Presenting a live 110 ‐ minute teleconference with interactive Q&A Cross ‐ Border Ownership Structures: Lessons Learned Under Tougher IRS Scrutiny Best Practices for Complying with Forms 1120 ‐ F, 5471, 5472 and 926 THURSDAY, MARCH 3, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Juan Carlos Ferrucho Managing Director Alvarez & Marsal Taxand Miami Fla Juan Carlos Ferrucho, Managing Director, Alvarez & Marsal Taxand , Miami, Fla. Ming Fang, Senior Manager, Spott Lucey & Wall , San Francisco Kristina Dautrich, Senior Director, Alvarez & Marsal Taxand , Washington, D.C. For this program, attendees must listen to the audio over the telephone. Please refer to the instructions emailed to the registrant for the dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at1-800-926-7926 ext. 10 .
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Cross ‐ Border Ownership Structures: L Lessons Learned Under Tougher IRS L d U d T h IRS Scrutiny Webinar March 3, 2011 Kristina Dautrich, Alvarez & Marsal Taxand LLC Ming Fang, Spott Lucey & Wall kdautrich@alvarezandmarsal.com ming.fang@spottluceywall-cpas.com Juan Carlos Ferrucho, Alvarez & Marsal Taxand LLC jferrucho@alvarezandmarsal.com j
Today’s Program Form 5471 Experiences Slide 7 – Slide 46 [Krist ina Daut rich and Ming Fang] Form 926 Experiences Slide 47 – Slide 58 [Krist ina Daut rich] Slide 59 – Slide 72 Form 1120-F Experiences [Ming Fang and Juan Carlos Ferrucho] Form 5472 Experiences Slide 73 – Slide 87 [Juan Carlos Ferrucho]
K i i Kristina Dautrich, Alvarez & Marsal Taxand LLC D i h Al & M l T d LLC Ming Fang, Spott Lucey & Wall FORM 5471 EXPERIENCES FORM 5471 EXPERIENCES
Form 5471: General Concepts 547 p Definition of Terms Definition of Terms U.S. person : Includes a citizen or resident of the U.S., a domestic • partnership, a domestic corporation, and an estate or trust that is not a foreign estate or trust g Controlled foreign corporation (CFC) : Any foreign corporation in which more • than 50% of the total combined voting power of all classes of stock entitled to vote, or more than 50% of the total value of the stock, is owned directly, indirectly or constructively by U.S. shareholders on any day during the taxable year U.S. Shareholder : A U.S. person who owns 10% or more (directly, indirectly or • constructively) of the total combined voting power of all classes of stock t ti l ) f th t t l bi d ti f ll l f t k entitled to vote in a foreign corporation 8
Form 5471: General Concepts (Cont.) 547 p ( ) Definition of Terms Definition of Terms Control : A U.S. person has control of a FC if, at any time during the person’s tax • year, it owns stock possessing: ― More than 50% of total value of all classes of stock or More than 50% of total value of all classes of stock, or ― More than 50% of the combined voting power of all stock entitled to vote ― Example: Company X has 100 shares of Class A voting stock and 50 Shares of Class B non-voting stock outstanding. Cl B ti t k t t di ― The fair value of Class A and Class B are $1 and $2, respectively. ― Shareholder Y owns 51 shares of Class A stock. ― Shareholder Z owns the remaining 49 shares of Class A and all 50 shares of Class B. ― Both Shareholders have control over Company X. ― Shareholder Y controls more that 50% of the voting power, and Shareholder Z controls more than 50% of the value. 9
Form 5471: Who Must File? 547 Category 1 Filers Category 1 Filers Repealed • Category 2 Filers U.S. citizen or resident who is an officer or director of a foreign corporation in • which a U.S . person has acquired: 10% of a FC’s stock (by vote or value), or – An additional 10% of the outstanding stock of FC (by vote or value) – Triggers the filing of Schedule O • The filings related to this category are often missed The filings related to this category are often missed • 10
Form 5471: Who Must File? (Cont.) 547 ( ) Category 3 Filers Category 3 Filers U.S. person who acquires stock in FC which, when added to the stock already • owned, meets the 10% stock ownership requirement U S person who acquires stock which without regard to stock already owned U.S. person who acquires stock which, without regard to stock already owned, • • meets the 10% stock ownership requirement A person who becomes a U.S. person while meeting the 10% stock ownership • requirement requirement U.S. person who disposes of sufficient stock in the FC to reduce the ownership to • less than 10% A person who is treated as a U S shareholder under IRC Sect 953(c) related to A person who is treated as a U.S. shareholder under IRC Sect. 953(c) related to • • captive insurance companies Often applies to formations, acquisitions, mergers, restructuring or dispositions • Triggers the filing of Schedule O Triggers the filing of Schedule O • • 11
Form 5471: Who Must File? (Cont.) 547 ( ) Category 3 Filers (Cont ) Category 3 Filers (Cont.) Category 3 filers need to attach a statement that includes amount and type of • indebtedness the FC has with: – Any U.S. person owning 5% or more in value of its stock, or Any U S person owning 5% or more in value of its stock or – Any other FC owning 5% or more in value of the outstanding stock of the FC, provided that the shareholder filing the return owns 5% or more in value of the outstanding stock of such other FC the outstanding stock of such other FC Provide information of each shareholder or entity • 12
Form 5471: Who Must File? (Cont.) 547 ( ) Category 4 Filers Category 4 Filers This includes a U.S . person who had control of a foreign corporation for an • uninterrupted period of at least 30 days during the annual accounting period of the foreign corporation. g p – Definition of U.S. person under Category 4 also includes non-resident aliens for whom an election is in effect under Sect. 6013(g) to be treated as a resident of the US., for the purpose of filing a joint return; and – An individual for whom an election is in effect relating to non-resident aliens who become residents of the U.S. during the tax year and are married at the close of the tax year to a citizen or resident of the U.S. Category 5 Filers A U.S. shareholder (10% owner) who owns stock in a FC that is a CFC for an • uninterrupted period of 30 days or more during any tax year of the FC, and who owned that stock on the last day of the CFC’s year d th t t k th l t d f th CFC’ 13
Form 5471: Filing Requirements For Categories Of 547 g q g Filers 14
Form 5471: Exceptions For Filing 547 p g Multiple Filers of Same Information Multiple Filers of Same Information Form 5471 allows the filer of the form to file on behalf of another person with • similar filing requirements. For Category 3 filers the required information may only be filed by another person For Category 3 filers, the required information may only be filed by another person • • having an equal or greater interest (by vote or value). Page 1, item D must be completed to provide the necessary information about the • person on whose behalf they are filing. person on whose behalf they are filing. If Form 5471 has been filed on the taxpayer’s behalf, then a statement must be • attached to such taxpayer’s federal tax return providing information of the person filing Form 5471. A separate Schedule I and M must be submitted for each person who is being filed • on behalf of. This is commonly missed in practice. It is prevalent in the private equity space to have multiple filers of the same p p q y p p • information and multiple service providers, which can be confusing and cause missed filings. 15
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