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A Costa Rican Sociedad Anónima that holds a home, a lot, or a rental is a foreign corporation for U.S. tax purposes, and your reporting does not stop at Form 5471. Depending on what the company holds, what it earns, and how much of it you own, the same structure can raise PFIC questions, trigger […]
Costa Rica S.A. Holding Companies and U.S. Form 5471 Reporting Read More »
If you bought Costa Rica property through a Costa Rican corporation, such as a Sociedad Anónima or SRL, you almost certainly own or control a foreign corporation, which usually means you have to file Form 5471 with your U.S. tax return. The obligation applies whether or not the corporation earns a dollar, and the penalty
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Form 5471 has five filer categories, and your category determines which schedules you complete. Category 2 (officers and directors) and Category 3 (people acquiring or disposing of stock) carry the lightest load, mostly Schedule O. Categories 1, 4, and 5 carry the financial and income schedules, with Category 4 (control) filing the most and Category
Form 5471 Filing Categories Explained (Category 1 Through 5) Read More »
You generally must file Form 5471 if you are a U.S. person who owns 10% or more of a foreign corporation’s vote or value, who controls one, or who is an officer or director when a U.S. person crosses that 10% mark. The threshold is low, and the constructive ownership rules can make you a
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Subpart F income is certain income, mostly passive and related-party income, that a controlled foreign corporation (CFC) earns and that the U.S. taxes to its 10% U.S. shareholders in the year it is earned, even if the company never pays it out. It exists to stop U.S. owners from parking mobile income in a low-tax
What Is Subpart F Income? A Plain-English Guide for CFC Owners? Read More »
By Ed Parsons, CPA | 17 years of IRS tax resolution and international compliance experience. Ed Parsons, CPA works with U.S. taxpayers and businesses that own or invest in foreign corporations, in English and Spanish. Form 5471 is an information return that certain U.S. persons must file each year for their interests in foreign corporations.
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Form 8858 reports U.S. ownership and operation of Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs) to the IRS. Failure to file triggers the same $10,000 per-form penalty as Form 5471 under IRC Section 6038(a), with continuation penalties capped at $50,000 and the statute of limitations on the entire tax return staying open under IRC
A foreign corporation can be both a Controlled Foreign Corporation (CFC) and a Passive Foreign Investment Company (PFIC) at the same time. Without invoking the overlap exclusion under IRC Section 1297(d), a U.S. shareholder can face double taxation: PFIC excess distribution tax with interest charges on the same income that is also captured by CFC
IRC Section 6038(b) imposes an automatic $10,000 penalty for each annual accounting period a U.S. person fails to file Form 5471 for a Controlled Foreign Corporation, plus an additional $10,000 per 30-day period (capped at $50,000) after IRS notification. The statute of limitations on the entire tax return never begins under IRC 6501(c)(8) until the
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Subpart F income (passive and certain other categories of CFC income) is taxed to U.S. shareholders in the year the CFC earns it, regardless of whether any distribution is made. The categories include foreign personal holding company income (dividends, interest, rents, royalties), foreign base company sales and services income, and insurance income under IRC Sections