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Questions about Form 5471
- 08-06-2010
ysmum posted on August 6, 2010, 9:04 pm
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Hi! I have a question about Form 5471. Back in 2004, along with my mom,
dad, sister, and brother, we all bought stocks in foreign company. Each
owning about 6% of the company.
At that time, my mom filed 5471 on my behalf and I received a letter from
the IRS saying that I had met the requirements for form 5471 and no
further action was needed on my part.
Only my mom, dad, sister, brother, and myself are US citizens, all the
other shareholders are not and we do not make any decisions for the
company.
All the previous years, the company had been losing money so we were told
by the tax consultant and we did not need to file anything.
However, this year, the company made a profit and is distributing the
majority of the profit as a dividend to the shareholders.
I called IRS and explained the situation and they just told me that I
needed to enter the dividend amount on line 9a on form 1040.
It just seems too simple to be so I'm hoping someone here with expertise
in foreign corporations can help.
Thanks in advance!
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candaexpress posted on
Re: Questions about Form 5471
On Aug 6, 6:04 pm, queenie_zee_at_yahoo_dot_...@foo.com (ysmum) wrote:
***************************************************************************************
Not a response to your question, but you would have file form "Form TD
F 90-22.1" if at any point during the calendar year your 6% investment
crosses $ 10,000 in value. (Independent whether it pays dividend or
not). This form needs to be filed before June 30th.
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removeps-groups@yahoo.com posted on
Re: Questions about Form 5471
That's the beauty of corporations. The corporation's own tax return
is complex, but yours isn't.
So if I own $25,000 in a foreign company, say Nestle, then do I have
to file the TDF form?
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Tom Healy CPA posted on
Re: Questions about Form 5471
On Aug 10, 6:37 pm, "removeps-gro...@yahoo.com" <removeps-
gro...@yahoo.com> wrote:
No. That assumes that you own the stock through a US securities
account. I have clients who have securities accounts in other
countries, and for those, even if they were invested in US companies,
they need to do the TD form. The key is where the financial assets are
held, not the country where the underlying company is located. So if
you have a stock certificate for a foreign company in your safe
deposit box, no reporting; but if the company holds your investment
"in street name" or on its books with no certificate, then, yes, you
might need to file the TD Form.
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Alan posted on
Re: Questions about Form 5471
On 8/6/10 7:04 PM, ysmum wrote:
Well the IRS got this one right. You report stock dividends on Line 9a
of Form 1040. As to whether these dividends are qualified dividends that
you can also report on Line 9b, will depend on passing at least one of
three tests.
1. The foreign company was incorporated in a US possession.
2. The stock is publicly traded on a US securities market.
3. The company is eligible for benefits under an income tax treaty with
the US and the treaty has an exchange of information provision.
Under test 3, there is an IRS Notice that contains a list of those
countries. See the link below for the Notice.
http://www.irs.gov/irb/2003-42_IRB/ar09.html
--
Alan
http://taxtopics.net
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Re: Questions about Form 5471
ysmum had written this in response to
http://www.rockryno.com/taxes/Re-Questions-about-Form-5471-28897-.htm :
-------------------------------------
Alan wrote:
Thanks Alan! You've been a great help!
I only received a letter saying that I own one ordinary share of their
stock. I
don't have a foreign securities account which holds the stock for me. Does
that
mean I don't need to fill out Form TDF?
The country is British Virgin Islands so I think it fulfills test 3 since
the
United Kingdom is listed there. So does that mean I also that dividend
income
will only be taxed a maximum of 15%?
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Re: Questions about Form 5471
On 8/13/10 8:44 AM, ysmum wrote:
My understanding of the filing requirements are that mere ownership of
stock in a foreign corporation does not trigger the filing requirement.
Ownership of more than 50% of the company would trigger the requirement.
In addition, if the value of your stock exceeds $10K and the stock is
not in your possession or your broker's possession in the US, i.e., it
is held in a foreign account or held by the foreign corporation in your
name, you have a filing requirement.
I do not believe that the US income treaty with the UK encompasses the
BVI. In addition, even if it did, as the BVI has no corporate income
tax, I don't see how a corporation could avail itself of any treaty
benefit. The BVI has always been considered by the US to be an offshore
tax haven. I believe the signing of the Tax Information Exchange
Agreement (TIEA) with the US was an effort by the BVI to show it was not
a haven. The TIEA is not considered an income tax treaty for purposes of
being categorized as a qualified foreign corporation.
A routine search tells me that the only income tax treaties with the BVI
are the UK treaties with Japan and Switzerland as they elected to
include the BVI.
--
Alan
http://taxtopics.net
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