See Regulations sections 1.904-4(g) and 1.904-6(e). If more than one category applies, check all boxes that apply. With respect to line a at the top of page 1 of Schedule E, there is a new code TOTAL that is required for Schedule E and Schedule E-1 filers in certain circumstances. Employee benefit plan determinations The other Schedule Q can come into play when a company or organization is setting up or making changes to a pension or retirement savings plan, such as a 401 (k), or some other employee benefit plan. Form 5471 Schedules J, P, H, E | CPE Webinar | Strafford If the person filing Form 5471 is unable to determine whether amounts should be reported as previously taxed E&P, those amounts should be included in column (a), Post-2017 E&P Not Previously Taxed, section 959(c)(3) balance. Certain transactions resulting in a loss of at least $10 million in any single year or $20 million in any combination of years. Schedule R: Distributions From Foreign Corporations - IRS Form 5471 See Regulations section 1.9601(d)(2). See Regulations section 1.9603(c)(1). Enter the U.S. dollar amount of the recipient foreign corporation's income taxes deemed paid that are properly attributable to the PTEP distribution reported in column (f) and not deemed to have been paid by the domestic corporation for any prior tax year. If an amount is entered on line 14, you must attach a statement that includes the following information. Enter on lines 5c(i), 5c(ii), 5c(iii)(A), 5c(iii)(B), 5c(iii)(C), and 5c(iii)(D), as applicable, the portion of the line 5c current year E&P amount with respect to each applicable category of income. Legislative changes have dictated continual changes to Form 5471. Any foreign corporation with respect to which one or more domestic corporations is a U.S. shareholder. If so, an adjustment for the prior year amended return (and its impact on intervening years) should be reflected on line 2. The U.S. shareholder may have to pay a penalty if it is required to disclose a reportable transaction under section 6011 and fails to properly complete and file Form 8886. Enter the total amount of the lower-tier foreign corporations PTEP group taxes with respect to the PTEP group within the annual PTEP account identified in column (d) and column (e). In addition: Changes have been made throughout these instructions based on final regulations (REG -101657-20 (November 12, 2020)). Enter the appropriate code from the table below for the separate category of income with respect to which the Schedule Q is being completed. Interest income includes factoring income arising when a person acquires a trade or service receivable (directly or indirectly) from a related person. Currency codes are available at www.iso.org/iso-4217-currency-codes.html or www.currency-iso.org/en/home/tables/tables-a1.html. Enter the income tax expense (benefit) allocated to OCI items in the intraperiod allocation. If there are multiple differences, include the explanation and amount of each such difference on the attachment. CFC2 reclassifies such amount as section 959(c)(1) previously taxed E&P on Schedule J. Information described in a code listed above qualifies as alternative information only if information described in any preceding code is not readily available (as defined in section 3.04 of Rev. The person that files the required information on behalf of other persons must complete a joint Form 5471 according to the applicable column(s) of the Filing Requirements for Categories of Filers, earlier. Corporation A wholly owns the only class of stock of CFC2. Enter the total asset amount of derivatives on line 3 and total amount of liability on line 17 reported in accordance with ASC 815 (Derivatives and Hedging). Enter the excess of foreign currency gains over foreign currency losses from section 988 transactions. See Category 5 Filers, later, for definition. Requests for approval may be submitted electronically to substituteforms@irs.gov, or requests may be mailed to: If a computer-generated Form 5471 and its schedules conform to and do not deviate from the official form and schedules, they may be filed without prior approval from the IRS. Shareholder's Pro Rata Share of Subpart F Income of a C.F.C. Each single item of foreign base company income (as defined in Regulations section 1.954-1(c)(1)(iii)) is a separate subpart F income group. 2019-40, Item HPerson(s) on Whose Behalf This Information Return Is Filed, Items 1f and 1gPrincipal Business Activity, Reporting Amounts on Lines 1 Through 4 on Your Income Tax Return, Part ITaxes for Which a Foreign Tax Credit Is Allowed, Section 1Taxes Paid or Accrued Directly by Foreign Corporation, Section 2Taxes Deemed Paid (Section 960(b)), Part IIITaxes for Which Foreign Tax Credit Is Disallowed, Specific Instructions Related to Lines 1 through 16. Enter the payor entitys EIN or reference ID number in column (b). However, in the case of a consolidated return, enter the name of the U.S. parent in the field for Name of person filing Form 5471.. 