5471 questions

My client formerly owned 100% of his foreign corporation, but has divested a portion of his shares. He now owns only 63% of the Corp. I’m filling out the 5471 and I’m brain dead, not to mention getting up with all the new schedules & rules. Do I report 63% of the income & expenses on the 5471 & schedules or 100%?

100%, your GILTI and SubF will be 63%. Make sure you include Category 3 too and file Schedule O. You might have a Form 926 filing is purchaser is foreign.

I agree with Deniz that you include 100% of the numbers on the income statement and the balance sheet, and that only the GILTI and Subpart F Income inclusions are computing based on the reduced percentage.

If the client sold shares of the CFC at a gain, be sure to consider section 1248, which may cause all or a portion of the gain to be recharacterized as dividend income.

Since his ownership did not drop below 10%, I don’t think the client needs to file as a Category 3 filer. I also don’t think a Form 926 would be required, regardless of whether the purchaser is foreign or not.

The shares were given, not sold