WHO TO CONTACT For Additional Registrations: -Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Program: -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN. IMPORTANT INFORMATION This program is approved for 2 CPE credit hours. To earn credit you must: • Participate in the program on your own computer connection (no sharing) – if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa, MasterCard, Discover. • Listen on-line via your computer speakers. • Respond to five prompts during the program plus a single verification code. You will have to write down only the final verification code on the attestation form, which will be emailed to registered attendees. • To earn full credit, you must remain connected for the entire program. Mastering Form 5471 for Interests in Foreign Entities: Determining Ownership Share and Correct Filing Status TUESDAY, JUNE 23, 2015, 1:00-2:50 pm Eastern
Transcript
WHO TO CONTACT
For Additional Registrations:
-Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10)
For Assistance During the Program:
-On the web, use the chat box at the bottom left of the screen
If you get disconnected during the program, you can simply log in using your original instructions and PIN.
IMPORTANT INFORMATION
This program is approved for 2 CPE credit hours. To earn credit you must:
• Participate in the program on your own computer connection (no sharing) – if you need to register additional people,
please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa,
MasterCard, Discover.
• Listen on-line via your computer speakers.
• Respond to five prompts during the program plus a single verification code. You will have to write down only the final
verification code on the attestation form, which will be emailed to registered attendees.
• To earn full credit, you must remain connected for the entire program.
Mastering Form 5471 for Interests in Foreign Entities: Determining Ownership Share and Correct Filing Status
TUESDAY, JUNE 23, 2015, 1:00-2:50 pm Eastern
Tips for Optimal Quality
Sound Quality
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of your sound will vary depending on the speed and quality of your internet
connection.
If the sound quality is not satisfactory, please e-mail [email protected]
immediately so we can address the problem.
Viewing Quality
To maximize your screen, press the F11 key on your keyboard. To exit full screen,
• Top of first page – foreign corporation’s annual accounting period
– Required tax year for CFC is the majority U.S. shareholder’s tax year
– Report information on Form 5471 based on foreign corporation’s tax year that ends with or within U.S. shareholder’s tax year
– Schedule O reports acquisitions, dispositions, organizations and reorganizations that occurred during the U.S. shareholder’s tax year
• U.S. Filer’s name, address and tax year end
• Item A – U.S. filer’s U.S. taxpayer identification number (SSN or FEIN)
• Item B – U.S. filer categories 2, 3, 4 and 5
• Item C – U.S. filer’s percentage of voting stock owned directly, indirectly and constructively at end of foreign corporation’s annual accounting period
• Item D – U.S. person on whose behalf Form 5471 is filed for multiple filers of same information, members of U.S. consolidated groups and constructive owners exceptions
• Item 1 – Name, address, date of incorporation, country of incorporation, principal place of business, business activity code number, principal business activity, functional currency
• Item 1(b)(1) – U.S. FEIN of foreign corporation, if any
• Item 1(b)(2) – Reference ID number of foreign corporation is required if it does not have a U.S. FEIN
• Item 2(a) – Name, address and identifying number of U.S. branch office or agent
• Item 2(b) – U.S. taxable income and tax paid if foreign corporation files a U.S. Federal income tax return (Form 1120-F)
• Item 2(c) – Name and address of foreign corporation’s statutory or resident agent in country of incorporation
• Item 2(d) – Name and address of person with custody of foreign corporation’s books and records
• Schedule A – Stock of the Foreign Corporation – Description of each class of stock
– Number of shares issued and outstanding at beginning and end of annual accounting period
• Schedule B – U.S. Shareholders of Foreign Corporation – Category 3 and 4 filers complete Schedule B for U.S. persons that owned
