Part VI. Supplemental Information

Information to be reported. When providing any information in the Supplemental Information, indicate the Part, Part column, row, and line for which the information is provided.

Additional Part rows. If additional rows are needed to enter information in Parts I through V in the Supplemental

Information, provide the information on an attachment or attachments to Schedule H in the same format as required for the row on the Part at issue. If separate supplemental schedules are used for any Part of Schedule H for specific section 721(c) properties, use the same corresponding identification line number from the Part I of Schedule G for such property on the supplemental schedule for Schedule H.

Other information. Use the Supplemental Information section to provide any additional information required by Regulations section 1.721(c)-6 that isn’t reported in Parts I through V above.

Schedule K Form 8865, 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 Form 8865, Schedule K.

Schedule K-1 Schedule K-1 (Form 8865) 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 (Form 8865) for any direct interest they hold in the partnership. A Category 1 or 2 filer that doesn’t own a direct interest is not required to complete Schedule K-1 (Form 8865).

Category 1 filers must also complete Schedule K-1 (Form 8865) 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 interests in partnership profits, losses, capital, or deductions. These percentages should include any interest constructively owned by the filer.

Complete boxes 1 through 21 for any direct interest that the partner owns in the partnership.

Example. Partner A owns a 45% direct interest in a foreign partnership (FPS). Partner A also owns 100% of the stock of a domestic corporation (DC), which owns a 10% direct interest in FPS. Therefore, Partner A is considered to own a 55% interest in FPS and is thus a Category 1 filer. When Partner A completes Schedule K-1 (Form 8865) for itself, Partner A must report the distributive share of items allocated to Partner A’s direct interest of 45% but not any items allocated to DC’s 10% interest. When Partner A completes Schedule K-1 (Form 8865) for DC (which Partner A must do because DC owns a direct 10% interest), Partner A must report on DC’s Schedule K-1 (Form 8865) only items allocated to DC’s direct 10% interest.

Although the partnership isn’t subject to income tax, the partners are liable for tax on their shares of the

Instructions for Form 8865 (2025) 15

partnership income, whether or not distributed, and must include their shares of such items on their tax returns.

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

Schedule K-1 (Form 8865) for related foreign part- ners. If the gain deferral method is applied and a section 721(c) partnership doesn’t have a filing obligation under section 6031, the U.S. transferor must obtain a Schedule K-1 (Form 8865) for each direct or indirect partner that is related to the U.S. transferor (within the meaning of section 267(b) or 707(b)(1)) and that isn’t a U.S. person (related foreign partner). See Regulations section 1.721(c)-6(c)(3). The Schedule K-1 (Form 8865) for each related foreign partner must be filed and attached to the Form 8865 as part of the annual reporting relating to the gain deferral method pursuant to Regulations section 1.721(c)-6(b)(3)(xi). The instructions that apply to Schedule K-1 (Form 8865) for all other partners also apply to a Schedule K-1 (Form 8865) for a related foreign partner. See Gain deferral method, Section 721(c) partnership , and U.S. transferor , earlier.

General Reporting Instructions for Schedule K-1 (Form 8865)

On each Schedule K-1 (Form 8865), enter the information about the partnership and the partner in Parts I and II (items A through F). For Schedule K-1 (Form 8865), items E and F, see the instructions for the corresponding Schedule K-1 (Form 1065), items J and L, in the Instructions for Form 1065 under Specific Instructions (Schedule K-1 only). In Part III, enter the partner’s distributive share of each item of income, deduction, and credit and any other information the partner needs to prepare the partner’s tax return.

Item A2 Enter the reference ID number used on Form 8865, item G2(b). For details, see Item G2(b), earlier.

Part III—line 1. If the gain deferral method is applied to which the section 721(c) partnership adopts the remedial allocation method, the amounts reflected on each partner’s Schedule K-1 for the allocations of income, gains, losses, deductions, or credits allocated to such partner must include any allocations of remedial items for section 721(c) property. See Regulations section 1.721(c)-3(c). For example, if the partner is the U.S. transferor of section 721(c) property, Part III, line 1, would include any remedial income allocated to the U.S. transferor from Schedule G, Part II, column (c), “Remedial income allocated to U.S. transferor,” as applicable. For partners other than the transferor, Part III, line 1, would include their share of ordinary business income (or loss) after taking into account any remedial items to such partner relating to section 721(c) property. However, Part III, line 1, would not include basis adjustments attributable to section 197(f)(9) for related foreign partners. See Regulations sections 1.704-3(d)(5)(iii) and 1.721(c)-3. See Section 721(c)

partnership , Section 721(c) property , and Gain deferral method , earlier.

Codes. In box 11 and boxes 13 through 21, identify each item by entering a code in the column to the left of the dollar amount entry space. These codes are identified in List of Codes Used for Schedule K-1 (Form 8865) , later (for Box 11—“Code ZZ. Other,” see “Code ZZ. Other” in the Instructions for Form 1065). Information concerning each of the boxes and codes is available in the Partner’s Instructions for Schedule K-1 (Form 1065).

Attached statements. When attaching statements to Schedule K-1 to report additional information to the partner, indicate there is a statement for the following.

• If an amount can be input on Schedule K-1 but additional information is required, enter an asterisk (*) after the code in the column to the left of the entry space.

• For items that can’t be reported as a single dollar amount, enter the code and an asterisk (*) in the column to the left and enter “STMT” in the right column to indicate that the information is provided on an attached statement.

