Specific Instructions

Part I. Reasons for Filing

Adjusted seasonal installment method and/or annualized income installment method.   If the partnership's income varied during the year because, for example, it operated its business on a seasonal basis, it may be able to lower or eliminate the amount of one or more required installments by using the adjusted seasonal installment method and/or the annualized income installment method.

Example.   A ski shop, which receives most of its income during the winter months, may benefit from using one or both of these methods to figure its required installments. The annualized income installment or adjusted seasonal installment may be less than the required installment under the current year safe harbor (increased by any reduction recaptured under section 6655(e)(1)(B)) for one or more due dates. Using one or both of these methods may reduce or eliminate the penalty for those due dates.

Use Parts IV through VI of Schedule A (Form 8804) to figure one or more required installments. If Parts IV through VI are used for any payment due date, those Parts must be used for all subsequent payment due dates. To arrive at the amount of each required installment, Part VI uses the smallest of:

  • The adjusted seasonal installment (if applicable),

  • The annualized income installment (if applicable), or

  • The current year safe harbor (increased by any reduction recaptured under section 6655(e)(1)(B)).

Follow the steps below to determine which parts of the form have to be completed:

  • If the partnership is using only the adjusted seasonal installment method, check the applicable box in Part I and complete Parts IV and VI of Schedule A (Form 8804).

  • If the partnership is using only the annualized income installment method, check the applicable box in Part I and complete Parts V and VI of Schedule A (Form 8804).

  • If the partnership is using both methods, check both of the boxes in Part I and complete all three parts (Parts IV through VI) of Schedule A (Form 8804).

Part II. Current Year and Prior Year Safe Harbors

Line 2 (prior year safe harbor).   Enter the total section 1446 tax that would have been due for 2012, without regard to reductions for certified foreign partner-level items on the ECTI allocable to foreign partners for 2012.

The partnership may generally use the prior year safe harbor only if it paid the required amount using that method for each of its installment payments of section 1446 tax during the tax year. However, see Regulations section 1.1446-3(b)(3)(ii) for an exception. Also, see the Note below. In addition, the partnership may only use the prior year safe harbor if all of the following apply: 

  • Each installment payment that was made during the tax year, when averaged with all prior installment payments, must have been 25% of the partnership's total section 1446 tax liability under the prior year safe harbor,

  • The prior tax year consisted of 12 months,

  • The partnership timely files (including extensions) a U.S. return of partnership income (e.g., Form 1065) for the prior tax year, and

  • The amount of ECTI for the prior tax year is not less than 50% of the ECTI shown on the current year Form 8804 that is (or will be) timely filed.

If the partnership is not permitted to use the prior year safe harbor method because any of the necessary conditions described above is not met, skip line 2 and enter on line 3 the amount from line 1.

Note.   If the partnership qualifies for and uses the exception under Regulations section 1.1446-3(b)(3)(ii) to switch to the standard option annualization method during the tax year, the partnership should include on line 2 the total of all installment payments that were made during the tax year under both the prior year safe harbor method and the standard option annualization method. Attach a statement that explains the computation.

Part III. Figuring the Underpayment

Line 6.   Enter the estimated tax payments made by the partnership for its tax year as indicated below. Include any overpayment from line 13 of the partnership's 2012 Form 8804 that was credited to the partnership's first installment period on its 2013 Form 8804. If an installment is due on a Saturday, Sunday, or legal holiday, payments made on the next day that is not a Saturday, Sunday, or legal holiday are considered made on the due date to the extent the payment is applied against that required installment.

Also include on line 6 any:

  • Section 1446 tax paid or withheld by another partnership in which the partnership filing this Schedule A (Form 8804) was a partner during the tax year. See the instructions for Form 8804, lines 6b and 6c, in the Instructions for Forms 8804, 8805, and 8813.

  • Section 1445(a) or 1445(e) tax withheld from or paid by the partnership filing this Schedule A (Form 8804) during the tax year for a disposition of a U.S. real property interest. See the instructions for Form 8804, lines 6d and 6e, in the Instructions for Forms 8804, 8805, and 8813.

Column (a).   Enter payments made by the date on line 4, column (a).

Columns (b), (c), and (d).   Enter payments made on or before the date on line 4 for that column and after the date on line 4 of the preceding column.

Line 12.   If any of the columns in line 12 shows an underpayment, complete Part VII to figure the penalty.

