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I had bought some USO via Robinhood who have a W8BEN on file and now I have received a K1.

The K1 reports an interest income of $9. Is this ECI? Can I just put it in line 2b in the 1040NR?

My accountant suggests filing a Schedule B, which seems off to me as that is for residents only based on my reading.

Further should I wait for a K3? Line 21 on the K1 is empty.

1 Answer 1

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Is this ECI?

No. You do not have a US trade or business.

Can I just put it in line 2b in the 1040NR?

No, you don't need to report interest payments unless they're related to your US trade or business, which in this case they're not. The interest is taxable in your home country.

You may need to report it (on schedule NEC) if there was an incorrect withholding applied to that payment. See the IRS instructions to the form 1040NR that has a very relevant example:

Example.

Logan is a nonresident alien individual. The only U.S. source income Logan received during the year was as follows.

  • 4 dividend payments.
  • 12 interest payments.

All payments were reported to Logan on Form(s) 1042-S. On one of the dividend payments, the withholding agent incorrectly withheld at a rate of 30% (instead of 15%). There were no other withholding discrepancies. Logan must report all 4 dividend payments. Logan is not required to report any of the interest payments.

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  • Thanks! How is this not ECI? What can I tell my accountant so that she doesn’t source this to the States?
    – ggy
    Commented Mar 18, 2023 at 22:06
  • @gyani why would she? If she's a licensed tax professional in the US she's supposed to know these rules, it's not that hard.
    – littleadv
    Commented Mar 18, 2023 at 23:15
  • I’m not sure why she did. She asked me how the income is sourced. I shared some paragraphs from the prospectus which seems to say that it’s not US source but she said let’s go with ECI anyway. Then she suggested Schedule B; which I don’t agree with. I wonder if it should find a new accountant. Even if it’s US sourced I don’t think we need a schedule B.
    – ggy
    Commented Mar 19, 2023 at 2:05
  • @gyani there's no schedule B to form 1040NR. Read more about ECI here. Note: you're a member of a partnership (USO is a traded partnership). I don't know if income from this partnership is ECI, you'll need in fact to analyze the prospectus, but I don't think it is in this case (maybe I'm wrong, if your CPA disagrees - go with your CPA)
    – littleadv
    Commented Mar 19, 2023 at 6:25
  • Thanks @littleadv! My reading of the prospectus also suggests that it isn't ECI. The fact that she is suggesting a Schedule B to form 1040NR (which she says will make it mail in instead of efile) makes me doubt her and wonder if I should geet a different CPA.
    – ggy
    Commented Mar 19, 2023 at 11:22

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