• If the partnership has more coded items than the number of entry boxes (for example, boxes 11 and 13 through 15, or boxes 17 through 21), don’t enter a code or dollar amount in the last entry box. Instead, enter an asterisk (*) in the left column and enter “STMT” in the entry space to the right.

More than one attached statement can be placed on the same sheet of paper. The information included in the statement should be identified in alphanumerical order by box number followed by the letter code (if any), description, and dollar amount for each item. For example: “Box 15, code J—Work opportunity credit—$1,000.” This can be followed with any additional information the partner needs to determine the proper tax treatment of the item.

Specific Instructions for Schedules K and K-1 For the specific instructions for Form 8865, Schedule K, and Schedule K-1 (Form 8865), see the Instructions for Form 1065.

If the partnership is a section 721(c) partnership, box 20 (code AL—Section 721(c) partnership) of Schedule K-1, Part III, must include the amounts relating to any remedial items made under the remedial allocation method (described in Regulations sections 1.704-3(d) and 1.704-3(d)(5)(iii)) for section 721(c) property. For the specific partner’s information relating to the remedial method allocations and gain deferral method, see the Instructions for Form 1065, especially the Partner’s Instructions for Schedule K-1 (Form 1065).

Line 16. If the partnership had items of international tax relevance, see the Instructions for Schedules K-2 and K-3 (Form 8865) to determine if you need to check the box and attach Schedules K-2 and K-3.

16 Instructions for Form 8865 (2025)

Schedule K-2 Schedule K-2 (Form 8865) is an extension of Schedule K of the Form 8865 and is used to report items of international tax relevance from the operation of a partnership.

Schedule K-3 Schedule K-3 (Form 8865) is an extension of Schedule K-1 (Form 8865) and is generally used to report the partner’s share of the items reported on Schedule K-2. The information reported on Schedule K-3 is used to report information on a partner’s tax or information returns.

For more information, see the Instructions for Schedules K-2 and K-3 (Form 8865).

The balance sheets should agree with the partnership’s books and records. Attach a statement explaining any differences.

Only Category 1 filers are required to complete Form 8865, Schedule L.

If you answered “Yes” to item H11 on page 1 of Form 8865, you don’t have to complete Form 8865, Schedule L.

Schedule L requires balance sheets prepared and translated into U.S. dollars in accordance with U.S. generally accepted accounting principles (GAAP).

Exception. Generally, if the partnership or any QBU of the partnership uses the dollar approximate separate transactions method (DASTM), Form 8865, Schedule L, should reflect the tax balance sheets prepared and translated into U.S. dollars according to Regulations section 1.985-3(d).

Specific Instructions for Schedule L For the specific instructions for Form 8865, Schedule L, see the Instructions for Form 1065.

Form 8865 filers aren’t required to complete Schedule M-3 (Form 1065), Net Income (Loss) Reconciliation for Certain Partnerships.

Only Category 1 filers are required to complete Form 8865, Schedule M-1. If you answered “Yes” to item H11 on page 1 of Form 8865, you don’t have to complete Form 8865, Schedule M-1.

Specific Instructions for Schedule M-1 For the specific instructions for Schedule M-1 (Form 8865), see the Instructions for Form 1065.

Only Category 1 filers are required to complete Form 8865, Schedule M-2. If you answered “Yes” to item H11 on page 1 of Form 8865, you don’t have to complete Form 8865, Schedule M-2.

Specific Instructions for Schedule M-2 For the specific instructions for Form 8865, Schedule M-2, see the Instructions for Form 1065.

All Category 1 filers must complete Schedule N and report all transactions of the foreign partnership during the tax year of the partnership listed on the top of Form 8865, page 1. A Category 1 filer filing a Form 8865 for other Category 1 filers under the multiple Category 1 filers exception must complete a Schedule N for itself and a separate Schedule N for each Category 1 filer not filing Form 8865.

Category 2 filers are required to complete columns (a), (b), and (c) of Schedule N. Category 2 filers don’t have to complete column (d).

Column (a). Use column (a) to report transactions between the foreign partnership and the person filing the Form 8865.

Column (d). Use column (d) to report transactions between the foreign partnership and any U.S. person with a 10% or more direct interest in the foreign partnership. If such person also qualifies under column (b), don’t report transactions between the foreign partnership and that person under column (d). Report the transactions only under column (b).

Lines 6 and 16. Enter distributions received from other partnerships and distributions from the foreign partnership for which this form is being completed.

Lines 20 and 21. Enter the largest outstanding balances during the tax year of gross amounts borrowed from, and gross amounts lent to, the related parties described in columns (a) through (d). Don’t enter aggregate cash flows, year-end loan balances, average balances, or net balances. Don’t include open account balances resulting from sales and purchases reported under other items listed on Schedule N that arise and are collected in full in the ordinary course of business.

Category 3 filers must complete Schedule O.

Instructions for Form 8865 (2025) 17

Section 721(c) partnerships. Regulations section 1.721(c)-2 overrides section 721(a) nonrecognition of gain upon a contribution of section 721(c) property to a section 721(c) partnership occurring on or after August 6, 2015. A U.S. transferor must recognize gain unless the gain deferral method described in Regulations section 1.721(c)-3 is applied. To satisfy the reporting requirements of the gain deferral method, the U.S. transferor is required to report certain information for the year of the contribution and for subsequent years. See Regulations section 1.721(c)-6. See Section 721(c) property , Section 721(c) partnership , U.S. transferor , and Gain deferral method , earlier.

Reference ID number. Use the reference ID number shown on Form 8865, item G2(b). For details, see Item G2(b) , earlier.