Specific Instructions

Important:

If the information required in a given section exceeds the space provided within that section, do not write “see attached” in the section and then attach all of the information on additional sheets. Instead, complete all entry spaces in the section and attach the remaining information on additional sheets. The additional sheets must conform with the IRS version of that section.

Identifying Information

Annual Accounting Period

Enter, in the space provided below the title of Form 8858, the annual accounting period of the FDE for which you are furnishing information. The annual accounting period of an FDE is the annual accounting period or taxable year of the tax owner. Therefore, in the case of a U.S. tax owner, the annual accounting period of the FDE is the taxable year of the U.S. tax owner; and in the case of a CFC or CFP that is a tax owner, the annual accounting period of the FDE is the annual accounting period of the CFC or CFP.

Person Filing This Return

In the spaces provided at the top of page 1 of Form 8858, provide the identifying information for the U.S. person filing Form 8858 (see definition, earlier).

If a U.S. corporation is the U.S. person filing Form 8858 and is a member of a consolidated group, list the common parent as the person filing the return and enter its identifying information in the spaces provided at the top of page 1 of the form.

Name Change

If the name of the person filing the return, the tax owner, the direct owner, or the FDE whose activities are being reported changed within the past 3 years, show the prior name(s) in parentheses after the current name.

Addresses

Use the following instructions to complete lines 1a, 2a, 2b, 3a, 4a, and the entry spaces at the top of page 1 of the form for the filer's address.

U.S. Addresses.   Include the suite, room, or other unit number after the street address. If the Post Office does not deliver mail to the street address and the U.S. person has a P.O. box, show the box number instead.

Foreign Addresses.   Enter the information in the following order: city, province or state, and country. Follow the country's practice for entering the postal code, if any. Do not abbreviate the country name. However, if you are filing Form 8858 electronically, enter a valid country code posted on the IRS website www.irs.gov/countrycodes instead of the country name.

Identifying Numbers

Use the following instruction to complete lines 1b, 3c, 4c, and the entry space at the top of page 1 of the form for the filer's identifying number. The identifying number of an individual is his or her social security number (SSN). The identifying number of all others is their employer identification number (EIN).

If a U.S. corporation is the U.S. person filing Form 8858 and is a member of a consolidated group, see Person Filing This Return, earlier.

Functional Currency

Use the following instruction to complete lines 1i, 3e, and 4d.

Enter the entity's functional currency.

See sections 985 and 989, and Regulations sections 1.985-1(a) through (c) and 1.989(a)-1(b) for rules for determining the functional currency of a QBU and the definition of a QBU.

Hyperinflationary exception.   An entity that otherwise would be required to use a hyperinflationary currency as its functional currency must use the U.S. dollar as its functional currency and compute income or loss or earnings and profits using the U.S. dollar approximate separate transactions method of accounting (DASTM) under the special rules of Regulations section 1.985-3. See Regulations section 1.985-1(b)(2).

Line 1b(2)—Reference ID Number

A reference ID number (defined below) is required on line 1b(2) only in cases where no EIN was entered on line 1b(1) for the FDE. However, filers are permitted to enter both an EIN on line 1b(1) and a reference ID number on line 1b(2). If applicable, enter the reference ID number you have assigned to the FDE identified on line 1a.

A "reference ID number" is a number established by or on behalf of the U.S. person identified at the top of page 1 of the form that is assigned to an FDE with respect to which Form 8858 reporting is required. These numbers are used to uniquely identify the FDE in order to keep track of the FDE from tax year to tax year.

The reference ID number must meet the requirements set forth below.

Note.

Because reference ID numbers are established by or on behalf of the U.S. person filing Form 8858, there is no need to apply to the IRS to request a reference ID number or for permission to use these numbers.

Requirements

The reference ID number that is entered in item 1b(2) must be alphanumeric (defined below) and no special characters or spaces are permitted. The length of a given reference ID number is limited to 50 characters.

For these purposes, the term "alphanumeric" means the entry can be alphabetical, numeric, or any combination of the two.

The same reference ID number must be used consistently from tax year to tax year with respect to a given FDE or tax owner. If for any reason a reference ID number falls out of use (for example, the FDE or tax owner no longer exists due to disposition or liquidation), the reference ID number used for that FDE or tax owner cannot be used again for another FDE or tax owner for purposes of Form 8858 reporting.

