U.S. individual owns a 50% interest in a controlled foreign corporation ("CFC"). So he is filing Form 5471 each year as a "category 5" filer. CFC contributed assets to a foreign partnership in exchange for a 40% interest in the foreign partnership during 2017. Is the U.S. individual required to report this transaction on Form 8865, Schedule O? Schedule P? Neither?
The instructions and regulations are not clear (at least to me). It seems unlikely that no reporting at all is required, but I am having a hard time fitting this transaction neatly into Category 3 or Category 4 of Form 8865, as the U.S. individual is not acquiring a direct interest, even though, pursuant to the constructive ownership rules of IRC 267, he owns 20% of the foreign partnership.
Thoughts?