Specifically, if the foreign corporation was a controlled participant (as defined in Regulations section 1.482-7(j)) in more than one cost sharing arrangement (as defined in Regulations section 1.482-7(b)) during the tax year, the filer is required to complete Schedule G-1 for each cost sharing arrangement. Income described in section 952(a)(5). Line 9b. During the tax year, did the CFC have excess foreign currency gains over foreign currency losses (as defined in section 988(b)) attributable to any section 988 transaction directly related to the business needs of the foreign corporation? See section 959(b). Therefore, it is important that the U.S. shareholder track the PTEP groups to follow the different rules for each group. Section references are to the Internal Revenue Code unless otherwise noted. Line 6. Exception for certain income subject to high foreign taxes. A U.S. shareholder who is a Category 5 filer (defined above) must complete Form 5471 and file all information required of a Category 5a filer if that U.S. shareholder does not qualify as a Category 5b or 5c filer. See the instructions for Line 37, Current E&P limitation, later, for a discussion of the current-year E&P limitation. Also, new lines 14 and 29 were added for reporting other amounts received (line 14) and other amounts paid (line 29). 2019-40. See the instructions for lines 1 through 4. Proc. The line 6 result can be positive or negative. If the failure continues for more than 90 days after the date the IRS mails notice of the failure, an additional $10,000 penalty will apply for each 30-day period, or fraction thereof, during which the failure continues after the 90-day period has expired. The name, address, and EIN (or reference ID number) of the foreign corporation(s). 851, available at, Enter foreign currency transaction gain or loss reported on the income statement. See Regulations sections 1.954-1(c)(1)(iii)(B) and 1.904-4(c)(3) through (5). Corporate U.S. shareholders should enter the foreign-source portion of any subpart F income inclusions attributable to the sale or exchange by a CFC of stock of another foreign corporation that is eligible for the section 245A dividends received deduction pursuant to section 964(e)(4). See line 15 with respect to reporting tested taxes not deemed paid as a result of the inclusion percentage or the application of the 80% limitation. Category 1b and 5b filers are not required to file Schedule G for foreign-controlled corporations. Foreign taxes imposed on PTEP distributions reduce PTEP and are reported on Schedule J, line 6. The name of the person filing Form 5471 is generally the name of the U.S. person described in the category or categories of filers (see Categories of Filers, earlier). To adhere to the reporting requirements of Secs. If the name of either the person filing the return or the corporation whose activities are being reported changed within the past 3 years, show the prior name(s) in parentheses after the current name. Enter the number of shares constructively owned (within the meaning of section 958(b)) by the shareholder listed in column (a). See Related constructive U.S. shareholder, later, for instructions pertaining to when Form 5471 may be completed as a Category 1c filer. If applicable, use the reference ID number shown on Form 5471, page 1, Item 1b(2). Foreign income is reported in one of six categories with an appropriate code, 951A, RBT (income re-source by treaty), 901 (j) (income earned from a . Any foreign corporation with respect to which one or more domestic corporations is a U.S. shareholder. 309, available at IRS.gov/irb/2009-36_IRB#RP-2009-37. A hybrid deduction account with respect to a share of stock of a CFC reflects the amount of hybrid deductions of the CFC that has been allocated to the share. The second quarter of the tax year" field, "1c. If the sum of foreign base company income (determined without regard to section 954(b)(5)) and gross insurance income (as defined in section 954(b)(3)(C)) for the tax year is less than the smaller of 5% of gross income for income tax purposes, or $1 million, then no portion of the gross income for the tax year is treated as foreign base company income or insurance income. Enter the employer identification number (EIN) or reference ID number of the lower-tier foreign corporation listed in column (a). In this case, enter total gross income (for income tax purposes) on line 11. If a U.S. corporation that owns stock in a foreign corporation is a member of a consolidated group, list