form 5471 schedule q example

Line 3. Qualified Interest Expense Next, we will calculate "qualified interest expense". On line 4(1), both columns (xii) and (xiv) should be blank in all cases. CFC1, in turn, wholly owns the only class of stock of CFC2, a foreign corporation. Section 965 specified foreign corporation (SFC). During the tax year, was the CFC an eligible CFC (as defined in section 954(h)(2)) that derived qualified banking or financing income (as defined in section 954(h)(3))? The name, address, identifying number, and number of shares subscribed to by each subscriber to the foreign corporation's stock. However, this amount is reduced (but not below zero) by the following liabilities. Reportable transaction disclosure statement. Report foreign income taxes related to the current tax year that have been suspended due to the rules of section 909. PTEP attributable to hybrid dividends under section 245A(e)(2) and reclassified as investments in U.S. property. U.S. shareholder's pro rata share of the amount on line 12" field, "14. However, see Certain Category 1 and Category 5 Filers, later, which may apply. Line 19. 851, available at, Enter foreign currency transaction gain or loss reported on the income statement. On Form 5471 and separate schedules, in entry spaces that request identifying information with respect to a foreign entity, taxpayers will no longer have the option to enter FOREIGNUS or APPLIED FOR. Instead, if a foreign entity does not have an EIN, the taxpayer must enter a reference ID number that uniquely identifies the foreign entity. If no deduction is being claimed, check the No box and go to line 7. Only those answering yes to Form 5471, Schedule G, question 7 are required to complete and file separate Schedule G-1. The identifying number of all others is their employer identification number (EIN). circle3 Covered bonds debt backed by a segregated pool of assets called "cover pool" 3.1.4 Credit Enhancement circle3 Credit enhancement variety of provisions that can be used to barb1down the credit risk of a bond issue. Therefore, the revised tax liability is $2. In general, a taxpayer that is subject to tax as a domestic corporation that is a U.S. shareholder (corporate U.S. shareholder) of a CFC is deemed to pay all or a portion of the foreign income taxes paid or accrued by the CFC that are properly attributable to subpart F income or tested income included in gross income by the corporate U.S. shareholder. The functional currency of all corporations is the U.S. dollar. The schedules of Form 5471 are used to satisfy the reporting requirements of the Internal Revenue Code. The time needed to complete and file this form will vary depending on individual circumstances. Revision Date. The above rules apply with respect to amounts received for services under a particular contract only if at some time during the tax year 25% or more in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for the individual who has performed, is to perform, or may be designated (by name or by description) as the one to perform, such services. Complete lines 19a and 19b only if the filer is a domestic corporation. The income groups include the subpart F income groups, the tested income group, and the residual income group. See section 953(c)(3)(D) for special rules for this election. Ladies and gentlemen, closed captioning is available for today's presentation. If the tax is paid or accrued by the pass-through entity, enter the name of such entity instead of the name of the foreign corporation. Also assume for both years that the local currency in which the tax was paid was the same as the foreign corporations functional currency. See Regulations section 1.245A-5(c) for rules for calculating an extraordinary disposition amount. These adjustments may include both positive and negative adjustments to conform the foreign book income to U.S. GAAP and to U.S. tax accounting principles. As a result, previous line 5a is now line 5. In other words, are any amounts excluded from line 1d of Worksheet A by reason of being attributable to a transaction(s) directly related to the business needs of the foreign corporation? During Year 1, Domestic Corporation reports an inclusion under section 951(a)(1) of $100 and deemed paid taxes of $20 under section 960(a) as a result of subpart F income of CFC3. For more information, see sections 245A, 951, 952, and 964(e). Line 11. An amount equal to the deficit reported in column (a), (b), or (c) of