A separate unit is a controlled foreign corporation (CFC) or a foreign corporation engaged in a trade or business in which more than 50% of the gross income is passive income. A combined group consists of one or more controlled foreign corporations that are treated as a single entity for U.S. tax purposes. A combined group is reported on a single Form 8865, Schedule A or A-1. A separate unit, on the other hand, is reported on a separate Form 8865, Schedule K-1. The difference lies in the reporting and consolidation of income and losses.