directly or indirectly through foreign entities 10% or more in vote or value of any class of foreign corporation’s stock during the annual accounting period
– Column (a) – Name, address and identifying number of U.S. shareholder
– Column (b) – Description of each class of stock held by U.S. shareholder
– Columns (c) and (d) – Number of shares held at beginning and end of annual accounting period
– Column (e) – Pro rata share of Subpart F income as a percentage
INCOME, WAR PROFITS AND EXCESS PROFITS TAXES PAID OR ACCRUED
• Income, war profits and excess profits taxes paid or accrued to United States, any foreign country or U.S. possession for the annual accounting period
• Accrual method taxpayers report amounts in the local currency and then translate to U.S. dollars based on average exchange rate for the tax year to which the tax relates unless an exception applies
• Translate to U.S. dollars based on exchange rate at time the taxes are paid if:
– The taxes are paid more than two years after the close of the tax year to which the taxes relate
– The taxes are paid in a tax year prior to the year to which they relate
– The taxes are denominated in a hyperinflationary currency
– The taxes are denominated in any currency other than the taxpayer’s functional currency if the taxpayer makes an election under I.R.C. Section 986(a)(1)(D)
• U.S. dollar amount of foreign taxes will be included in foreign corporation’s foreign tax pool relevant for calculating the I.R.C. Section 902 deemed paid foreign tax credit
• Balance sheet is reported and translated into U.S. dollars in accordance with U.S. GAAP
• Line 5 loans to (U.S.) shareholders and other (U.S.) related persons may indicate a possible I.R.C. Section 956 inclusion if the foreign corporation has positive earnings and profits
• Consider whether an appropriate interest rate is being charged on loans receivable due from and loans payable due to particularly for shareholders and other related persons
• Significant line 1 cash amounts may indicate that FinCEN Form 114 Report of Foreign Bank and Financial Accounts (FBAR) should be filed if a U.S. shareholder owns more than 50% of foreign corporation or if U.S. officers and directors have signature authority over the foreign accounts
• Statement required if foreign corporation owned 10% directly or indirectly of a foreign partnership
• Disclosure required to indicate ownership of interest in a trust or foreign disregarded entity
• Form 8858 must be attached by Category 4 or 5 filer of Form 5471 if foreign corporation is the tax owner of a foreign disregarded entity. Otherwise, a statement is attached by other filers.
• Disclosure for participation in cost sharing arrangement for development of intangibles
SUMMARY OF SHAREHOLDER’S INCOME FROM FOREIGN CORPORATION
• A separate Schedule I is required for each U.S. shareholder who is a Category 4 or 5 filer on whose behalf the Form 5471 is filed
• Line 1 reports the U.S. shareholder’s share of Subpart F income translated at average exchange rate for CFC’s tax year
• Line 2 reports the U.S. shareholder’s I.R.C. Section 956 inclusion from earnings invested in U.S. property translated at the spot rate on the last day of the CFC’s tax year
• Line 7 reports the U.S. shareholder’s share of dividends actually received (and not previously taxed as Subpart F income) translated at the spot rate on the date when the dividend was included in income
• Line 8 reports exchange gain or loss recognized on actual distribution of previously taxed income
• Answer questions regarding blocked and unblocked income
SUMMARY OF SHAREHOLDER’S INCOME FROM FOREIGN CORPORATION
I.R.C. SECTION 956 INCLUSION INCOME
• I.R.C. Section 956 inclusion is the lesser of: – the U.S. shareholder’s pro rata share of CFC’s applicable earnings, or
– the share of the average of the CFC’s investments in U.S. property for the year as measured at the end of each quarter
• Investments in U.S. property include: – Tangible property located in the United States
– Stock of a U.S. corporation
– An obligation with a U.S. issuer (bond, note, debenture, certificate, account receivable, note receivable, open account or other debt whether or not issued at a discount and whether interest or non-interest bearing) • Exception for stock or debt of a U.S. corporation that is not a CFC shareholder
and 25% or more of voting stock is not owned by CFC’s U.S. shareholders
• Exception for account receivable for services paid within 60 days