line 5a is included as a positive amount on line 5b of column (a), (b), or (c), respectively. The amount of gross income entered on line 1 will generally be a positive amount. Rev. See section 482. Schedule M Name of person filing Form 5471. For example, if there were errors in the original computation of foreign income taxes, an adjustment would be included on this line. The additional sheets must conform with the IRS version of that section. No penalty will be imposed with respect to any portion of an underpayment if the taxpayer can demonstrate that the failure to comply was due to reasonable cause with respect to such portion of the underpayment and the taxpayer acted in good faith with respect to such portion of the underpayment. A negative $4 will be recorded on line 11, column (e)(x), and a positive $4 will be recorded on line 11, column (e)(iii). Enter amounts included in gross income of the U.S. shareholder(s) under section 951(a)(1)(A) or section 951A with respect to the CFC. Foreign base company shipping income as defined in former section 954(f). As a result of the addition of these new lines, all subsequent lines of Schedule M have been renumbered, as appropriate. These are also reported in column (e). 818, available at IRS.gov/irb/2007-42_IRB#RP-2007-64. When a schedule is required but all amounts are zero, the schedule should still be filed with one or more zero amounts. On page 1, Schedule E, Part I, Section 2, for purposes of clarification, columns (a) and (b) now request the name and EIN or reference ID number of the lower-tier distributing foreign corporation. A U.S. person has acquired stock in a foreign corporation when that person has an unqualified right to receive the stock, even though the stock is not actually issued. The schedules are: Form 5471 Schedule A - Stock of the Foreign Corporation Form 5471 Schedule B - U.S. Shareholders of Foreign Corporations Form 5471 Schedule C - Income Statement However, if a CFCs cost of goods sold exceeds its gross income, a negative amount is permitted on line 1. Complete a separate Schedule Q for each applicable separate category of income. If Yes, complete lines 5b and 5c. "field, "61.Shareholders pro rata share of subpart F income. It begins with the inclusion of gross CFC income, followed by the list of the applicable exclusions. Each single item of foreign base company income (as defined in Regulations section 1.954-1(c)(1)(iii)) is a separate subpart F income group. Form 5471 requires information and details about the corporation's ownership, stock transactions, shareholder and company transactions, foreign taxes, foreign bank and financial accounts, accumulated earnings and profits, and currency conversions. A foreign corporation may have PTEP in a PTEP group within any of the separate categories of income, with the exception of foreign branch category income. Enter the foreign corporation's RAB share of the total present value of all platform contributions made by the U.S. taxpayer during the tax year with respect to the foreign corporation on line 5b. Taxes are deemed paid by a domestic corporation that is a U.S. shareholder or a foreign corporation that is a controlled foreign corporation with respect to distributions of PTEP that it receives. Every U.S. citizen or resident described in Category 2 must complete Part I. Report current-year taxes allocated and apportioned to the item of gross income reported for each QBU or tested unit as well as the aggregate amount of such foreign taxes allocated and apportioned to each group. During the tax year, did the CFC derive income (either directly or through a branch or similar establishment, for example, disregarded entity) in connection with the purchase or sale from, to, or on behalf of a related person, of personal property manufactured by the CFC within the meaning of Regulations section 1.954-3(a)(4)(ii) or (iii)? See Regulations section 1.245A-5(e) for rules for calculating an extraordinary reduction amount. See section 367(d). List the date of any reorganization of the foreign corporation that occurred during the last 4 years while any U.S. person held 10% or more in value or vote (directly or indirectly) of the corporation's stock. Enter any income equivalent to interest, including income from commitment fees (or similar amounts) for loans actually made. However, the foreign corporations reference ID number should also be entered on Form 8858 if the foreign corporation is listed as a tax owner of a