Form 5472 Reporting by Foreign Owned Disregarded Entities Established in the U.S. – Coming Soon!

Presently, a domestic single member LLC, and other similar single owner entities, absent a check-the-box election to the contrary, are disregarded for almost all U.S. tax purposes.

Presently, a foreign owner of such disregarded entity need not file a Form 5472 regarding that entity, since it is a non-entity for tax purposes. The Form 5472 form (Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business) is authorized under Code Sections 6038A and 6038C, with respect to each related party with which the reporting corporation has had any “reportable transactions.” These corporations must also keep permanent books of account or records as required by section 6001 that are sufficient to establish the accuracy of the federal income tax return of the corporation, including information, documents, or records to the extent they may be relevant to determine the correct U.S. tax treatment of transactions with related parties. Failure to report can result in significant penalties.

New proposed regulations will treat such entities as a corporation for purposes of Section 6038A, thus giving rise to the above…

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