Form 5471

Technical topics regarding tax preparation.
#1
Posts:
593
Joined:
10-Apr-2019 4:35pm
Location:
WA
Client transferred $1 Million to a foreign corporation (hedge fund), but their ownership (vote and value) never surpassed 10% either directly or constructively, can I eliminate the chance of it being a CFC and the need to file Form 5471?
 

#2
deniz  
Posts:
336
Joined:
19-Feb-2018 11:33pm
Location:
WA
yes, i would focus on pfic rules, which would be a worse outcome. It still could be a CFC through other owners, but your owner is not a US shareholder of a CFC as long as he is under 10%.
 

#3
Posts:
1716
Joined:
28-Jul-2017 12:08pm
Location:
Somewhere out there...
As long as the “hedge fund” doesn’t also meet the criteria of a captive insurer... there were some strange investment vehicles out there a few years ago that dabbled with insurance

But I would guess $1m is less than 1% for most hedge funds

Why did your client invest in a foreign entity, rather than the US vehicle in a typical hedge fund?
 

#4
Posts:
593
Joined:
10-Apr-2019 4:35pm
Location:
WA
HenryDavid wrote:As long as the “hedge fund” doesn’t also meet the criteria of a captive insurer... there were some strange investment vehicles out there a few years ago that dabbled with insurance

But I would guess $1m is less than 1% for most hedge funds

Why did your client invest in a foreign entity, rather than the US vehicle in a typical hedge fund?


They are a private foundation and the hedge fund is a corporation.

I found out that the investment is a PFIC.

Thanks!
 

#5
Posts:
1716
Joined:
28-Jul-2017 12:08pm
Location:
Somewhere out there...
Makes sense, most NFPs would invest in the foreign vehicle.
 


Return to Taxation



Who is online

Users browsing this forum: AlexCPA and 133 guests