foreign disregarded entity (FDE) or foreign branch (FB) on Form 8858. In column (b), report post-1986 undistributed earnings, as defined under section 902(c)(1), and as in effect prior to the repeal of section 902. F is also a 50% owner of foreign corporation FK. See section 3 of Rev. This correlation requirement applies only to the first year the new reference ID number is used. Changes to separate Schedule M (Form 5471). Reclassified section 951A PTEP and section 951A PTEP that is in the section 951A category should be reported on the general category Schedule J. Check the box if the foreign income taxes reported in column (j) were paid or accrued by the corporation during prior tax years and were suspended due to the application of the rules of section 909 and that are unsuspended in the current year because related income is taken into account by the foreign corporation, certain U.S. corporate owners of the foreign corporation, or a member of such U.S. corporate owners consolidated group. Similarly, Corporation B will only be able to complete Schedule J, Part I, with respect to its PTEP of $50x on line 8, column (e)(viii). The first quarter of the tax year" field, "1b. Use column (e) to report the running balance of the foreign corporation's PTEP, section 964(a) E&P accumulated since 1962 that have resulted in deemed inclusions under subpart F, or amounts treated as PTEP under section 965(b)(4)(A). However, filers are permitted to enter both an EIN on line 1b(1) and a reference ID number on line 1b(2). Introduction to Schedule Q of Form 5471 Schedule Q will be used to report a CFC's income, deductions, taxes, and assets by CFC income groups. .Do not attach the statement described above to Form 5471.. Corporation A, a domestic corporation, owns 50% of the only class of stock of CFC1 and Corporation B, a domestic corporation, owns the remaining 50% of the stock of CFC1. Revenue $66.7 million. Column (xii). 1167, General Rules and Specifications for Substitute Forms and Schedules, which reprints the most recent applicable revenue procedure. Form 5471 is a perfect example and one of the most complex ones that the IRS ever created. The Form 5471, Schedule J, for CFC1 should include PTEP of $70x with respect to the aggregate section 951A inclusions of Corporation A and Corporation B. The annual accounting period of an SFC (as defined in section 898) is generally required to be the tax year of the corporation's majority U.S. shareholder. C3.ai, Inc. ("C3 AI," "C3," or the "Company") (NYSE: AI), the Enterprise AI application software company, today announced financial results for its fiscal third quarter ended January 31, 2023. Also, if a U.S. shareholder is required to file Schedule A (Form 8992) or Schedule B (Form 8992) with respect to the CFC, the reference ID number on Form 5471 and the reference ID number on Schedule A (Form 8992) or Schedule B (Form 8992) for that CFC must be the same. See Regulations section 1.482-7(b)(1)(i). Check Yes if, during the tax year, the filer engaged in at least one of the transactions described in Regulations section 1.385-3(b)(2). Enter the amount of interest expense included on line 5. Domestic Corporation reports on CFC2s Form 5471, Schedule J, line 4, column (e)(x), as a positive number, the $40 PTEP distribution. Enter the foreign corporations share of reasonably anticipated benefits (RAB) for the CSA during the tax year. Furthermore, a Category 1 or 5 filer does not have to file Form 5471 if all of the following conditions are met. If the failure continues 90 days or more after the date the IRS mails notice of the failure to the U.S. person, an additional 5% reduction is made for each 3-month period, or fraction thereof, during which the failure continues after the 90-day period has expired. The amounts reclassified are reported as negative numbers in columns (a) through (c) and positive numbers in column (e)(iii), as applicable. During the tax year, was the CFC a regular dealer in property described in section 954(c)(1)(B), forward contracts, option contracts, or similar financial instruments (including notional principal contracts and all instruments referenced to commodities)? Subtract the sum of lines 27 and 28 from line 14e." Schedule Q (Form 5471), CFC Income by CFC Income Groups, is used to report the CFC's income in each CFC income group to the U.S. shareholders of the CFC so that the U.S. shareholders can use it to properly complete Form 1118 (Foreign Tax Credit - Corporations) to