Form 5471 Schedule B, Part I
Form 5471 Schedule B, Part I refers to the different shareholders accounted for on the Form that are being reported on the Form. It is important to only include U.S. shareholders who meet the category requirements for the actual filer. Specifically, the filers referred to in this section of the form include all of the different qualifying U.S. shareholders of the foreign corporation — in accordance with the category of the filer. This way, the IRS can determine who else has shares/ownership in the company, and more importantly who is required to report.
Schedule B Requires the Filer to Include:
- Name, address, and identifying number of shareholder
- Description of each class of stock held by shareholder. Note: This description should match the corresponding description entered in Schedule A, column (a).
- Number of shares held at beginning of annual accounting period
- Number of shares held at end of annual accounting period
- Pro rata share of Subpart F income (enter as a percentage)
Remember, Schedule A, column (a) refers to the description of each stock.
What do the Form 5471 Instructions Say?
The Form 5471 instructions provide the following guidance:
- “Category 3 and 4 filers must complete Schedule B, Part I, for U.S. persons that owned (at any time during the annual accounting period), directly or indirectly through foreign entities, 10% or more in value or voting power of any class of the foreign corporation’s outstanding stock. Column (e). Enter each shareholder’s allocable percentage of the foreign corporation’s subpart F income.”
Category 3 & Form 5471 Schedule B, Part I
A Category 3 filers refers primarily to someone who is a U.S. person and acquires additional stock that bumps them up to the 10% threshold.
Category 3 Filer
This category includes:
- A U.S. person (see Category 2 Filer, above, for definition) who acquires stock in a foreign corporation which, when added to any stock owned on the date of acquisition, meets the 10% stock ownership requirement (described above) with respect to the foreign corporation;
- A U.S. person who acquires stock which, without regard to stock already owned on the date of acquisition, meets the 10% stock ownership requirement with respect to the foreign corporation;
- A person who is treated as a U.S. shareholder under section 953(c) with respect to the foreign corporation
- A person who becomes a U.S. person while meeting the 10% stock ownership requirement with respect to the foreign corporation; or
- A U.S. person who disposes of sufficient stock in the foreign corporation to reduce his or her interest to less than the 10% stock ownership requirement. For more information, see section 6046 and Regulations section 1.6046-1.
Common Type 3 Category Filers:
- Acquires 10% ownership the current year
- Acquires additional shares that bumps them over 10%
- Became a U.S. person in a year in which they already owned 10%
- Sold or transferred stock and it brought them below 10%
Category 4 & Form 5471 Schedule B, Part I
Category 4 refers to U.S. persons who had Control over the foreign corporation.
“This category includes U.S. persons, who are defined as follows:
- A citizen or resident of the United States;
- A nonresident alien for whom an election is in effect under section 6013(g) to be treated as a resident of the United States;
- An individual for whom an election is in effect under section 6013(h), relating to nonresident aliens who become residents of the United States during the tax year and are married at the close of the tax year to a citizen or resident of the United States;
- A domestic partnership;
- A domestic corporation; and
- An estate or trust that is not a foreign estate or trust as defined in section 7701(a)(31). See Regulations section 1.6038-2(d) for exceptions.
What is Control for Category 4?
A U.S. person has control of a foreign corporation if, at any time during that person’s tax year, it owns stock possessing:
- More than 50% of the total combined voting power of all classes of stock of the foreign corporation entitled to vote, or
- More than 50% of the total value of shares of all classes of stock of the foreign corporation.
A person in control of a corporation that, in turn, owns more than 50% of the combined voting power, or the value, of all classes of stock of another corporation is also treated as being in control of such other corporation.”
What is Subpart F Income?
Subpart F Income is a highly complicated issues involving certain passive and other income earned by a CFC. Some later schedules may require you to compute and include the Subpart F on your 5471.
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