Foreign Corporations

FILING REQUIREMENTS

U.S. persons who are shareholders or officers in a foreign corporation whether directly or indirectly through a U.S. corporation or partnership may be required to file Form 5471 - Information Return of U.S. Persons With Respect to Certain Foreign Corporations. Internal Revenue Service considers a U.S. person to be 1) a citizen or resident of the United States, 2) a domestic partnership, 3) a domestic corporation, 4) an estate or trust that is not a foreign estate or trust. A foreign corporation is formed outside of the United States according to the laws of the foreign country where formed. A corporation organized in Guam, American Samoa, the Northern Mariana Islands or the Virgin Islands is not considered foreign for U.S. tax purposes.

CATEGORIES OF FILERS

Requirements for filing this information return depend upon the category of filer. Category 1 relating to a foreign personal holding company has been repealed. Category 2 is a U.S. person who is an officer or director of a foreign corporation and who owns a 10% or more interest in the foreign corporation. Category 3 is a U.S. person who acquires or disposes of 10% interest in the foreign corporation. Category 4 is a U.S. person who had more than 50% control of a foreign corporation for 30 or more days during the tax year. Category 5 is a U.S. shareholder who owned stock in a foreign corporation that was a Controlled Foreign Corporation for 30 or more days during the tax year. Control is determined by category 4. Read about the experience of an American Expat who set up several Foreign Corporations.

Family members who independently own 10% or more of the voting stock of a foreign corporation are included in determining percentage ownership. Two or more members of a family could together own more than 50%, resulting in control of the foreign corporation. A 50% owner of a U.S. corporation or partnership that owns shares in a foreign corporation is considered as owning those shares for purposes of control. Shareholders in a CFC are subject to more stringent taxation even if such ownership of shares only occurred for 30 days during the taxable year.

FORM 5471 PREPARATION

With over 15 years experience in preparing this complex information return, we can assist in preparing this Form. Simply download our 5471 Organizer.

Fill in the details and send to us at taxbarron@yahoo.com.

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OUR SERVICE

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