Is the entity a foreign corporation - incorporated or organized under the laws of a country other than the United States?
A foreign corporation is any corporation not organized under US law. IRC §7701(a)(5). Entities treated as partnerships or disregarded entities under check-the-box rules are not corporations and are not subject to Form 5471 (but may be subject to Form 8865). A foreign entity with a valid check-the-box election to be treated as a corporation IS a corporation for this purpose.
2
Your Status
Question 2 of 7
Are you a US person? (US citizen, resident alien, domestic corporation, domestic partnership, domestic estate or trust)
Nonresident alien individuals are generally not subject to Form 5471. US residency is determined under IRC §7701(b) - green card holders and those meeting the Substantial Presence Test are US persons. Domestic corporations with foreign subsidiaries are US persons subject to Form 5471.
3
Your Ownership
Question 3 of 7
What is your ownership percentage in the foreign corporation, directly, indirectly, AND constructively (including attribution)?
Include constructive ownership under IRC §318 as modified by §958(b). You must attribute stock owned by: (1) your spouse, children, grandchildren, and parents; (2) partnerships, estates, trusts, or corporations in which you own 50%+; (3) if you own 50%+ of a partnership, the partnership’s stock in the corporation. TCJA expanded downward attribution - if a foreign person owns stock, that stock may now be attributed down to you through a domestic entity. IRC §951(b).
4
CFC Status
Question 4 of 7
In aggregate, do US shareholders (each owning 10%+ by vote or value) collectively own more than 50% of the foreign corporation?
This is the CFC test. If US shareholders in aggregate own >50% of total voting power or total value on any day during the tax year, the corporation is a CFC. IRC §957(a). You do not need to individually own 50%+. Identify every US person with 10%+ direct or constructive ownership and sum their interests. Include constructive ownership under modified §318 rules.
5
Acquisition Event
Question 5 of 7
During the tax year, did you newly acquire stock bringing your ownership to 10% or more for the first time?
Category 3 applies to US persons who acquire (directly or constructively) 10%+ stock in a foreign corporation for the first time, or who acquire additional stock. IRC §6046. A Category 3 filing is required in the year of acquisition even if no CFC status exists.
6
Officer or Director
Question 6 of 7
Are you a US person who is an officer or director of this foreign corporation?
Category 2 applies to US persons who are officers or directors when any US person acquires 10%+ stock during the year. This filing obligation applies even if you own no stock. IRC §6038(a)(3).
7
25% Threshold (SFC)
Question 7 of 7
Do US shareholders collectively own 25% or more of the vote or value? (Specified Foreign Corporation test)
A Specified Foreign Corporation (SFC) is any foreign corporation owned 25%+ by US shareholders in aggregate. US shareholders of SFCs must file Form 5471 as Category 1 filers, even if the corporation is not a CFC. IRC §965(e)(1).
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