Parts IV Through VI

Extraordinary items.   Generally, under the annualized income installment method, extraordinary items must be taken into account after annualizing the ECTI for the annualization period. Similar rules apply in determining ECTI under the adjusted seasonal installment method. An extraordinary item includes:

  
  • Any item identified in Regulations section 1.1502-76(b)(2)(ii)(C)(1), (2), (3), (4), (7), and (8);

  • A section 481(a) adjustment; and

  • Net gain or loss from the disposition of 25% or more of the fair market value of the partnership's business assets during the tax year.

  These extraordinary items must be accounted for in the appropriate annualization period. However, a section 481(a) adjustment (unless the partnership makes the alternative choice under Regulations section 1.6655-2(f)(3)(ii)(C)) is treated as an extraordinary item occurring on the first day of the tax year in which the item is taken into account in determining ECTI.

  For more information regarding extraordinary items, see Regulations section 1.6655-2(f)(3)(ii) and the examples in Regulations section 1.6655-2(f)(3)(vii). Also see Regulations section 1.6655-3(d)(3).

De minimis rule.

Extraordinary items identified above resulting from a particular transaction that totals less than $1 million (other than a section 481(a) adjustment) may be annualized using the general rules of Regulations section 1.6655-2(f), or, if the partnership chooses, may be taken into account after annualizing the ECTI for the annualization period.

Part IV. Adjusted Seasonal Installment Method

Note.   Part IV does not reflect the lower preferential rates permitted under Regulations section 1.1446-3(a)(2). These were omitted because, for most taxpayers, the income reported in Part IV will be predominantly (or exclusively) ordinary income. If the partnership wishes to consider lower preferential rates for Part IV (and if the requirements outlined in the third paragraph of the line 31 instructions are met), it must attach a schedule which appropriately expands lines 15 and 22 through 25 to show the applicable special types of income or gain and the applicable percentages (see, for example, lines 33 and 34 of this schedule).

The partnership may use the adjusted seasonal installment method only if the partnership's base period percentage for any 6 consecutive months of the tax year is 70% or more. The base period percentage for any period of 6 consecutive months is the average of the three percentages figured by dividing the ECTI for the corresponding 6 consecutive month period in each of the 3 preceding tax years by the ECTI for each of their respective tax years. Figure the base period percentage using the 6-month period in which the partnership normally receives the largest part of its ECTI.

Example.   An amusement park with a 2013 calendar tax year receives the largest part of its taxable income during a 6-month period, May through October. To compute its base period percentage for this 6-month period, the amusement park figures its ECTI for each May–October period in 2010, 2011, and 2012. It then divides the ECTI for each May–October period by the total ECTI for that particular tax year. The resulting percentages are: 69% (.69) for May–October 2010, 74% (.74) for May–October 2011, and 67% (.67) for May–October 2012. Because the average of 69%, 74%, and 67% is 70%, the base period percentage for May through October 2013 is 70%. Therefore, the amusement park qualifies for the adjusted seasonal installment method.

Line 15.   If the partnership has certain extraordinary items, special rules apply. Do not include on line 15 the de minimis extraordinary items that the partnership chooses to include on line 22b. See Extraordinary items, earlier.

Line 22b.   If the partnership has certain extraordinary items of $1 million or more from a transaction, or a section 481(a) adjustment, special rules apply. Include these amounts on line 22b for the appropriate period. Also include on line 22b the de minimis extraordinary items that the partnership chooses to exclude from line 15. See Extraordinary items, earlier.

Line 23.   Enter the amount by which line 22c is being reduced for state and local taxes under Regulations section 1.1446-6(c)(1)(iii) and for certified foreign partner-level items submitted using Form 8804-C. See Reductions for State and Local Taxes and Certification of Deductions and Losses in the Instructions for Forms 8804, 8805, and 8813 for additional information.

Part V. Annualized Income Installment Method

Line 30. Annualization periods.   Enter on line 30, columns (a) through (d), respectively, the annualization periods for the option listed below. For example, if the partnership elected Option 1, enter on line 30 the annualization periods 2, 4, 7, and 10, in columns (a) through (d), respectively.

  
Use Option 1 or Option 2 only if the partnership elected to do so by filing Form 8842, Election To Use Different Annualization Periods for Corporate Estimated Tax, by the due date of the first required installment payment. Once made, the election is irrevocable for the particular tax year.

  
  1st  
Install- 
ment
2nd  
Install- 
ment
3rd  
Install- 
ment
4th  
Install- 
ment
Standard Option 3 3 6 9
Option 1 2 4 7 10
Option 2 3 5 8 11

Line 31.   Enter on lines 31a through 31e the ECTI allocable to all foreign partners for the months entered for each annualization period in columns (a) through (d) on line 30.

