Enjoy our head attorney’s deep dive into the murky waters of Form 5471. Phil explains attribution rules, filing categories, filing exceptions, and more. Join our newsletter to receive each article straight to your inbox.
Shameless Pimping The first of eleven episodes of The Form 5471 Series will go live next Friday, April 28, 2023, at noon Pacific time. People on the International Tax Lunch Mailing List get information on how to sign up (paid or free, your choice) and will get a PDF copy of the slide deck. Email…
Update, Prophesy, and Exhortation This week’s post is shorter than usual. I deliver here an Update, a Prophesy, and an Exhortation, especially if you have form 5471 problems. Update: Important Tax Court Case The IRS lost an important Tax Court case: Alon Farhy v. Commissioner, 160 T.C. No. 6 (April 3, 2023). (Opinion here as…
In our last thrilling episode of The Form 5471 Files, we considered the curious case of a U.S. manufacturer that sold widgets to its lower-tier foreign subsidiary, which turned around and sold the widgets to an unrelated U.S. customer. The result, we decided, is that Foreign Subsidiary’s profit was foreign base company sales income, which…
When will a CFC’s regular-looking business income from regular-looking, normal business operations be classified as Subpart F income? This week I introduce the concept of “foreign base company sales income” with a simple example, which happens to come from a CPA who asked me about a situation he is dealing with. I distilled the fact…
We need to identify the shareholders of a “reporting corporation” and if we find one or more “25% foreign shareholders” they are listed in Form 5472, Part II. This discussion deals entirely with the problem of family attribution: when do you pretend that one family member’s stock is constructively owned by another family member? Let’s…
Introduction We have default assumptions about everything. “Unless proven otherwise, X is true.” For U.S. taxpayers who own stock of controlled foreign corporations, the default assumptions for how CFCs behaved shifted abruptly in late 2017. This was a geomagnetic reversal, the tax equivalent of the magnetic North Pole and magnetic South Pole flipping places. The…
Here is a simple explanation of “tested interest expense” — one of the variables you will compute when calculating how much global intangible low-taxed income will be included in a U.S. shareholder’s gross income because of IRC §951A(a). The example will show you how to prepare both forms, and what the numbers mean, including how…
Introduction All of the profits generated by a minimultinational enterprise will be exposed in real time to the U.S. tax system. Chapter 2 explains why. We will talk about how the U.S. taxes those profits in future installments of this book. Different business structures have different tax results.1 Recap What’s a minimultinational? Let’s recap. A…
American minimultinationals are small (for various definitions of “small”) business enterprises subjected to the U.S. tax system. There are many ways that a minimultinational becomes exposed to the U.S. tax system. Doing business in the United States is an obvious way. If you have an office or employees in the United States, some portion of…
What’s an American Minimultinational? What do I mean by American minimultinational? Multinational A multinational business operates in multiple countries, exposed to multiple tax-hungry governments. Apple. General Motors. Exxon. A minimultinational is a multinational business, but smaller. Do you have 100 people in a cubicle farm working on your international tax stuff? You’re a multinational. Is…
“You Don’t Own It, But the IRS Treats You as if You Do” Do you have to file Form 5471? Sometimes, the IRS treats you as something you’re not. They might think that you own stock of a foreign corporation even if you don’t. You really aren’t a shareholder: Yet the IRS says you are…
Here is a real life problem we1 are solving right now for a real life couple: an American citizen married to a noncitizen, living abroad. H formed a corporation in his country of residence, and started a business. It is a “foreign corporation” to the IRS. H met W, an American citizen. They married. W…
Happy Friday from Phil. This is your Friday Edition, the biweekly delivery of international tax info straight to your inbox. If you want this to stop happening, click the unsubscribe link at the bottom of this email. American 50% Owners of Foreign Corporations An email from a CPA friend triggered this topic. (Thanks B). Here’s…