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DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 789
Experience:  Years of Experience in Business & Personal Taxes
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Thank you my question, I have specific questions about a

Customer Question

Thank you for taking my question,
I have specific questions about a U.S. Corporation (located in DE) which is 100% owned by a foreign corporation (located oversees). The U.S. Corp doesn’t have any foreign bank accounts or assets. Moreover, the Foreign Corp creates products which then the U.S. Corp sells in the U.S. The product is computer software.
Do I need to attach the 5472 Form to my U.S. Corporation tax return? Is the foreign corporation considered a related party to the U.S Corporation based on the above information?
Is the U.S Corp considered a “25% foreign-owed U.S. Corporation” (as defined by Form 5472 instructions”).
On Form 1120, Do I need to check the box on line 4(a)?
On Form 1120, Do I need to check the box on line 7?
Also, do I need to attach any other special Forms.
I understand that there are several questions here. This is why I am willing to offer a nice bonus for answering all of these questions. Thank you!
Submitted: 9 months ago.
Category: Tax
Expert:  DanielleCPA replied 9 months ago.

Since the U.S. corporation is 100% owned by a foreign corporation, you will need to attach Form 5472 to your U.S. corporate tax return (Form 1120).

Expert:  DanielleCPA replied 9 months ago.

The foreign corporation is considered a related party for purposes of completing Form 5472 (Part III) and any transactions between the U.S. corp and its foreign shareholder will need to be reported in Parts IV, V, and VI of the form, depending on the transactions involved.

Expert:  DanielleCPA replied 9 months ago.

To answer the rest of your questions:

Is the U.S Corp considered a “25% foreign-owed U.S. Corporation” (as defined by Form 5472 instructions”).

Yes, it is considered a 25% foreign-owned U.S. Corporation. You will need to complete the Form 5472.

On Form 1120, Do I need to check the box on line 4(a)?

Yes, you will need to check the box for line 4a and complete form Schedule G with the pertinent information (name, country, entity type, percentage owned) for the foreign corporation.

On Form 1120, Do I need to check the box on line 7?

Yes, foreign corporations are considered "foreign persons" for purposes of this question, so you will check this box yes.

Expert:  DanielleCPA replied 9 months ago.

There should be no other additional forms related to the foreign ownership besides the Form 5472 and Schedule G mentioned above.

Please let me know if there is anything else that you need. Have a great night!

Customer: replied 9 months ago.

THANK YOU SO MUCH.

You did wonderful. Just one follow up question (I promise).

I am trying to determine which section of Form 5472 should I complete. Is it section IV (Monetary Transaction) or section V (Nonmonetary Transaction)?

The U.S Corp sells online subscriptions to the digital product created by the foreign Corp to U.S. customers.

Based on this, I assume that I need to fill out section V since there is no monetary transaction between the foreign corporation and the U.S. Corp. Am I correct?

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