– The right to use intangible property in the United States
FORM 5471 SCHEDULE J ACCUMULATED EARNINGS & PROFITS
• Report amounts on Schedule J in functional currency
• Column (a) Post-1986 undistributed E&P reports opening balance, current year additions and subtractions and closing balance
• Column (b) Pre-1987 E&P not previously taxed, distributed or deemed distributed
• Line 3 total CEP and AEP as of the close of the tax year before actual or deemed distributions during the year is the denominator of the fraction for the I.R.C. Section 902 deemed paid foreign tax credit calculation (local currency dividend/post-1986 E&P in local currency x post-1986 foreign tax pool translated into USD at average exchange rate unless taxpayer has elected to use the spot rate)
• Column (c) reports cumulative balance of previously taxed E&P resulting from I.R.C. Section 956 inclusions and Subpart F income
• Only Category 4 filers need to attach Schedule M to Form 5471
• Report amounts in USD translated at average exchange rate
• Report transactions between CFC and: – U.S. filer
– Any U.S. or foreign corporation or partnership controlled by U.S. filer
– Any 10% or more U.S. shareholder of CFC other than U.S. filer
– Any 10% or more U.S. shareholder of any corporation controlling CFC
• IRS determines transfer pricing issues from Schedule M
• Schedule M may reflect Subpart F income (interest, dividends, rents, royalties, income from services or sales of property received) or I.R.C. Section 956 inclusion issues (amounts loaned by CFC to U.S. person or other accounts receivable due from U.S. person)
• Accrued amounts must be reported if accrual method CFC
• Lines 1-12 report amounts received by CFC
• Lines 13-26 report amounts paid by CFC
• Schedules should be maintained to reconcile amounts paid to and received from other related foreign corporations
FORM 5471 SCHEDULE O ORGANIZATION OR REORGANIZATION OF FOREIGN
CORPORATION, AND ACQUISITIONS AND DISPOSITIONS OF ITS STOCK
• Schedule O, Part I is completed by Category 2 filers – Report U.S. shareholders who have acquired 10% vote or value
• Schedule O Part II is completed by Category 3 filers – Section A reports U.S. shareholder information
– Section B reports U.S. officers and directors
– Section C reports U.S. filer’s acquisition information
– Section D reports U.S. filer’s disposition information • Report constructive dispositions such as sale of U.S. company with foreign
subsidiary corporations, redemption, dilution and gifts
– Section E reports I.R.C. Section 351 transactions and reorganizations • Description of assets, fair market value and basis of assets transferred to and
by foreign corporation
– Section F requires statement if U.S. tax return filed in last three years, date of any reorganization in last four years and organization chart
• How to resolve prior year delinquencies depends on whether the taxable income from the foreign corporation was reported on the U.S. shareholder’s U.S. Federal tax return.
• All taxable income was reported with non-willful failure to file - Amend the prior year U.S. Federal tax return and attach the Form 5471 with a reasonable cause statement
• Not all taxable income was reported with non-willful failure to file – Consider IRS Streamlined Domestic Offshore filing procedure with 5% penalty or IRS Streamlined Foreign Offshore filing procedure
• Not all taxable income was reported with willful or intentional failure to file – Consider IRS Offshore Voluntary Disclosure Program
• Consider impact of failure to file FinCEN Form 114 (f/k/a TD F 90-22.1) Foreign Bank Account Reports to report U.S. majority shareholder’s or U.S. officer or director’s financial interest in or signature authority over foreign accounts owned by the foreign corporation
FORM 8938 STATEMENT OF SPECIFIED FOREIGN FINANCIAL ASSETS
• U.S. individuals file Form 8938 with U.S. Federal Form 1040
• Take into account value of stock in foreign corporation for Form 8938 filing threshold 1. Single living in United States - $50,000 at 12/31 or $75,000 at any
time during calendar year
2. Married filing jointly living in United States - $100,000 at 12/31 or $150,000 at any time during calendar year
• If filing Form 5471, still must attach Form 8938 if within filing threshold
• If not filing Form 5471, must report information regarding foreign corporation on Form 8938 if within filing threshold
