Tag: form 5471 penalty

By Anthony Diosdi In order to effectively audit the transfer prices used by a U.S. subsidiary of a foreign corporation, the Internal Revenue Service (“IRS”) often must examine the books and records of foreign parent corporations. Historically, foreign parties have resisted making their records available to the IRS, or have not maintained records sufficient to determine arm’s-length transfer prices. In response, Congress enacted the requirement that each year certain reporting corporations must file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, and maintain certain books and records. See IRC Sections 6038A and 6038C. A domestic corporation is a reporting corporation if, at any time during the taxable year, 25% or more of its stock, by vote or…

By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with information necessary to ensure compliance with Global Intangible Low-Taxed Income (“GILTI”) and the Subpart F provisions of the Internal Revenue Code, each year a U.S. person who owns more than 50% or more of the stock, by vote or value, of a foreign corporation must file a Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations. See Treas. Reg. Section 1.6038-2(a) and (b). Other persons who must file a Form 5471 include 1) U.S. persons who acquire a 10% ownership interest, acquire an additional 10% ownership interest, or dispose of stock holdings to reduce their ownership in the foreign corporation to less than 10% and 2) U.S. citizens and residents who are officers…