There are some situations that warrant correlation of a new reference ID number with a previous reference ID number when assigning a new reference ID number to an FDE or tax owner partnership. For example:

  • In the case of a merger or acquisition, a Form 8858 filer must use a reference ID number which correlates the previous reference ID number with the new reference ID number assigned to the FDE or tax owner.

  • Under Regulations section 301.6109-1(b)(2)(v), a foreign entity that makes an entity classification election on Form 8832 to become an FDE must have an EIN. For the first year that Form 8858 is required to be filed after an entity classification election is made on behalf of the foreign entity on Form 8832, the new EIN must be entered on line 1b(1) of Form 8858 and the old reference ID number must be entered on line 1b(2) of Form 8858. In subsequent years, a filer may continue to enter both the EIN on line 1b(1) and the reference ID number on line 1b(2), but must enter at least the EIN on line 1b(1).

You must correlate the reference ID numbers as follows: New reference ID number (space) Old reference ID number. If there is more than one old reference ID number, you must enter a space between each such number. As indicated above, the length of a given reference ID number is limited to 50 characters and each number must be alphanumeric and no special characters are permitted.

Note.

This correlation requirement applies only to the first year the new reference ID number is used.

Line 1h—Principal Business Activity

Enter a brief description of the FDE's principal business activity.

Line 3b

If the tax owner is a CFC, enter the annual accounting period covered by Form 5471 (as described in Regulations section 1.6038-2(e)). If the tax owner is a CFP, enter the annual accounting period covered by Form 8865 (as described in Regulations section 1.6038-3(f)).

Line 3c(2)—Reference ID Number

A reference ID number (defined earlier) is required on line 3c(2) only in cases where no EIN was entered on line 3c(1). However, filers are permitted to enter both an EIN on line 3c(1) and a reference ID number on line 3c(2). If this tax owner is a CFC, enter the reference ID number for the CFC from Form 5471 Item 1b(2). If this tax owner is a CFP, enter the reference ID number for the CFP from Form 8865 Item F2(b). See the instructions for line 1b(2) for more information about the requirements for the reference ID number.

Line 4

If the FDE has more than one direct owner, attach a statement to Form 8858 that includes the information requested on line 4 for each additional direct owner.

Line 5

You must attach an organizational chart that includes the following information with respect to the chain of ownership between the tax owner and the FDE and the chain of ownership between the FDE and all entities in which the FDE has a 10% or more direct or indirect interest:

  • The name and percentage of ownership of all entities in the chain of ownership, including partnerships and entities disregarded as separate from their owners.

  • The FDE's position in the chain of ownership.

  • The tax classification of all entities in the chain of ownership (see Form 8832 instructions for tax classification rules and related definitions).

  • The country under whose law each entity is organized.

For these purposes, the rules of section 958(a) (relating to “direct and indirect ownership”) apply.

Each filer of Form 8858 that is required to file an organizational chart with respect to more than one FDE may satisfy this requirement by filing a single organizational chart that includes the required information with respect to all FDEs.

Schedule C

Use Schedule C to report a summary income statement for the FDE computed in the FDE's functional currency in accordance with U.S. generally accepted accounting principles (GAAP). Enter in the U.S. dollar column each line item functional currency amount translated into dollars using U.S. GAAP translation rules. If the FDE does not maintain U.S. GAAP income statements in U.S. dollars, you can use the average exchange rate as determined under section 989(b). The rate used should be the rate stated on line 7, Schedule H. If you choose to use the average exchange rate rather than the U.S. GAAP translation rules, check the box above line 1 on Schedule C.

Special rules for DASTM.   If the FDE uses DASTM, the functional currency column should reflect local hyperinflationary currency amounts computed in accordance with U.S. GAAP. The U.S. dollar column should reflect such amounts translated into dollars under U.S. GAAP translation rules. Differences between this U.S. dollar GAAP column and the U.S. dollar income or loss figured for tax purposes under Regulations section 1.985-3(c) should be accounted for on Schedule H. See Special rules for DASTM, under Schedule H, later.

Line 7.   Include on line 7 adjustments for extraordinary items, prior period adjustments, and the provision for income, war profits, and excess profits taxes deducted in accordance with U.S. GAAP. The terms “extraordinary items” and “prior period adjustments” have the same meaning given to them by U.S. GAAP (see Opinion No. 30 of the Accounting Principles Board and Statement No. 16 of the Financial Accounting Standards Board).