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). Amounts entered in Schedule R (Form 5471), column (d) are also included on line 9, column (f) of Schedule J (Form 5471) and Part I, line 8 of Schedule P (Form 5471), both of which are completed by separate category of income. This is the case even if the Schedule I-1 also includes general category income. See the instructions for Form 5471, Schedule I, Vegetable & Melon Farming (including potatoes & yams), Greenhouse, Nursery, & Floriculture Production, Other Crop Farming (including tobacco, cotton, sugarcane, hay, peanut, sugar beet & all other crop farming), Aquaculture (including shellfish & finfish farms & hatcheries), Forest Nurseries & Gathering of Forest Products, Support Activities for Crop Production (including cotton ginning, soil preparation, planting, & cultivating), Sand, Gravel, Clay, & Ceramic & Refractory Minerals Mining & Quarrying, Other Nonmetallic Mineral Mining & Quarrying, Electric Power Generation, Transmission & Distribution, Other Heavy & Civil Engineering Construction, Foundation, Structure, & Building Exterior Contractors (including framing carpentry, masonry, glass, roofing, & siding), Plumbing, Heating, & Air-Conditioning Contractors, Building Finishing Contractors (including drywall, insulation, painting, wallcovering, flooring, tile, & finish carpentry), Other Specialty Trade Contractors (including site preparation), Fruit & Vegetable Preserving & Specialty Food Mfg, Other Food Mfg (including coffee, tea, flavorings & seasonings), Women's, Girls' & Infants' Cut & Sew Apparel Mfg, Footwear Mfg (including rubber & plastics), Veneer, Plywood, & Engineered Wood Product Mfg, Petroleum Refineries (including integrated), Asphalt Paving, Roofing, & Saturated Materials Mfg, Resin, Synthetic Rubber, & Artificial & Synthetic Fibers & Filaments Mfg, Pesticide, Fertilizer, & Other Agricultural Chemical Mfg, Soap, Cleaning Compound, & Toilet Preparation Mfg, Alumina & Aluminum Production & Processing, Nonferrous Metal (except Aluminum) Production & Processing, Machine Shops; Turned Product; & Screw, Nut, & Bolt Mfg, Coating, Engraving, Heat Treating, & Allied Activities, Agriculture, Construction, & Mining Machinery Mfg, Commercial & Service Industry Machinery Mfg, Ventilation, Heating, Air-Conditioning, & Commercial Refrigeration Equipment Mfg, Engine, Turbine & Power Transmission Equipment Mfg, Semiconductor & Other Electronic Component Mfg, Navigational, Measuring, Electromedical, & Control Instruments Mfg, Manufacturing & Reproducing Magnetic & Optical Media, Other Electrical Equipment & Component Mfg, Furniture & Related Product Manufacturing, Motor Vehicle & Motor Vehicle Parts & Supplies, Professional & Commercial Equipment & Supplies, Household Appliances & Electrical & Electronic Goods, Hardware & Plumbing & Heating Equipment & Supplies, Jewelry, Watch, Precious Stone, & Precious Metals, Beer, Wine, & Distilled Alcoholic Beverages, Flower, Nursery Stock, & Florists' Supplies, Motorcycle, ATV, & All other Motor Vehicle Dealers, Automotive Parts, Accessories, & Tire Stores, Electronic Stores (including Audio, Video, Computer, & Camera Stores), Lawn & Garden Equipment & Supplies Stores, Supermarkets and Other Grocery (except Convenience) Stores, Cosmetics, Beauty Supplies, & Perfume Stores, Gasoline Stations (including convenience stores with gas), General Merchandise Stores, incl. circle3 3.1.4.1 Internal credit enhancement subordination ordering of claim priorities for ownership or interest in an asset. This rule uses the payors asset apportionment percentages as a proxy for the accumulated earnings of the payor taxable unit from which the remittance is made. The amount included in the gross income of a U.S. shareholder of a CFC under section 951(a)(1)(A) for any tax year and attributable to a qualified activity must be reduced by the shareholder's pro rata share of any qualified deficit (see section 952(c)(1)(B)). Is the U.S. person filing this return relying on any exception(s), exclusion(s), or other provision(s) not listed above to reduce or exclude any amounts reported or reportable as subpart F income (of or with respect to the CFC)? 960 deemed paid taxes. Enter foreign income taxes that are disallowed under section 901(k), which generally applies to certain taxes paid on dividends if the minimum holding period is not met with respect to the underlying stock, or if the corporation is obligated to make related payments with respect to positions in similar or related property. See section 959(c). See Regulations section 1.960-3(c)(1). See generally Regulations section 1.482-7 for more information on determining whether stock-based compensation is directly identified with, or reasonably allocable to, the intangible development activity (IDA) under the CSA. The name of the person filing Form 5471 is generally the name of the U.S. person described in the applicable category or categories of filers (see Categories of Filers, earlier). While not allowed as a credit, such taxes are taken into account in determining the foreign corporations E&P. 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. 