1120-F Bldg purchased by Foreign NGO

Technical topics regarding tax preparation.
#1
Lin-CPA  
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Not sure what to do on this one...... Thank you for any guidance or advice!

Foreign NGO fully funded by the German Government has offices all over the world, including 2 offices in US. This German NGO (Headquarters) in Berlin purchased a building in 2022 for its office in DC instead of continually renting. The funds to purchase the building were wired from Headquarters to the US bank account of the DC office and then paid from that account. My client is the DC office set up in the 1970’s as a foreign corporation. I am working on the 1120-F and I don’t think this building should be reported as an asset on the 1120-F Sch L balance sheet because the DC “corporation” does not own it. The title is in the name and address of the foreign NGO in Germany. Theoretically they don’t own anything! All their funding comes from their headquarters for purchases, operating expenses and programs. Also, there is no business, trade or investment income generated by this DC organization in the US. Because those funds came into their bank account and then were paid from their bank account, should I be reporting this on their tax return? And if yes, how?
 

#2
RowTax  
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I think you are correct
Somehow, this does not seem like a substance over form situation. DC office does not own the building.
 

#3
Lin-CPA  
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Thanks for your reply!
 

#4
deniz  
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Title is everything, the building shouldnt be listed on the balance sheet since there is no title transfer. What you have are lease reporting issues. If Germany doesnt charge rent, you would have a related party lease at below market rates under 482 and underreported income for Germany under OECD. There is also new guidance in ASC 842 on Related Party Leases to look into.
 


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