the common parent as the U.S. person filing In addition to the separate category codes referred to above, if you have more than one of the categories of income referred to above, you must complete and file a separate Schedule Q using code TOTAL that aggregates all amounts listed for each line and column in all other Schedules Q. Subtract the sum of lines 24 and 25 from line 13h." Subtract the sum of line 9b and line 9c from line 9a and enter the result on line 9d. 3 Scanner When user wants to input the data in the form of images in that case . The same reference ID number must be used consistently from tax year to tax year with respect to a given foreign corporation. Column (viii). 2022. Report on these lines loan guarantee fees received (line 13) and loan guarantee fees paid (line 28). Subtract line 11 from line 10" field, "13. Certain non-corporate U.S. shareholders may elect under section 962 to be taxed at corporate rates on section 951(a) amounts and the GILTI inclusion for the tax year, so as to be able to claim a credit for certain foreign taxes paid or accrued by the CFC. Use Schedule P to report the PTEP in the U.S. shareholders annual PTEP accounts with respect to a CFC in the CFCs functional currency (Part I) and the U.S. shareholders U.S. dollar basis in that PTEP (Part II). If you are reporting with respect to more than one section 901(j) country, add to page 3 new lines 1m, 1n, 1o, etc. In general, a CFC is a foreign corporation that has U.S. shareholders that own (directly, indirectly, or constructively, within the meaning of sections 958(a) and (b)) on any day of the tax year of the foreign corporation, more than 50% of: The total combined voting power of all classes of its voting stock, or. See Regulations section 1.9601(d)(2). See section 367(d). Enter the income reported to the foreign tax authority under foreign tax law. field, "36.Total subpart F income. Do not report such taxes in Part I, but in Part III. Add lines 6 and 7" field, "9.Enter 5% of total gross income (as computed for income tax purposes)" field, "10.Enter 70% of total gross income (as computed for income tax purposes)" field, "11.If line 8 is less than line 9 and less than $1 million, enter 0 on this line and skip lines 12 through 21" field, "12.If line 8 is more than line 10, enter total gross income (as computed for income tax purposes)" field, "13.Total adjusted gross foreign base company income and insurance income (enter the greater of line 8 or line 12)" field, "14. Such taxes may include, but are not limited to, certain taxes on the purchase or sale of oil and gas (section 901(f)), certain taxes used to provide subsidies (section 901(i)), and taxes for which no credit is allowed because of the boycott provisions of section 908. See sections 956(c) and (d) and the regulations under section 956 to determine whether the CFC is treated as holding U.S. property. In completing these lines, do not account for debt instruments that were issued, or distributions or acquisitions that occurred, before April 5, 2016. Proc. If the foreign corporation applied more than one RAB share during the tax year in determining its share of intangible development costs (IDCs), enter the RAB share that was applied to IDCs incurred at the end of the year. Criminal penalties under sections 7203, 7206, and 7207 may apply for failure to file the information required by sections 6038 and 6046. See the instructions for, Enter the amount of interest income included on line 4. Section 956(a)(2) amount. Warehouse Clubs and Supercenters, All Other Miscellaneous Store Retailers (including tobacco, candle, & trophy shops), Fuel Dealers (including Heating Oil and Liquefied Petroleum), Other Direct Selling Establishments (including door-to-door retailing, frozen food plan providers, party plan merchandisers, & coffee-break service providers), Other Transit & Ground Passenger Transportation, Support Activities for Air Transportation, Support Activities for Rail Transportation, Support Activities for Water Transportation, Other Support Activities for Road Transportation, Other Support Activities for Transportation, Warehousing & Storage (except lessors of mini-warehouses & self-storage units), Motion Picture & Video Industries (except video rental), Telecommunications (including paging, cellular, satellite, cable & other program distribution, resellers, & other telecommunications, and Internet service providers), Data Processing, Hosting, & Related Services, Other Information Services (including news syndicates & libraries, Internet publishing & broadcasting), Real Estate Credit (including mortgage bankers & originators), All Other Nondepository Credit Intermediation, Activities Related to Credit Intermediation (including loan brokers, check clearing, & money transmitting), Other Financial Investment Activities (including portfolio management & investment advice), Direct Life, Health, & Medical Insurance & Reinsurance Carriers, Direct Insurance & Reinsurance (except Life, Health & Medical) Carriers, Other Insurance Related Activities (including third-party administration of insurance and pension funds), Open-End Investment Funds (Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies), Other Financial Vehicles (including mortgage REITs and closed-end investment funds)Offices of Bank Holding Companies and Offices of Other Holding Companies are located under, Lessors of Residential Buildings & Dwellings (including equity REITs), Lessors of Nonresidential Buildings (except Mini-warehouses) (including equity REITs), Lessors of Mini-warehouses & Self-Storage Units (including equity REITs), Lessors of Other Real Estate Property (including equity REITs), Commercial & Industrial Machinery & Equipment Rental & Leasing, Lessors of Nonfinancial Intangible Assets (except copyrighted works), Surveying & Mapping (except Geophysical) Services, Specialized Design Services (including interior, industrial, graphic, & fashion design), Management, Scientific, & Technical Consulting Services, Scientific Research & Development Services, Marketing Research & Public Opinion Polling, All Other Professional, Scientific, & Technical Services, Business Service Centers (including private mail centers & copy shops), Other Business Support Services (including repossession services, court reporting, & stenotype services), Travel Arrangement & Reservation Services, Other Support Services (including packaging & labeling services, & convention & trade show organizers), Educational Services (including schools, colleges, & universities), Offices of Physicians (except mental health specialists), Offices of Physicians, Mental Health Specialists, Offices of Mental Health Practitioners (except Physicians), Offices of Physical, Occupational & Speech Therapists, & Audiologists, Offices of All Other Miscellaneous Health Practitioners, Outpatient Mental Health & Substance Abuse Centers, Freestanding Ambulatory Surgical & Emergency Centers, Other Ambulatory Health Care Services (including ambulance services & blood & organ banks), Community Food & Housing, & Emergency & Other Relief Services, Spectator Sports (including sports clubs & racetracks), Promoters of Performing Arts, Sports, & Similar Events, Agents & Managers for Artists, Athletes, Entertainers, & Other Public Figures, Independent Artists, Writers, & Performers, Museums, Historical Sites, & Similar Institutions, Other Amusement & Recreation Industries (including golf courses, skiing facilities, marinas, fitness centers, & bowling centers), RV (Recreational Vehicle) Parks & Recreational Camps, Rooming & Boarding Houses, Dormitories & Workers Camps, Special Food Services (including food service contractors & caterers), Automotive Mechanical & Electrical Repair & Maintenance, Automotive Body, Paint, Interior, & Glass Repair, Other Automotive Repair & Maintenance (including oil change & lubrication shops & car washes), Electronic & Precision Equipment Repair & Maintenance, Commercial & Industrial Machinery & Equipment (except Automotive & Electronic) Repair & Maintenance, Home & Garden Equipment & Appliance Repair & Maintenance, Other Personal & Household Goods Repair & Maintenance, Other Personal Care Services (including diet & weight reducing centers), Drycleaning & Laundry Services (except Coin-Operated), Religious, Grantmaking, Civic, Professional, & Similar Organizations (including condominium and homeowners associations), Electronic Federal Tax Payment System (EFTPS), Instructions for Form 5471 - Introductory Material, Filing Requirements for Categories of Filers, Computer-Generated Form 5471 and Schedules, Item EExcepted Specified Foreign Financial Assets, Item FAlternative Information Under Rev. Subtract line 20b from line 20a" field, "20d.Net insurance income excluded under high-tax exception" field, "20e.Subtract line 20d from line 20c" field, "21.Adjusted net related person insurance income:", "21a.Enter amount from line 7 that is related person insurance income" field, "21b.Expenses allocated and apportioned to related person insurance income under section 