Section 2. — Instruction 8865 (Schedule K-2 & K-3)

Qualified Electing Fund (QEF)

General Information

Columns (a) and (b). Enter the name and U.S. EIN (or reference ID number) of each PFIC held directly or indirectly by the partnership during its tax year. Don’t enter “FOREIGNUS” or “APPLIED FOR.”

QEF Information

Columns (c) and (d). Enter the partnership’s share of the total ordinary earnings and net capital gain (as defined in Regulations section 1.1293-1(a)(2)) of the PFIC for the partnership’s tax year in which or with which the tax year of the PFIC ends in columns (c) and (d), respectively. The PFIC must provide the partnership (or any other shareholder or intermediary through which the partnership owns stock of the PFIC) with a statement that provides information to assist the partnership in determining these amounts. See Regulations section 1.1295-1(g) for additional information on annual PFIC statements.

Provide the information the partnership received in (a) PFIC annual information or intermediary statement for the PFIC; or (b) on a Schedule K-3, Part VII, in its capacity as a partner of a lower-tier partnership with information regarding the PFIC unless the U.S. person filing the Form 8865 hasn’t made, or doesn’t intend to make, a QEF election for the PFIC.

Note: Certain partners may need additional information not required to be reported on this Schedule K-2, Part VII (or the

partner’s Schedule K-3, Part VII), from the QEF for its computation of its net capital gain (as defined in Regulations section 1.1293-1(a)(2)) to make certain computations under section 1061 or the regulations thereunder. The U.S. person preparing the Form 8865 may request, or the foreign partnership for which the Form 8865 is filed may aid the U.S. person filing the Form 8865 in obtaining, such information from the QEF, though the QEF isn’t required to provide such information. See section 1061 and Regulations sections 1.1061-4 and 1.1061-6 for more information.

Section 1296 MTM Information

Columns (e) and (f). Enter the fair market value (FMV) of the PFIC stock at the beginning and end of the partnership’s tax year in columns (e) and (f), respectively. If any shares of the PFIC were acquired during the tax year for which the Form 8865 is being filed, the FMV in column (e) should reflect the FMV of those shares as of the date of acquisition. This information must be provided unless the U.S. person filing the Form 8865 hasn’t made, or doesn’t intend to make, a section 1296 MTM election for the PFIC, including a non-initial section 1296 MTM election.

Reminder. The U.S. person filing the Form 8865 isn’t required to complete Schedules K-2 and K-3, Part VII, for a PFIC the stock of which has been marked to market as described in Regulations section 1.1291-1(c)(4), though it may use Part VII to provide the partners with additional information to meet their tax obligations for the PFIC in certain instances, such as when the section 1291 rules apply because the stock wasn’t marked to market the first year of the shareholder’s holding period.

Section 1291 and Other Information

Note: Generally, the information in columns (g) through (o) is to assist shareholders of section 1291 funds in satisfying any information reporting obligations and in computing income inclusions for section 1291 funds. However, this information may be relevant to PFICs for which a QEF election (pedigreed or unpedigreed), a section 1296 MTM election (including a non-initial section 1296 MTM election), or another election has been made by a partner or other indirect PFIC shareholder. Accordingly, complete columns (g) through (o) for each PFIC for which reporting on Schedule K-2, Part VII, and Schedule K-3, Part VII, is required. However, note the instructions for column (k) regarding reporting distributions from PFICs for which the U.S. person filing the Form 8865 has made a pedigreed QEF election or section 1296 MTM election (other than a non-initial section 1296 MTM election).

Reminder. If the partnership has additional required information for a PFIC for any of columns (g) through (j) or (l) through (m) (for example, multiple distributions for the PFIC stock), the U.S. person filing the Form 8865 must complete those columns with the first of those entries and attach a statement including the remaining entries to Schedule K-2, Part VII, and its corresponding Schedules K-3, Part VII, with the information contained in Attachment 6.

Column (g). Enter the date(s) on which the partnership initially acquired each block of stock in the PFIC using the format YYYYMMDD.

22 Inst. for Schedules K-2 and K-3 (Form 8865) (2025)

Attachment 6. Additional Information for Part VII, Section 2

and/or the FMV of any other property distributed to the partnership by the PFIC during the tax year, if any.

Note: Deemed distributions by QEFs don’t need to be reported on this Schedule K-2, Part VII (or the partner’s Schedule K-3, Part VII). However, partners which have made, or intend to make, an election under section 1294, and which are deemed to have received a distribution from the QEF, may require this information to complete any computations under section 1294 (including for Form 8621, if required). See section 1294(f) and Temporary Regulations section 1.1294-1T for additional information.