If the partnership has certain extraordinary items, special rules apply. Do not include on line 31a, 31b, 31c, 31d, or 31e the de minimis extraordinary items that the partnership chooses to include on line 33a, 33e, 33i, 33m, or 33q, respectively. See Extraordinary items, earlier.

With respect to lines 31b through 31e, enter the specified types of income allocable to non-corporate partners if (a) the partners would be entitled to use a preferential rate on such income or gain (see Regulations section 1.1446-3(a)(2)) and (b) the partnership has sufficient documentation to meet the requirements of Regulations section 1.1446-3(a)(2)(ii).

If the partnership has net ordinary loss, net short-term capital loss, or net 28% rate loss, each net loss should be netted against the appropriate categories of income and gain to determine the amounts of income and gain to be entered on lines 31b, 31c, 31d, and 31e, respectively. See section 1(h) and Notice 97-59, 1997-45 I.R.B. 7, for rules for netting gains and losses.

Line 32. Annualization amounts.   Enter on line 32, columns (a) through (d), respectively, the annualization amounts shown in the tables below for the option used for line 30. For example, if the partnership elected Option 1, enter on line 32 the annualization amounts 6, 3, 1.71429, and 1.2, in columns (a) through (d), respectively.
  1st  
Install- 
ment
2nd  
Install- 
ment
3rd  
Install- 
ment
4th  
Install- 
ment
Standard Option 4 4 2 1.33333
Option 1 6 3 1.71429 1.2
Option 2 4 2.4 1.5 1.09091

Lines 33a, 33e, 33i, 33m, and 33q.   If the partnership has extraordinary items that total $1 million or more from a particular transaction, or a section 481(a) adjustment, special rules apply. Include these amounts on line 33a, 33e, 33i, 33m, or 33q, depending on the type of income against which the item applies, for the appropriate period. Also include on line 33a, 33e, 33i, 33m, or 33q the de minimis extraordinary items that the partnership chooses to exclude from line 31a, 31b, 31c, 31d, or 31e, respectively. See Extraordinary items, earlier.

  If the partnership has included on line 33a, 33e, 33i, 33m, or 33q any of the items referred to in the previous paragraph, write “EI” and the dollar amount of the item next to the affected line. Attach a statement which shows the income for that line before the extraordinary item, the amount of the extraordinary item, and the net amount. Also include an explanation of the item, including the authority under which it is being claimed.

Lines 33b, 33f, 33j, 33n, and 33r.   Enter the reduction amounts for state and local taxes under Regulations section 1.1446-6(c)(1)(iii). The netting rules under section 1(h) and Notice 97-59 must be considered in determining the category of income the reduction amounts offset.

Lines 33c, 33g, 33k, 33o, and 33s.   Enter the reduction amounts resulting from certified partner-level items received from foreign partners using Form 8804-C. See Certification of Deductions and Losses in the Instructions for Forms 8804, 8805, and 8813 for additional information. The netting rules of section 1(h) and Notice 97-59 must be considered in determining the category of income the reduction amounts offset.

Part VI. Required Installments

Line 38.   Before completing line 38 in columns (b) through (d), complete lines 39 through 43 in each of the preceding columns. For example, complete lines 39 through 43 in column (a) before completing line 38 in column (b).

Line 43.   For each installment, enter the smaller of line 39 or line 42 on line 43. Also enter the result on line 5.

Part VII. Figuring the Penalty

Complete Part VII to determine the amount of the penalty. The penalty is figured for the period of underpayment using the underpayment rate determined under section 6621(a)(2). The period of underpayment runs from the installment due date to the earlier of the date the underpayment is actually paid or the 15th day of the fourth month after the close of the 2013 tax year (the 15th day of the sixth month if the partnership keeps its books and records outside the United States and Puerto Rico). For information on obtaining the interest rate on underpayments denoted by an asterisk, see the footnote on page 5 of the schedule.

Example.   A partnership underpaid the April 15 installment by $1,000. The June 15 installment requires a payment of $2,500. On June 11, the partnership deposits $2,500 to cover the June 15 installment. However, $1,000 of this payment is applied against the April 15 installment. The penalty for the April 15 installment is figured to June 11 (57 days). The remaining $1,500 is applied to the June 15 installment as if it were made on June 15.

If the partnership has made more than one payment for a required installment, attach a separate computation for each payment.


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