953" field, "21c.Net related person insurance income. "field, "52.Section 954(c) subpart F Foreign Base Company Services Income subtotal. Similarly, Corporation B will only be able to complete Schedule J, Part I, with respect to its PTEP of $50x on line 8, column (e)(viii). If no deduction is being claimed, check the No box and go to line 7. The amount reported in column (xii) may not be the same as the sum of the amounts in columns (viii) through (x) if columns (viii) through (x) include taxes that are not creditable, including taxes paid or accrued to sanctioned countries, foreign taxes disallowed under sections 901(k), (m), and (l), and taxes paid or accrued to the United States. In other words, are any amounts described in section 954(c)(2)(C)(i) excluded from line 1a of Worksheet A? In general, see Regulations section 1.951A4(b)(1) to determine how to compute the CFCs tested interest expense. If applicable for lines 5c(iii)(A), 5c(iii)(B), 5c(iii)(C), and 5c(iii)(D), also enter the country code for the sanctioned country using the two-letter codes (from the list at IRS.gov/CountryCodes). Enter the expenses allocated and apportioned to the item of gross income reported for each QBU or tested unit as well as the aggregate amount of such expenses allocated and apportioned to each group. No credit is allowed for these taxes because only foreign income taxes paid or accrued to a foreign country or possession of the United States are allowed as a credit. Report the inclusion as a negative amount in columns (a) through (c), as applicable. See section 960(d). Foreign tax imposed by reason of a disregarded payment that is a remittance is assigned to the income groups based upon the assets of the payor. In addition, lines 1b, 1c, and 2 have been shaded in columns (a), (b), (c), and (d), and a pre-printed zero has been inserted on line 16 of columns (a), (b), and (c). For purposes of this Schedule P, include in each separate category of income, foreign source and U.S. source income. For purposes of the preceding sentence, if a CFC is a shareholder or partner of a corporation or partnership, the CFC is treated as owning directly its proportionate share of any such capital or profits interest held directly or indirectly by such corporation or partnership. field, "30.Enter the portion of line 15e that is U.S. source income effectively connected with a U.S. trade or business (section 952(b))" field, "31.Exclusions under section 959(b) that apply to line 15e amount" field, "32.Section 954(e) subpart F Foreign Base Company Services Income. Because a CFC cannot earn section 951A category income or foreign branch category income at the CFC level, there is no tested income group within either section 904 category. Attach a statement detailing any differences between the starting and ending balance of the extraordinary disposition account reported on line 8b. CFC1, in turn, wholly owns the only class of stock of CFC2, a foreign corporation. Subtract line 15 from line 14." 2439 User Road Hamilton, NJ 08690-3303 (609) 570-1000 Fax (609) 570-1050 Toll Free (877) 269-0090 www.mdlab.com For line 4(1), $300 of gross income is reported in column (ii) and $105 of foreign tax is reported in column (x). See section 381(c)(2)(B) and Regulations sections 1.367(b)-7(d)(2)(i) (post-1986 undistributed earnings) and 1.367(b)-7(e)(1) (pre-1987 E&P not previously taxed). Thus, the amount of previously untaxed earnings limits the section 956 inclusion. During the tax year, did the CFC derive income (either directly or through a branch or similar establishment, for example, disregarded entity) in connection with the purchase or sale from, to, or on behalf of a related person, of personal property manufactured by the CFC within the meaning of Regulations section 1.954-3(a)(4)(iv)? For line 1(a)(3), gross income of $75 is reported in column (ii), $3 of foreign tax is reported in each of columns (x) and (xii), and the checkbox in column (xiv) is not checked. Do not include amounts reported on line 1b. Distributions made by the C.F.C. Line 21. Enter the result here and on line 2 of Schedule I" field. Enter foreign currency transaction gain or loss reported on the income statement. It is only necessary to complete Form 8938, Part IV, line 17. from investment in U.S. property and to translate the amount from functional currency to U.S. dollars. Category 1b, 1c, 5b, and 5c filers are not required to file Schedule J for foreign-controlled corporations. Enter the appropriate code on line a (at the top of page 1 