# Foreign Partnersip for US Tax Return



## ctm-cat (Jun 4, 2013)

I have gone into partnership with my husband in the uk and we have only uk sourced income where we are resident. I am a US/UK dual citizen and he is a uk citizen (NRA for US tax purposes). How do I show my share of the partnership income on my us tax return. On all previous returns I have been self-employed. Any guidance would be appreciated.


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## Bevdeforges (Nov 16, 2007)

This is one of those situations where you have to take a "tax stance" and see how it flies.

If you are actively involved in the partnership (i.e. do work for the partnership), you could conceivably report your share of the income as "salary" and list the partnership as your employer. This would allow you to exclude your "salary" using the FEIE.

Or, you could report your share as "self-employment" income, if you plan on claiming your share of the partnership expenses on your US return.

If your part of the partnership is strictly passive in nature, then you should probably report your income from the partnership as some form of investment income.

You should also take a look at Publication 54 where they discuss "Earned Income" (p. 17 or thereabouts in this year's edition). They mention partnerships where capital is the main producer of income (and the fact that that income is considered investment income). But if you're in a partnership where you are working alongside your husband, I'd characterize it as earned income - i.e. salary - and let them come back to you if they have any problems with that approach.
Cheers,
Bev


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## ctm-cat (Jun 4, 2013)

Thanks for your input. Both my husband and I provide consultancy services and there is no passive income so it is our earned income which I'm thinking should go on schedule c. I'm also thinking I should fill in return 8865 as a category 1 filer.

I understand from reading that if we had the same set-up in the US we would be a qualifying joint venture, but I don't file jointly as my husband has no filing obligations.


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## Bevdeforges (Nov 16, 2007)

Don't be in a big hurry to file that form 8865, if you can avoid it. The FATCA regulations only apply to those with "foreign assets" above a certain threshold level (something like $200K for individuals and twice that for couples filing jointly). If your partnership is smaller than the limits, I'd invoke the threshold and keep your returns as simple as possible.
Cheers,
Bev


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## ctm-cat (Jun 4, 2013)

I thought 8865 was the foreign partnership return. I will have to look it up. You are right I don't have to enough assets to have to complete the FATCA return and can avoid it for now. Just trying to save some money doing my own 1040 is difficult enough and all to come back to 0 owed. 

Thanks for your replies as it helps to confer.


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## Bevdeforges (Nov 16, 2007)

Note the title of the form: Return of U.S. Persons With Respect to *Certain* Foreign Partnerships. It's clearly not applicable to ALL foreign partnerships. The trick seems to be to figure out what they mean by "certain foreign partnerships." There is a similar form for "certain foreign corporations." In the instructions, they are usually vague about which ones they intend to use the form, but read through the instructions carefully to see if you can claim an exception for your particular situation.
Cheers,
Bev


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