Information Return of U.S. Persons with Respect To Certain Foreign Corporations

Major Chanses to the Instructions for Form 5471

+

On page I,
under What's New, we added text to reflect the extension of
the temporary exceptions for certain active financing income. We also
added text to advise taxpayers of the address change to Ogden, UT for
filing a duplicate copy of the form under When and Where To File.
On page 4, we added a new section heading and text for Section
362(e)(2)(C) Elections to provide information to taxpayers on how to make
the election.
On page 6, we updated the tax year to reflect the extension of the
exceptions for certain active financing income from subpart F foreign
personal holding company income, foreign base company services
income and insurance income under the instructions for Worksheet A.
On page 7, we updated the code section references on line l a to reflect
that amounts described under section 954(c)(6) should also be excluded
from the computation. This change was made to reflect section 103 of
the Tax Increase Prevention and Reconciliation Act of 2005.

lnstructions for Form 5471

Department ot the Treasury
Internal Revenue Service

(Rev. December 2006)
(Use with the December 2005 revision of Form 5471 and schedules)
Information Return of U.S. Persons
With Respect to Certain Foreign Corporations
Section references are to the Internal
Revenue Code unless otherwise noted.

What's New
The Tax Increase Prevention and
Reconciliation Act of 2005 extended the
temporary exceptions for certain "active
financing income" from subpart F foreign
personal holding company income,
foreign base company services income,
and insurance income. The except~ons
now apply to tax years of foreign
corporat~onsbeginning after December
31,1998, and before January 1,2009,
and to tax years of U.S. shareholders with
or within any such tax year of the foreign
corporation ends. For more information.
see the instructions for Worksheel A
beginning on page 6.
The address tor f~linga duplicate copy
of the form and schedules has changed.
See When and Where To Frlo below.

General Instructions

Purpose of Form
Form 5471 is used by certain U.S.
citizens and residents who are officers,
directors, or shareholders in certain
foreign ccrporations. The form and
schedules are used to satisfy the
repofling requirements of sections 6038
and 6046, and the related regulations.

Who Must File
Generally, all U.S. persons described in
Categories of Filers below must complete
the schedules, statements, andlor other
information requested in the chart, Filing
Requrrements for Categories of Filers, on
page 2. Read the information for each
category carefully to determine which
schedules, statements, andor information
apply.
If the filer is described in more than
one filing category, do not duplicate
information. However, complete all items
that apply. For exa~nple,if you are the
sole owner of a CFC (i.e , you are
described in Categurres 4 and 5),
complete all four pages of Form 5471 and
separate Schedules J and M.
Note. Complete a separate Form 5471
and all applrcable schedules for each
applicable foreign corporation.

When and Where To File
Form 5471 is due when your income tax
return IS due, rncluding extensions. Attach

the original copy ot Ihe Form 5471 and
schedules to your income tax return. You
are requ~redto file a duplicate copy of the
form and required schedules with the
Internal Revenue Service Cen!er, P.O.
Box 409101, Ogden, US 84409. However,
see Electron~cFiling of Form 547 1
on page 3.

Categories of Filers
Category 1 Filer
This filing requirement has been repealed
by section 413(c)(26) of the American
Jobs Creation Act of 2004, which
repealed section 6035.

Category 2 Filer
This includes a U.S. citizen or resident
who is an officer or director of a foreign
corporation in which a U.S. person
(defined below) has acquired (in one or
more transactions):
1. Stock which meets the 1 0% stock
ownership requirement (described below)
with respect to the foreign corporation or
2. An additional 10% or more (in value
or voting power) of the outstanding stock
of the foreign corporation.
A U.S. person has acquired stock in a
foreign corporat~onwhen Ihat person has
an unqualitied right to receive the stock,
even though the stock is not actually
issued. See Regulations section
1 6046-1 (f)(l) for more detai!s.

Stock ownership requirement. For
purposes of Category 2 and Category 3,
the stock ownersh~pthreshold is met if a
U.S.person owns:
1. 10% or more of the total value of
the fore~gncorporat~on'sstock or
2. 1
or more of the total combined
voting power of all classes of stock with
voting rights.

U.S. person. For purposes of Category 2
and Category 3, a U.S. person is:
1. A citizen or resident of the United
States,
2. A domestic partnership,
3. A domestic corporation, and
4. An estate or trust that is not a
foreign estate or trust defined in section
7701{a)(31).
See Temporary Regulations section
1.6046-1T(f)(3) for exceptions.
Cat. No. 49959G

Category 3 Filer
This category incfudes:
A U.S. person (defined above) who
acquires stock in a foreign corporation
which, when added to any stock owned
on the date of acquisition, meets the 10%
stock ownership requirement (described
above) with respect to the foreign
corporation;
A U.S. person who acquires stock
which, without regard to stock already
owned on the date of acquisition, meets
the 10% stock ownership requirement
with respect to the foreign corporation;
A person who is treated as a U.S.
shareholder under section 953(c) with
respect lo the foreign corporation;
A person who becomes a U.S. person
wh~lemeeting the 10% stock ownership
requirement with respect to Ihe foreign
corporallon; or
A U.S. person who disposes of
sutficlent stock in the foreign corporation
to reduce his or her interest to less than
the stock ownership requ~rement.
For more information, see sect~on
6046 and Regulations section 1.6046-1

