Form 8858: foreign disregarded entities and branches

What Form 8858 reports

Form 8858 reports information about foreign disregarded entities and foreign branches for specified U.S. persons. The IRS describes direct ownership and, in certain circumstances, indirect or constructive ownership within the form's reporting scope.^[1]

The form and its schedules serve reporting requirements under Internal Revenue Code sections 6011, 6012, 6031 and 6038 and related regulations. The instructions include U.S. citizens within their definition of a U.S. person.^[2]

What the key definitions mean

A foreign disregarded entity, or FDE, is an entity organized outside the United States that is disregarded as separate from its owner for U.S. income tax purposes under Treasury Regulations sections 301.7701-2 and 301.7701-3.^[2]

The tax owner is the person treated as owning the FDE's assets and liabilities under U.S. income tax law. The direct owner is its legal owner, so the definitions describe different ownership relationships.^[2]

For Form 8858, a foreign branch, or FB, includes a qualified business unit located outside the United States. Whether separate books and records exist may affect whether an activity qualifies as a reportable branch.^[2]

Who the instructions cover

The instructions divide filers into categories with different reporting requirements.^[2]

• Category 1 covers a U.S. person directly treated as the FDE's tax owner or operating an FB at any point during the relevant tax year or accounting period. Category 2 covers those relationships indirectly through tiers of FDEs.^[2]
• Category 3 covers certain Form 5471 filers concerning a controlled foreign corporation that owns an FDE for tax purposes or operates an FB. Category 4 addresses certain Form 8865 filers concerning a controlled foreign partnership with those relationships.^[2]
• Category 5 concerns a U.S. partner where the partnership's section 987 method places gain or loss recognition at partner level. It calls for the first page and Schedule C-1 for each relevant FDE or FB.^[2]
• Category 6 concerns a U.S. corporate partner where the partnership checked the dual consolidated loss box on Schedules K-2 and K-3. RICs, REITs and S corporations are excluded from this category.^[2]

What information and attachments it requests

The form requests identifying information and the FDE's or FB's accounting period, which follows its tax owner. Business entries include a six-digit activity code and a three-letter functional currency code.^[2]

Line 5 requests an ownership chart extending from the tax owner to the FDE or FB and onward to entities in which it holds at least a 10% direct or indirect interest. The chart includes ownership percentages, entity classifications and countries of organization.^[2]

What the schedules ask for

Schedule requirements depend on the filer category, including whether the entire form or specified portions apply.^[2]

• Schedule C summarizes income, with functional currency and dollar reporting instructions. Schedule F summarizes the balance sheet in dollars under U.S. generally accepted accounting principles, subject to the separate DASTM rule.^[2]
• Schedule H reports taxable income for an FDE or FB whose tax owner is a U.S. person or controlled foreign partnership. Its instructions request a separate schedule itemizing applicable adjustments.^[2]
• Schedule C-1 addresses section 987 information for qualified business units. An owner may be subject to section 987 when its functional currency differs from the unit's currency.^[2]
• Schedule J requests specified income taxes paid or accrued by jurisdiction and excludes noncreditable taxes. Schedule M addresses transactions with the filer or related entities, subject to the category-specific filing instructions.^[2]

How filing timing and related forms work

Form 8858 follows the due date of the income tax or information return, including extensions. A tax owner or branch operator attaches it, with Schedule M when required, to that return.^[2]

For specified filings through a controlled foreign corporation or partnership, Form 8858 accompanies Form 5471 or Form 8865. Applicable amounts from the FDE or FB also enter the tax owner's equivalent schedules on those forms.^[2]

Questions and answers

Related pages

• IRS forms: All form reference pages.
• FinCEN Report 114 (FBAR): foreign account reporting
• Form 1041: income tax return for estates and trusts
• Form 1116: foreign tax credit
• Form 2555: foreign earned income exclusion
• IRS form finder: Search the forms by keyword.