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Does a U.S. 1120 with a sole shareholder be required to file…

Does a U.S. 1120...

Does a U.S. 1120 with a sole shareholder be required to file a F-5472 if the shareholder is filing under tie-breaker rules . The shareholder is filing F-5471 with regard to CFCs and F-114 as he is considered a U.S. resident under the U.S. Tax code.

Accountant's Assistant: Because laws vary from place to place, can you tell me what state this is in?

Texas

Accountant's Assistant: Has anything been filed or reported?

Not yet.

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Customer reply replied 9 months ago
The sole shareholder is considered a U.S. resident by the code and the Tax Treaty allows for him to be taxed as a nonresident when meeting the profile required under tie-breaker rules ( which he does meet). He is filing F-5471 and F-bars per the code even thought the tax calculations are as nonresident alien (a benefit given under the Tax Treaty tie-breaker rules) The question then is does that status extend to F-5472? Plus what is the responsibility of the U.S. 1120, who is required to file a F-5472 per foreign shareholder (nonresident). Is the shareholder a U.S. resident or is he a nonresident?
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Answered in 6 hours by:
11/7/2017
taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,240
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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I've been practicing in the international tax area for over 30 years, and I have been asked this question quite a bit.

If you are considered a US resident for tax purposes (whether you have a green card or just substantial presence) you are not considered a foreign shareholder for Form 5472 filing purposes. Conversely, if you are treated as a nonresident (as in your treaty position) then you are considered a foreign shareholder for Form 5472 filing purposes.

So if you are the shareholder of the corporation, and you are choosing to be treated as a nonresident alien under a treaty based return position (make sure you file the Form 8833) you do have a Form 5472 filing requirement as you are treated as a US nonresident alien. So you do have to file the Form 5472.

I hope this answers your question. If you have any more, please feel free to ask and I will be happy to answer.

Thanks! Have a great week!

Roger

taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,240
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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Customer reply replied 9 months ago
Hi,
Wonder if you would provide your reference or cite for your conclusion?

Internal Revenue Code §6038A(a)(2) requires the Form 5472 to be filed when the US company is 25% owned by a foreign person. §6038A(c)(2) defines the foreign shareholder as a foreign person. Since you are taking a treaty position, you are a foreign shareholder for US tax purposes. Therefore the Form 5472 is required.

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Customer reply replied 9 months ago
Hi,
Thanks however wonder if you could answer why 6038A(c)(2) over rides code section §7701(b)(1)(A)(ii) which defines a U.S. resident as a person with meeting the presence test of 183 days and required to file 5471s, F-BARs. The vital interest outside the U.S. test has been met as has all other test required for a treaty position.
Customer reply replied 9 months ago
Is there a Rev ruling, PLR or other such reference?
Customer reply replied 9 months ago
Hi,
Sorry if you responded after 8:15am CST -- I do not see your response. Thanks

I just now got back here.

While §7701 does define US resident, when you take a treaty position to state that the person is NOT a resident, you cannot then take a contrary position for another section of the IRC. Either you are a resident, or you are a nonresident. If you meet the resident requirements, but then use a treaty as a "tiebreaker" to say you are a nonresident, you are bound by the nonresident tiebreaker position for your entire return. You cannot take a position that you are a nonresident for the taxability of income, for example, and then in the same return say that you are a resident for Form 5472 reporting. You can't have your cake and eat it too. It is either one or the other.

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The only time that you can be both a resident and a nonresident in the same year is if you are a dual-status taxpayer in the year you arrive in the US or the year that you depart.

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