of Schedule P). The foreign corporation reports on the cash basis. A U.S. person has acquired stock in a foreign corporation when that person has an unqualified right to receive the stock, even though the stock is not actually issued. Instead, if the foreign entity does not have an EIN, the taxpayer must enter a reference ID number that uniquely identifies the foreign entity. See Regulations section 1.6046-1(i) for rules on determining when U.S. persons constructively own stock of a foreign corporation and therefore are subject to the section 6046 filing requirements. The line items to be completed are: Please click here for the text description of the image. Also, information pertaining to hovering deficits is no longer reported in column (d). Enter the PTEP distribution with respect to the PTEP group within the annual PTEP account identified in column (d) and column (e) in the functional currency of the distributing lower-tier foreign corporation. Proc. These numbers are used to uniquely identify the foreign corporation in order to keep track of the corporation from tax year to tax year. As of the date these instructions were revised, section 901(j) applied to Iran, North Korea, Sudan, and Syria. Schedules Q and R have been added to its numerous schedules to accommodate recent legislative changes. The top margin of the summary return must be labeled Filed Pursuant to Rev. Specifically, if you are reporting with respect to more than two units, add to pages 1 and 2, as appropriate, new lines (3), (4), (5), etc. Column (e)(vii) is E&P treated as PTEP under section 965(b)(4)(A) (section 959(c)(2) amounts). 2019-40, earlier, for more details. The instructions have been updated for each of the aforementioned changes to Form 5471 and separate schedules. 435, provides a summary filing procedure for filing Form 5471 for a dormant foreign corporation (defined in section 3 of Rev. Do not include foreign income taxes paid or accrued by the foreign corporation in its other tax years beginning after December 31, 2017, or that do not relate to the current tax year. In which more than 50% of the total voting power or value of all classes of stock of the corporation is treated as owned by a U.S. shareholder. Enter the result here and on Form 5471, Schedule I, line 1d. If the return was or will be filed electronically, enter e-file.. See section 482. More importantly, Schedule J tracks the corporations various balances of Previou. Form 5471 and Schedule J, M, or O who agrees to have another person file the form and schedules for him or her may be subject to the above penalties if the other person does not file a correct and proper form and schedule. Every U.S. person described in Category 4 must file Schedule M to report the transactions that occurred during the foreign corporation's annual accounting period ending with or within the U.S. person's tax year. Instead, they should be reported in the year to which such taxes relate. For example, an individual U.S. shareholder who receives a distribution of PTEP originally attributable to inclusions under section 965(a) may only claim a credit for a portion of the foreign taxes attributable to a distribution of such PTEP. In other words, are any amounts described in section 954(c)(3)(A)(ii) excluded from line 1a of Worksheet A? On lines 1 and 2, the phrase (see instructions if cost of goods sold exceed gross receipts) has been inserted after gross income (on line 1) and exclusions (on line 2). 2019-40). If the foreign surviving corporation had a deficit in E&P prior to a transaction described in section 381, such deficit is recharacterized as a hovering deficit after such nonrecognition transaction. Do not include any adjustments required to be reported on line 7 or 12. Schedule R of Form 5471 is used to report basic information pertaining to distributions from foreign corporations by Sections 245A, 959, and 986 (c). Otherwise, enter zero. Information Return of U.S. This information is required by sections 245A, 959, and 986(c). Thus, the U.S. shareholders must: Compute the current subpart F income inclusion (potentially increasing that previously taxed account), Take into account current distributions (potentially reducing the previously taxed and untaxed accounts), and. Report a PTEP distribution by a lower-tier foreign corporation in Section 2 only if foreign income taxes are deemed paid under section 960(b) by the foreign corporation with respect to such PTEP distribution. As a result, the line 3 result can be positive or negative. The