and distributions described in section 959(d) or 1293(c) are excluded from net investment income. An election that is made under Regulations section 1.1411-10(g) can’t be revoked. For more information regarding this election, see Regulations section 1.1411-10(g). The election must be made in a statement that is filed with the partnership’s original or amended return for the tax year in which the election is made. An election can be made on an amended return only if the tax year for which the election is made, and all tax years affected by the election, aren’t closed by the period of limitations on assessments under section 6501. The statement must include:

a. The name and EIN of the partnership making the

election;

b. A declaration that the partnership elects under

Regulations section 1.1411-10(g) to apply the rules in Regulations section 1.1411-10(g) to the CFCs and QEFs identified in the statement; and

c. The following information for each CFC and QEF for

which an election is made: (a) the name of the CFC or QEF; and (b) either the EIN of the CFC or QEF, or, if an EIN isn’t available, the reference ID number of the CFC or QEF.

7. Section 41(h) (payroll tax credit election).

Effect of Section 743(b) Basis Adjustment on Partnership Items If the basis of partnership property has been adjusted for a transferee partner under section 743(b), the partnership must adjust the transferee’s distributive share of the items of partnership income, deduction, gain, or loss in accordance with Regulations sections 1.743-1(j)(3) and (4). These adjustments (other than adjustments to depletable oil and gas property allocable to the partner under section 613A(c)(7)(D)) must be reported on Schedule K and the transferee partner’s Schedule K-1. Report the adjustments on an attached statement to Schedule K, line 20c, code U. See the instructions for Schedule K, line 20. Identify the partnership item being adjusted and the amount of the adjustment. If the adjustments are to partnership items from more than one trade or business, report the adjustments separately for each activity.

Electing Out of the Centralized Partnership Audit Regime A partnership can elect out of the centralized partnership audit regime for a tax year if the partnership is an eligible partnership that year. See Question 33 under Schedule B, later.