Hi, I received 1065 K1 form and I'm a none-resident, I want to ask is the income from schedule K1 considered to be effectively connected or not effectively connected with US Trade/Business. This is my only income from US and according to the Exceptions:
You do not need to file
Form 1040NR if you meet (1), (2), (3),
or (4) below.
4. You were a partner in a U.S.
partnership that was not engaged in a
trade or business in the United States
during 2018 and your Schedule K-1
(Form 1065) includes only income
from U.S. sources reportable on
Schedule NEC, lines 1 through 12.
I'm confused if I meet this, anyone can help to answer this question? Thanks a lot.
First, I'm not an expert in this matter. I did a very fast (thus might miss details) reading of some of the pertinent background info.
First, you didn't state what kind of partnership this is, or what the partnership does. Having said that, it appears to me that if on Sch K-1 (F1065), if there are entries in lines 1-4 of the K-1, there is probably a US trade or business.
Generally, the other lines on Sch K-1 are for separately stated items that relate more to investment income/expenses that more relate to SCH NEC.
Generally, unless this is an investment type partnership, for which there is probably not any ordinary income or rental income, there is more than likely trade or business income. But here again, what does the partnership do? Does it conduct activities outside of the US?
What might complicate this a little bit more, is that US partnerships that have foreign partners, might/should have withheld taxes on the foreign partners. Does your Sch K-1 indicate that any taxes were withheld?
I suggest you do some more reading for the instructions for F1040NR
Pub 535 as it is referenced in the instructions
Instructions for Sch K-1 (1065)