Important:

Differences between this functional currency amount and the amount of taxes that reduce E&P (in the case of an FDE of a CFC) or are deductible in computing U.S. taxable income (in the case of an FDE of a U.S. person or a CFP) should be accounted for on line 2 or 3 of Schedule H.

Schedule C-1

The activities of an FDE may give rise to one or more QBUs. Under section 987, the person treated as the owner of a QBU arising from the FDE’s activities may not be the tax owner of the FDE. In addition, a QBU arising from the activities of an FDE may be treated as having multiple owners. For example, the partners of a partnership may, in certain cases, be treated as owning the QBU arising from the activities of the partnership. For further discussion, see Proposed Regulations section 1.987-1(b).

Complete a separate Schedule C-1 for each owner of each QBU arising from the activities of the FDE and attach it to Form 8858. Provide the name and identifying number of the owner of each QBU. If an owner would be treated as owning multiple QBUs, complete a separate Schedule C-1 with respect to each QBU of the owner.

However, if the U.S. person filing Form 8858 knows that the owner of a QBU has the same functional currency as a QBU owned by that person, the U.S. person filing Form 8858 is not required to complete Schedule C-1 with respect to that owner’s interest in the QBU.

If the U.S. person filing Form 8858 does not know and does not have reason to know the functional currency of the owner of a QBU, leave column (b) of lines 1 and 2 blank.

Schedule F

Use Schedule F to report a summary balance sheet for the FDE computed and translated into U.S. dollars in accordance with U.S. GAAP.

Special rule for DASTM.   If the FDE uses DASTM, Schedule F should be prepared and translated into U.S. dollars according to Regulations section 1.985-3(d), rather than U.S. GAAP.

Schedule G

Question 3

If the tax owner of the FDE is claiming a section 165 loss with respect to worthless stock or with respect to certain obligations, see Regulations section 1.6011-4 for information relating to a disclosure statement that must be attached to Form 8858 if certain requirements are met.

Question 4

If the interest in the FDE is not treated as a separate unit or as part of a combined separate unit or the interest in the FDE is treated as a separate unit or as part of a combined separate unit but the separate unit or combined separate unit does not have a dual consolidated loss, check “No” to indicate that the question is not applicable. Otherwise, if you check “Yes,” enter the amount of the dual consolidated loss and answer question 5a.

Question 5a

Subject to certain exceptions, a domestic use of a dual consolidated loss is not permitted (“domestic use limitation rule”). A domestic use is deemed to occur in the year the dual consolidated loss is included in the computation of the taxable income of a consolidated group, unaffiliated dual resident corporation, or unaffiliated domestic owner, as applicable. See Regulations section 1.1503(d)-2.

Question 5b

A domestic use of a dual consolidated loss is permitted if an exception to the domestic use limitation rule applies. See Regulations section 1.1503(d)-6 for exceptions. For example, a domestic use election made pursuant to Regulations section 1.1503(d)-6(d) is such an exception. If you check “Yes,” you may need to include a domestic use election with your U.S. income tax return.

Question 5c

If a separate unit, as defined under Regulations section 1.1503(d)-1(b)(4), incurs a dual consolidated loss after having contributed to consolidated taxable income of a group in prior years, the dual consolidated loss may be used to offset income of domestic affiliates in the year of the dual consolidated loss (limited by the amount of the separate unit’s prior contribution to the cumulative consolidated taxable income of the group (“cumulative register”)). See Regulations sections 1.1503(d)-4(c) and 1.1502-21(c).

Schedule H

Use Schedule H to report the FDE's current earnings and profits (E&P) (if the tax owner is a CFC) or taxable income (if the tax owner is a U.S. person or a CFP). Generally, enter the amounts on lines 1 through 6 in functional currency.

Special rules for DASTM.   If the FDE uses DASTM, enter on line 1 the dollar GAAP income or (loss) from line 8 of Schedule C. Enter on lines 2 and 3 the adjustments made in figuring current E&P or taxable income for U.S. tax purposes. Report these amounts in U.S. dollars. Enter on line 5 the DASTM gain or loss figured under Regulations section 1.985-3(d).