compute the high-tax exception, high-tax kickout, and Code Sec. Enter the result here and on Form 5471, Schedule I, line 1d. Summary: This is an example of worksheet A, which is used to determine the shareholder's share of Subpart F income. Use Schedule P to report the PTEP in the U.S. shareholders annual PTEP accounts with respect to a CFC in the CFCs functional currency (Part I) and the U.S. shareholders U.S. dollar basis in that PTEP (Part II). Enter the two-letter codes (from the list at IRS.gov/CountryCodes) of all foreign countries and U.S. possessions to which taxes were paid or accrued. Accordingly, there can be no deemed-paid foreign taxes with respect to a PTEP distribution from a lower-tier foreign corporation that is the lowest foreign-tier foreign corporation in a chain, and therefore no such distributions will be reported in Section 2. The balances in the previously taxed accounts of prior section 956 inclusions (see section 959(c)(1)(A)) and current or prior subpart F inclusions (see section 959(c)(2)) reduce what would otherwise be the current section 956 inclusion. Category 4 and 5 filers are not required to file a Form 5471 (in order to satisfy the requirements of section 6038) if the FSC has filed a Form 1120-FSC. For details, see section 108(i) and Rev. Enter the smaller of line 6 or line 13" field, "15. For more information, see section 898 and Rev. Column (e)(vii) is E&P treated as PTEP under section 965(b)(4)(A) (section 959(c)(2) amounts). See Unrelated section 958(a) U.S. shareholder, below, for instructions pertaining to when Form 5471 may be completed as a Category 5b filer. This amount must be converted from functional currency to U.S. dollars using the average exchange rate for the year of the CFC. If a U.S. corporation that owns stock in a foreign corporation is a member of a consolidated group, list the common parent as the person filing the return and enter its EIN in Item A. . 02/11/2022. On lines 1j through 1l, enter international boycott income described in section 952(a)(3), illegal bribes, kickbacks, and other payments described in section 952(a)(4), and income included in a section 901(j) separate category described in section 952(a)(5). On lines 1a through 1i, enter for the total for each column by adding the amounts on lines (1), (2), etc., excluding from such total any amounts reported with respect to income excluded from subpart F income under the high-tax exception in section 954(b)(4) (subpart F high-tax exception). The total of all amounts entered in Schedule R (Form 5471), column (d) must equal the amount on line 9, column (f) of the Schedule J (Form 5471) that is filed with code TOTAL entered on line a of that Schedule J. See Regulations section 1.245A(e)-1(d) for additional information about hybrid deduction accounts. U.S. shareholder's pro rata share of the amount on line 3" field, "5. On lines 1 and 2, the phrase (see instructions if cost of goods sold exceed gross receipts) has been inserted after gross income (on line 1) and exclusions (on line 2). If the CFC has tested income on line 6, enter the Qualified Business Asset Investment (QBAI) (defined below). Report the opening balance, current year additions and subtractions, and the closing balance in the foreign corporation's E&P described in section 959(c)(3). In other words, is line 7 less than line 8 and less than $1 million? Persons With Respect To Certain Foreign Corporations, is one of the most comprehensive and complex forms required of foreign tax professionals. Schedule J contains information about the CFC's Earnings and Profits (E&P). Enter income that is recaptured as subpart F income in the current year. If "Yes," enter the Corresponding Code(s) from the table in the entry space provided on line 14 of the form. See Regulations section 1.986(c)-1(c). If the name of either the person filing the return or the corporation whose activities are being reported changed within the past 3 years, show the prior name(s) in parentheses after the current name. As a result of the addition of these new lines, all subsequent lines of Schedule M have been renumbered, as appropriate. Check the box on line F if Form 5471 has been completed using alternative information (as defined in section 3.01 of Rev. The reference ID number assigned to a foreign corporation on Form 5471 generally has relevance only on Form 5471, its schedules, and any other form that is attached to or associated with Form 5471, and generally should not be used with respect to that foreign corporation on any other IRS forms. CFC2 pays withholding tax of $4 on the distribution from CFC3. 