Examples of items of international relevance that must now be reported on Schedules K-2 and K-3 (as opposed to on Schedules K and K-1) include:
- Foreign tax credit–related information including the sourcing and basketing of income and deductions, including information related to items such as R&E expenses and interest expense.
- Interests in foreign entities or distributions from foreign corporations.
- Foreign partner's U.S.-source income and/or U.S. effectively connected income, including the distributive share of deemed sale items on the transfer of a partnership interest.
From the IRS:
"For 2021, eligible passthrough entities with no foreign activities or foreign partners/shareholders and without knowledge of partner or shareholder need for information on items of international relevance will not have to file the new schedules."
Click this link for more detailed info on Forms K-2 and K-3.
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