amounts reclassified are reported as negative numbers in columns (e)(vi) through (e)(x) and positive numbers in columns (e)(i) through (e)(v), as applicable. A Category 1 or 5 filer does not have to file Form 5471 if no U.S. shareholder (including such U.S. person) owns, within the meaning of section 958(a), stock in the foreign corporation on the last day in the year of the foreign corporation in which it was an SFC or CFC, and the foreign corporation is an SFC or CFC solely because one or more U.S. persons is considered to own the stock of the foreign corporation owned by a foreign person under section 318(a)(3). However, see the instructions for Schedule R, later, for changes that affect how the schedule is completed. During the tax year, did the CFC derive income (either directly or through a branch or similar establishment, for example, disregarded entity) in connection with the purchase or sale from, to, or on behalf of a related person, of personal property manufactured in the same country under the laws of which the CFC is created or organized? Regulations sections 1.6038-2(h) and 1.6046-1(g) require that certain amounts be reported in U.S. dollars and/or in the foreign corporation's functional currency. The corporate U.S. shareholder should include the line 5a amount on Form 1120, Schedule C, line 13, column (a), or the comparable line of other corporate income tax returns. On July 1, 2021, Mr. Jackson made a gift of 5,000 shares of foreign corporation X to his son, John. The identifying number of all others is their employer identification number (EIN). Subtract line 18d from line 18c" field, "19.Adjusted net foreign base company income. In this example, we assume that CFC1 is wholly owned by a domestic corporation and all the foreign taxes mentioned here are not withholding taxes. Use column (d) to report hovering deficits (see section 381(c)(2)(B) and Regulations section 1.367(b)-7) and suspended taxes (see section 909). See section 6712. Columns (a) through (j) of Schedule P correspond to Schedule J, columns (e)(i) through (e)(x). Section 965 specified foreign corporation (SFC). No changes have been made to this schedule. Enter the CFCs tested loss QBAI amount, as defined in Regulations section 1.951A4(b)(1)(iv). To determine the appropriate code, see Categories of Income in the Instructions for Form 1118. Such amounts are reported as negative numbers. See section 245A for guidance on computing the amount of a dividend eligible for a deduction. "field, "47.Shareholders pro rata share of line 41. Special rules apply for foreign corporations that use the U.S. dollar approximate separate transactions method of accounting (DASTM) under Regulations section 1.985-3. 12-2022) Page: 4 (viii) Current Year Tax on Reattributed Income From Disregarded Payments (ix) Current Year Tax on All Other Disregarded Payments (x) Other Current Year Taxes (xi) Net Income (column (ii) less columns (iii) through (x)) (xii) Foreign Taxes for Which Credit Allowed Subtract the sum of lines 27 and 28 from line 14e." As a result, the amounts included on lines 1a through 1i for each column may not equal the sum of the amounts reported on lines (1), (2), etc., for each column because any item excluded from subpart F income by reason of the high-tax election is included in the summation on line 4 instead of the summations on lines 1a through 1i. Instructions for Form 5471, Information Return of U.S. . Check Yes if the foreign corporation received any intangible property in a prior year or the current tax year in an exchange under section 351 or section 361 from a U.S. transferor that is required to report a section 367(d) annual income inclusion for the tax year. If there are multiple differences, include the explanation and amount of each such difference on the attachment. See Schedule H, line 2g. Report current-year taxes allocated and apportioned to the item of gross income reported for each QBU or tested unit as well as the aggregate amount of such foreign taxes allocated and apportioned to each group. Certain transactions involving an expatriated foreign subsidiary and/or its U.S. shareholders may be subject to special rules. Such differences include, for example, deferred income tax expenses, uncertain tax positions, intraperiod allocations, adjustments made after closing the financial statements (post-closing adjustments) and not reflected in income tax expense (benefit), and the adjustment for a foreign tax redetermination that required a redetermination of the U.S. tax liability.