Column (i). Enter the date(s) of distribution of the amounts entered in column (h) using the format YYYYMMDD.

Column (j). Enter the total creditable foreign taxes attributable to a distribution from the PFIC. See section 1291(g) and the instructions for Form 8621, Part V, line 16d, for additional information on creditable foreign taxes attributable to PFIC distributions, including apportioning creditable foreign taxes to the portion of a distribution which constitutes an excess distribution and certain rules related to creditable foreign taxes on a disposition of PFIC stock.

Column (k). Enter the total amount of distributions the partnership received from the PFIC in the 3 preceding tax years, or, if shorter, the total amount of distributions the partnership received during its holding period of the PFIC stock. However, don’t enter any amount in this column for a PFIC for which the U.S. person filing the Form 8865 has made a pedigreed QEF election or section 1296 MTM election (other than a non-initial section 1296 MTM election).

Column (l). Enter the date(s) on which the partnership disposed of any block of stock in the PFIC during the partnership’s tax year, if any, using the format YYYYMMDD.

Column (m). If the partnership disposed of any block of stock in the PFIC during the partnership’s tax year, enter the amount realized by the partnership on each disposition.

Column (n). If the partnership disposed of any block of stock in the PFIC during the partnership’s tax year, enter the partnership’s tax basis in the shares of the PFIC on the date of disposition.

Schedule K-3. Enter the partner’s share, through its ownership in the partnership, of the partnership’s tax basis in the PFIC shares. The partner’s share of the basis in the PFIC shares should include any applicable adjustments specific to the partner, such as section 743(b) adjustments or adjustments made under the PFIC regime. See sections 1293(d) and

adjustments made under the PFIC regime.

Column (o). Enter the partnership’s gain or loss on the disposition of PFIC shares. This equals column (m) minus column (n).

Schedules K-2 and K-3, Part VIII (Partners’ Information for Base Erosion and Anti-Abuse Tax (Section 59A))

Note: This information is relevant for partners completing Form 8991. Part VIII of Schedules K-2 and K-3 must be completed for corporate partners who are determining if they are subject to the BEAT, and to figure their BEAT, if any. This information includes the partner’s share of the partnership’s gross receipts, the partner’s amount of base erosion payments made through the partnership, and the partner’s base erosion tax benefits. The BEAT is generally levied on certain large corporations that have deductions and certain other items paid or accrued to foreign related parties (a base erosion payment) that are 3% of their total deductions or higher (2% in the case of certain banks or registered securities dealers), a determination referred to as the “base erosion percentage test.” Partnerships aren’t subject to the BEAT; however, corporate partners of a partnership that are applicable taxpayers under Regulations section 1.59A-2 may be subject to the BEAT. Except for purposes of determining a partner’s base erosion tax benefits under Regulations section 1.59A-7(d)(1), and whether a taxpayer is a registered securities dealer, BEAT determinations are made by the partner. See Regulations section 1.59A-7 for further information regarding the application of section 59A to partnerships, and the Instructions for Form 8991 for additional information on whether a corporate partner is an applicable taxpayer subject to the BEAT.

To complete Schedules K-2 and K-3, Part VIII, the foreign related parties of each partner must be identified, subject to the exception for small partners. It’s expected that the partners will collaborate to identify the foreign related parties of each partner. A foreign related party of the partner is a foreign person that is:

Any 25% owner of the applicable taxpayer (as defined in Regulations section 1.59A-1(b)(17)(ii)(A)),
Any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the applicable taxpayer or any 25% owner of the applicable taxpayer, or
Any other person who is related to the applicable taxpayer within the meaning of Regulations section 1.59A-1(b)(17)(i)(C).

Inst. for Schedules K-2 and K-3 (Form 8865) (2025) 23

Exception for small partners. Part VIII of Schedule K-3 isn’t required to be prepared for small partners meeting the following three requirements.

The partner’s interest in the partnership represents less than 10% of the capital and profits of the partnership at all times during the tax year.
The partner is allocated less than 10% of each partnership item of income, gain, loss, deduction, and credit for the tax year.
The partner’s interest in the partnership has an FMV of less than $25 million on the last day of the partner’s tax year, determined using a reasonable method.

See Regulations section 1.59A-7(d)(2) for further information regarding the application of the exception for small partners.

Exception for certain other partners. Don’t complete Schedule K-3, Part Vlll, for a partner that is an individual.

Don’t complete Schedule K-3, Part VIII, for a partner that is an S corporation.

Complete Section 1, lines 1–4, of Schedule K-3, Part VIII, for partners that are RICs and REITs but don’t complete Section 2 for these partners.