1167, General Rules and Specifications for Substitute Forms and Schedules, which reprints the most recent applicable revenue procedure. Enter income that is recaptured as subpart F income in the current year. For amounts included in Other Comprehensive Income (OCI), see the instructions for Lines 23 and 24. The schedules are: Form 5471 Schedule A - Stock of the Foreign Corporation Form 5471 Schedule B - U.S. Shareholders of Foreign Corporations Form 5471 Schedule C - Income Statement 851, available at IRS.gov/irb/2006-45_IRB#2006-45, as modified by Rev. Use columns (a) through (k) to report the opening balance of, current year additions and subtractions to, and the closing balance of, the PTEP in the U.S. shareholders annual PTEP accounts with respect to a CFC. 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. 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. Report the opening balance, current year additions and subtractions, and the closing balance in the foreign corporation's E&P described in section 959(c)(3). Enter foreign currency translation adjustments before the income tax expense (benefit) is allocated. Use Worksheet A, later in these instructions, to compute the U.S. shareholder's pro rata share of subpart F income of the CFC, which is reportable on lines 1e through 1h. These instructions clarify that this relief is extended to similarly situated Category 1 filers. PTEP attributable to inclusions under previous section 951(a)(1)(C) and subpart F income inclusions reclassified as investments in excess passive assets. If the subpart F income of any CFC for any tax year was reduced because of the current E&P limitation, any excess of the E&P of the CFC for any subsequent tax year over the subpart F income of the CFC for the tax year must be recharacterized as subpart F income. If a U.S. shareholder of a CFC is considered to have participated in a reportable transaction under the rules of Regulations section 1.6011-4(c)(3)(i)(G), the shareholder is required to disclose information for each reportable transaction. Enter the current income tax expense (benefit) on line 21a and deferred income tax expense (benefit) on line 21b. In other words, are any amounts excluded from line 1a of Worksheet A by reason of the look-through rule described in section 954(c)(6)? Persons With Respect to Certain Foreign Corporations .". Persons with Respect to Certain Foreign Corporations, is an Information Statement (Information Return) (as opposed to a tax return) for certain U.S. taxpayers with an interest in certain foreign corporations. See Reference ID Number, later, for details. Foreign income taxes reclassified from section 959(c)(2) previously taxed E&P to section 959(c)(1) previously taxed E&P should be reported as negative numbers in columns (e)(vi) through (e)(x) and as positive numbers in columns (e)(i) through (e)(v). Form 5471 filers generally use the same category of filer codes used on Form 1118. 0122. Enter the CFCs gross income. Section 956(a)(1) amount. If there is more than one regarded entity owner, use separate lines for each, listing each regarded entity owner in column (a) and reporting the information requested in columns (b), (c), and (d) for each such regarded entity owner. Enter the amount, if any, of the CFCs gross income excluded from foreign base company income (as defined in section 954) and insurance income (as defined in section 953) by reason of section 954(b)(4), the high-tax exception (include amounts excluded from tested income under Regulations section 1.951A-2(c)(7). Proc. There is an election in effect under section 986(a)(1)(D) to translate foreign taxes using the exchange rate in effect on the date of payment. Enter the appropriate code on line a (at the top of page 1 of Schedule P). The REMIC sends Schedule Q to the investor and a copy to the IRS. See section 367(d). 92-70 for Dormant Foreign Corporation.. 12-2022) DRAFT AS OF Page 3 Enter amounts in functional currency of the foreign corporation (unless otherwise noted). Let's Talk about Form 5471 - Advanced American Tax For purposes of Category 1 and Category 5 filers, a related constructive U.S. shareholder is a U.S. shareholder with respect to a foreign-controlled corporation who: Does not own, within the meaning of section 958(a), stock of the foreign-controlled corporation; and. Foreign personal holding company income derived in the active conduct of a banking, finance, or similar business (section 954(h)). The line items to be completed are: Foreign base company income generally does not include the following. If the return was or will be filed electronically, enter e-file.. Enter foreign income taxes that are disallowed under section 901(j), generally foreign income taxes paid or accrued to certain sanctioned countries. Column (e)(iv) is PTEP originally attributable to inclusions under section 951A and reclassified as investments in U.S. property (section 959(c)(1)(A) amounts). To figure the amounts to enter on lines 1a through 1i, on lines (1), (2), etc., under each line 1a through 1i, enter the name of each QBU of the CFC, including the CFC itself, and the information required in each column (i) through (xiv) with