Lines 2 and 3.    Certain adjustments must be made to the FDE's line 1 net book income or (loss) to determine its current E&P or taxable income. The adjustments may include those needed to conform the foreign book income to U.S. GAAP and to U.S. tax accounting principles. If the FDE's books are maintained in functional currency in accordance with U.S. GAAP, enter on line 1 the functional currency GAAP income or (loss) from line 8 of Schedule C, rather than starting with foreign book income, and show GAAP-to-tax adjustments on lines 2 and 3.

  The adjustments may include the following:
  • Capital gains and losses.

  • Depreciation, amortization, and depletion.

  • Investment or incentive allowance.

  • Charges to statutory reserves.

  • Inventory adjustments. Inventories must be taken into account according to the rules of sections 471 (incorporating the provisions of section 263A) and 472 and the related regulations.

  • Taxes. See the instructions for Schedule C, line 7.

  Attach a separate schedule that lists each applicable adjustment item. For each adjustment item, indicate the adjustment amount and whether the amount is a net addition or net subtraction. The separate schedule should also show two totals, the total net additions amount to be entered on line 2, and the total net subtractions amount to be entered on line 3.

Line 5.   DASTM gain or (loss), reflecting unrealized exchange gain or loss, should be entered on line 5 only for FDEs that use DASTM.

Line 7.   Enter the line 6 functional currency amount translated into U.S. dollars at the average exchange rate for the FDE's tax year. See section 989(b). Report the exchange rate using the “divide-by convention” specified under Reporting Exchange Rates on Form 8858, earlier. If the FDE uses DASTM, enter on line 7 the same amount entered on line 6.

Blocked income.   The E&P or taxable income of the FDE, as reflected on Schedule H, must not be reduced by all or any part of such E&P or taxable income that could not have been distributed by the FDE due to currency or other restrictions or limitations imposed under the laws of any foreign country.

Schedule M

Important:

In translating the amounts from functional currency to U.S. dollars, use the average exchange rate for the FDE's tax year. See section 989(b). Report the exchange rate in the entry space provided at the top of Schedule M (Form 8858) using the “divide-by convention” specified under Reporting Exchange Rates on Form 8858, earlier.

Every U.S. person that is required to file Schedule M (Form 8858) (see Who Must File, earlier) must file the schedule to report the transactions that occurred during the FDE's annual accounting period ending with or within the U.S. person's tax year.

If a U.S. corporation is the U.S. person filing Schedule M (Form 8858) and is a member of a consolidated group, list the common parent as the U.S. person filing Schedule M (Form 8858).

Reference ID number.   A reference ID number for the FDE identified on Schedule M (Form 8858), is required if no EIN is provided. However, filers are permitted to provide both an EIN and reference ID number. For more information on the reference ID number, see the instructions for line 1b(2) of Form 8858, earlier.

Column headings.   There are 2 sets of column headings above lines 1 through 19. The first set of column headings is to be used in cases where the tax owner is a CFP. The second set of column headings is to be used in cases where the tax owner is a CFC. If you are completing Schedule M (Form 8858) for an FDE for which the tax owner is a CFP, check the box for CFPs and complete lines 1 through 19 using the headings in columns (a) through (e) of the CFP set of columns. If you are completing Schedule M (Form 8858) for an FDE for which the tax owner is a CFC, check the box for CFCs and complete lines 1 through 19 using the headings in columns (a) through (f) of the CFC set of columns.

Column (e).   Use column (e) to report transactions between the FDE and any U.S. person with a 10% or more direct interest in the CFP or any 10% or more U.S. shareholder of any corporation controlling the CFC. If you are a Category 1 filer of Form 8865, or a Category 4 filer of Form 5471, do not report transactions between yourself and the FDE under column (e). Report the transactions only under column (b).

Line 6.   Report on line 6 dividends received by the FDE that were not previously taxed under subpart F in the current year or in any prior year.

Lines 18 and 19.   Report on lines 18 and 19 the largest outstanding balances during the year of gross amounts borrowed from, and gross amounts loaned to, the related parties described in columns (b) through (f). Do not enter aggregate cash flows, year-end loan balances, average balances, or net balances. Do not include open account balances resulting from sales and purchases reported under other items listed on Schedule M (Form 8858) that arise and are collected in full in the ordinary course of business.


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