10% or more of the total combined voting power of all classes of stock with voting rights. See Multiple filers of same information, earlier. A U.S. person who disposes of sufficient stock in the foreign corporation to reduce his or her interest to less than the 10% stock ownership requirement. For a corporate shareholder, enter the result from line 1a on Form 1120, Schedule C, line 16a; enter the result from line 1b on Form 1120, Schedule C, line 16b; and enter the remaining lines 1c through 1h, 2, and 4 on Form 1120, Schedule C, line 16c; or on the comparable line of other corporate tax returns. In Part I, Section 2, report taxes deemed paid under section 960(b)(2) with respect to distributions of PTEP from a lower-tier foreign corporation to the foreign corporation with respect to which this Schedule E (Form 5471) is being completed. Do not include taxes deemed paid by the foreign corporation with respect to its receipt of a PTEP distribution. From the Congressional Record, Volume 168 (2022) H.R. Subtract line 18d from line 18c" field, "19.Adjusted net foreign base company income. Section 960(b)(1). Enter the total amount of the lower-tier foreign corporations PTEP group taxes with respect to the PTEP group within the annual PTEP account identified in column (d) and column (e). A separate Schedule Q is required for foreign oil and gas extraction income (FOGEI) and foreign oil related income (FORI). Enter the CFCs qualified interest income, as defined in Regulations section 1.951A4(b)(2)(iii). (b) Address of shareholder. This example can also be found in the Schedule Q, Form 5471 instructions. If the shareholder is not a U.S. corporation, this amount is zero" field, "Section 956 inclusion. Report the exchange rate using the divide-by convention specified under Reporting exchange rates on Form 5471, earlier. Do not enter aggregate cash flows, year-end loan balances, average balances, or net balances. See section 959(f)(2). Inst 5471. For a noncorporate U.S. shareholder, include the result as Other income on Schedule 1 (Form 1040), line 8z (other income), or on the comparable line of other noncorporate tax returns. Enter the applicable two-letter codes (from the list at IRS.gov/CountryCodes). For schedules that are completed by category (that is, Schedule E, I-1, J, P and Q), inclusion of a single instance of that schedule for any separate category will meet the requirement. Enter the month, day, and year using the following format: MM-DD-YYYY. On pages 2 and 3, Schedule E-1, former line 15 is now line 13 and now requests filers to combine lines 8 through 12 in columns (a), (b), and (c). See sections 986(a) and 905(c). Persons With Respect to Certain Foreign Corporations. PTEP attributable to section 1248 amounts under section 959(e) and reclassified as investments in U.S. property. Enter this amount in U.S. dollars. Corporation A will report $20x of PTEP as a result of its section 951A inclusion on its Form 5471, Schedule P, line 7, column (h), with respect to CFC1. Form 5471, Information Return of U.S. 2007-64, 2007-42 I.R.B. Current-year tax on all other disregarded payments. Schedule I-1 is now completed once. Schedule R is used to report basic information pertaining to distributions from foreign corporations. If the foreign corporation is a CFC and the filer is a domestic corporation, enter on line 9 the sum of the hybrid deduction accounts with respect to each share of stock of the CFC that the domestic corporation owns directly or indirectly (within the meaning of section 958(a)(2), and determined by treating a domestic partnership as foreign). box, show the box number instead. Certain adjustments (required by Regulations sections 1.964-1(b) and (c)) must be made to the foreign corporation's line 1 net book income or (loss) to determine its current E&P. In other words, are any amounts described in section 954(c)(2)(A) excluded from line 1a of Worksheet A? The fourth quarter of the tax year" field, "2. If applicable for lines 5c(iii)(A), 5c(iii)(B), 5c(iii)(C), and 5c(iii)(D), also enter the country code for the sanctioned country using the two-letter codes (from the list at IRS.gov/CountryCodes). For more information, see the Instructions for Form 8938, generally, and in particular, Duplicative Reporting and the specific instructions for Part IV, Excepted Specified Foreign Financial Assets.