respect to the amount in each subpart F income group within each category for each QBU. Enter the employer identification number (EIN) or reference ID number of the payor entity listed in column (a). Lines 24, 27, 30, and 33. Report the inclusion as a negative amount in columns (a) through (c), as applicable. For purposes of Category 2 and Category 3, a U.S. person is: A citizen or resident of the United States. Enter on line 5b the DASTM gain or loss figured under Regulations section 1.985-3(d). Enter the applicable three-character alphabet code for the foreign corporation's functional currency using the ISO 4217 standard. Rev. During the tax year, did the CFC receive or accrue from a related CFC dividends, interest (including factoring income treated as income equivalent to interest for purposes of section 954(c)(1)(E)), rents, or royalties attributable or properly allocable to income of the related person which is neither subpart F income nor income treated as effectively connected with the conduct of a trade or business in the United States? PTEP attributable to subpart F income inclusions (not described in any other column) and reclassified as investments in U.S. property. 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. Report adjustments for foreign taxes related to the PTEP on line 2g. Subtract the sum of lines 30 and 31 from line 15e." If applicable, use the reference ID number shown on Form 5471, page 1, item 1b(2). If PTEP were distributed, include on Form 5471, Schedule I, line 6, any foreign currency gain or loss on the distribution that is recognized under section 986(c). The reference ID number assigned to a foreign corporation on Form 5471 generally has relevance only on Form 5471, its schedules, and any other form that is attached to or associated with Form 5471, and generally should not be used with respect to that foreign corporation on any other IRS forms. The additional penalty is limited to a maximum of $50,000. Enter each shareholder's allocable percentage of the foreign corporation's subpart F income. See section 959(b). See section 960(b). This column is used to report current-year tax imposed solely by reason of the receipt of a disregarded payment that is a reattribution payment. Add lines 1a through 1g" field, "3.Gross foreign base company sales income (see section 954(d))" field, "4.Gross foreign base company services income (see section 954(e))" field, "5.Gross foreign base company oil-related income (see section 954(g)) after application of section 954(b)(8)" field, "6.Gross foreign base company income. If the foreign corporation uses the DASTM under Regulations section 1.985-3, the functional currency column should reflect local hyperinflationary currency amounts computed in accordance with U.S. GAAP. Line 9. Enter the method of disposition (for example, sale, bequest, gift, trade). Any transaction identified by the IRS by notice, regulation, or other published guidance as a transaction of interest. See Notice 2009-55, 2009-31 I.R.B. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. 2003-47, 2003-28 I.R.B. If the amount on line 37c is greater than or equal to the amount on line 36, enter the amount from line 26 onto line 40, enter the amount from line 29 onto line 41, enter the amount from line 32 onto line 42, and enter the amount from line 35 onto line 43. If code 901(j) is entered on line a, enter on line b the country code for the sanctioned country using the two-letter codes (from the list at IRS.gov/CountryCodes). The foreign corporation divides 30,255,400 Yen by 108.8593 to determine the U.S. dollar amount to enter in column (l) of Schedule E, Part I, Section 1, line 1. Schedules Q & R, Form 5471 | CPE Webinar | Strafford If there is more than one majority shareholder, the required tax year will be the tax year that results in the least aggregate deferral of income to all U.S. shareholders of the foreign corporation. The attached statement must include a totals line that ties into the amounts reported in each column of line 29. During the tax year, did the CFC receive, from a corporation that is a related person, rents or royalties* for the use of, or privilege of using, property within the country under the laws of which the CFC is created or organized? Category 1b and 5b filers are not required to file Schedule G for foreign-controlled corporations. "As we enter Q4 FY 23, we are seeing . Exempt insurance income under section 953(e) and certain investment income of a qualifying insurance company or a qualifying insurance branch (sections 953(a)(2) and 954(i)). The information reported on Schedule E is relevant for U.S. shareholders making this election. See Regulations section 1.904-4(c)(3)(iv). 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. "field, "66.Amount of line 61 that applies to section 954(c) subpart F Foreign Base Company Services Income. Category 2 and Category 3 filers who are shareholders, officers, and directors of an FSC (as defined in section 922, as in effect before its repeal) must file Form 5471 and a separate Schedule O to report changes in the ownership of the FSC.