Category 4 Filer
This includes a U.S. person who had
control (defined below) of a foreign
corporation for an uninterrupted period of
at least 30 days during the annual
accounting period of the foreign
corporation.
U.S. person. For purposes of Category
4, a U.S. person is:
1. A citizen or resident of the United
States;
2. A nonresident alien for whom an
election is in effect under section 6013(g)
to be treated as a resident of the United
States;
3. An individual for whom an election
is in effect under section 6013(h), relating
to nonresident aliens who become
residents of the United States during the
tax year and are married at the close of
the lax year to a citizen or resider1 of the
United Slates;
4. A domestrc partnership;
5. A domest~ccorporation; and
6. An estate or trust that is not a
fore~gnestate or trusl defined in section
7701(a)(31).
See Temporary Regulations section
1.6038-2T(d)for exceptions.
Control. A U.S. person has control of a
fore~gncorporat~onif, at any time during

that person's tax year, it owns stock
possessing:

I More than 5OoA of the total
comblned votrng power of all classes of
stock ol the forelgn corporation entitled to
vote or
2. More than 5096 of the total value of
shares of all classes of stock of the
fore~gncorporallon.
A person In control a corporation
that. In turn, owns more than 50% of the
combined voting power, or the value, of
all classes of stock of another corporation
is also treated as being in control of such
other corporation.

Example. Corporatlon A owns 51% of
the voting stock in Corporatlon B.
Corporation B owns 51% of Ihe votlng
stock in Corporatlon C. Corporallon C
owns 51% of the votlng stock in
Coworation D. Therefore, Corporation D
is controlled by Corporation A,'
For more deta~lson "control," see
Regulations sections 1.6038-2(b) and (c).

Category 5 Filer
This includes a U.S. shareholder who
owns stock in a foreign corporation that is
a CFC for an uninterrupted period of 30
days or more during any tax year of the
foreign corporation, and who owned that
stock on the last day of that year.

U.S. shareholder. For purposes of
Category 5, a U.S. shareholder is a U.S.
person who:
1 . Owns (directly, indirectly, or
constructively, within the meaning of
sections 958(a) and (b)) 10% or more of
the total camb~nedvoting power of all
classes ot voting stock of a CFC or
2. Owns (either directly or indirectly,
within the meanina of section 958(a))any
'
stock of a CFC (as defined in sect&s
953(c)(l)(B)and 957(b)) that is also a
captive Insurance company,

U.S. percon. F~~purposes of Category
5 , a U,S,
is:
1. A citizen or resident of the United
States,
2. A domestic partnership,
3. A domestic corporation, and
4. An estate or trust that is not a
foreign estate or trust defined in section
770 1(a)(31)
See section 957(c) for exceptions.

CFC. A CFC is a foreign corporation that
has U.S.shareholders that own (directly,
indirectly, or constructively, wllhin the
meaning of sections 958(a) and (5)) on
any day of the tax year of the fore~gn
corporation, more than 50% of:
1. The total combined voting power of
all classes of its voting stock or
2. The total value of the stock of the
corporation.

Filing Requirements for Categories of Filers
Reuuired Information*

'See also Addrtional Ftling Requrremenb on thrs page

Category of Filer
1 1 2 1 3 1 4 1 5

Exceptions From Filing
Multiple filers of same information.

One person may file Form 5471 and the
applicable schedules for other persons

who have the same filing requirements. If
you and one or more other persons are
required to furnish information for the
same foreign corporation for the same
period, a joint information return that
contains the required information may be
filed with your income tax return or with
the income tax return of any one of the
other persons. For example, a U.S.
person described in Category 5 may file a
joint Form 5471 with a Category 4 or
another Category 5 filer. However, for
Category 3 filers, the required ~nformation
may only be filed by another person
having an equal or greater interest
(measured in terms of value or voting
power of the stock of the foreign
corporation).
The person that files Form 5471 must
complete ltem D on page 1 of the form.
All persons identified in ltem D must
attach a statement to their income tax
return that includes the information
described in the instructions for Item 0 on
page 4.
Domestic corporations. Shareholders
are not required to file the information
checked in the chart on this page for a
foreign insurance company that has
elected (under section 953(d)) to be
treated as a dornestlc corporation and
has filed a U.S. income tax return for its
lax year under that provision. See Rev.
Proc. 2003-47,2003-28I.R.B. 55, lor
procedural rules regarding the election
under section 953(d).
Members of consolidated groups. A
Category 4 lller is not required to file
Form 5471 lor a corporation defined in
section 1504(d) that flles a consolidated
return for the tirx year.
Constructive owners.
A U.S. person described in Category 3
or 4 does not have l o flle Form 5471 11all
of ihe following conditions are mei:
1. The U.S person does not own a
direct interest rn the foreign corporation,
2 The U . S ,
person IS requlred l o
furnish the inlormatlon requested solely
because of conslruclive ownersh~p(as
determined under Regulallons section
1.6038-2(c) or 1.6046-1(i)) from another
U.S. person, and
3. The U.S. person through which the
indrrect shareholder constructively owns
an interest in the foreign corporation files
Form 547 t to report all of the required
information.
A Category 2 filer does not have to file
Form 547 1 if:
1 , Immediately after a reportable
stock acquisition, three or fewer U.S.
persons own 95% or more in value of the
outstanding stock of the foreign
corporation and the U.S. person making
the acquisition files a return for the
acquisition as a Category 3 filer or
2. The U.S. person(s) for which the
Category 2 filer is required to file Form

Instructions for Form 5471