Dormant Foreign Corporations and Form 5471 - Rev. Proc. 92-70, 1992-2 C.B. 435



SECTION I. PURPOSE

This revenue procedure provides a summary filing procedure for filing Form 5471 with respect to dormant foreign corporations described in section 3 below. Persons complying with this revenue procedure satisfy their Form 5471 filing obligations under sections 6038(a)(1), 6038(a)( 4), and 6046(a)(3) with respect to dormant foreign corporations and will not be subject to penalties related to the failure to timely file a complete Form 5471 and to timely furnish information requested thereon.


SEC. 2. BACKGROUND

.01 Section 6038(a)(l) imposes information reporting requirements on any United States person who controls a foreign corporation. Pursuant to section 6038(a)(4), the information reporting requirements prescribed in section 6038 (a)( 1) also are imposed on any United States person who is treated as a United States shareholder of any foreign corporation that is treated as a controlled foreign corporation for any purpose under subpart F.

.02 Section 6046(a)(3) imposes reporting requirements on each person who is treated as a United States shareholder of a controlled foreign corporation under section 953(c).

.03 Section 1.6038-2 of the Income Tax Regulations requires a United States person controlling a foreign corporation to file an annual information return on Form 5471 specifying certain identifying information, stock, shareholder, earnings and profits, and financial information about the foreign corporation, as well as transactions between the foreign corporation, the filer, certain other shareholders, and entities related to the filer or the foreign corporation.

.04 Section 1.6038-2(j)(1) of the regulations allows two or more U.S. persons who are required to furnish information with respect to the same foreign corporation and for the same period to satisfy this obligation by filing a joint return. Pursuant to section 1.6038-2(j)(2) of the regulations, a U.S. person required to furnish information solely by reason of stock ownership attribution from another U.S. person is excepted from furnishing information if he does not directly own an interest in the corporation and all such required information otherwise is furnished by the person from whom the ownership is attributed. Section 1.6038-2(j)(3) of the regulations requires any U.S. person relying on section 1.6038-2(j)(1) or (2) to file a statement with his income tax return indicating that his filing liability will be satisfied by another return, identifying that return, and identifying the place of return filing.

.05 Section 1.6046-1(e)(1) of the regulations allows two or more U.S. persons who are required by section 1.6046-l(c) of the regulations to file a return with respect to the same corporation to satisfy this obligation by filing a joint return. Under section 1.6046-l(e)(4)(iii) of the regulations, a U.S. person required to file a return under section 1.6046-1(c) is excepted from this filing requirement if he is required to file solely by reason of stock ownership attribution from another U.S. person, he does not directly own an interest in the foreign corporation, and the information required by section 1.6046-1(c) is otherwise furnished by the U.S. person from whom the ownership is attributed. Pursuant to section 1.6046-1(e)(5) of the regulations, any U.S. person required by section 1.6046-1(c) to furnish information regarding a foreign corporation may, if such information is furnished by another person having an equal or greater stock interest (measured in terms of value of such stock) in such corporation, satisfy such requirement by filing a statement with his return on Form 5471 indicating that such liability has been satisfied and identifying the return in which such information was included .

.06 Section 6038(b)(l) imposes monetary penalties for a failure to timely furnish any information required by section 6038(a)(l) with respect to a foreign corporation (including entities treated as controlled foreign corporations under sections 957 and 953). Additional penalty amounts may apply under section 6038(b)(2) where the failure to furnish information continues for more than 90 days after notification by the Secretary.

.07 Section 6038(c) mandates a reduction in certain foreign tax credits for a failure to timely furnish information required by section 6038(a)(l) absent a showing of reasonable cause for the delay. Additional credit reductions may apply where such failures continue for more than 90 days after notice by the Secretary.

.08 Section 6679 imposes monetary penalties for a failure to timely file a return or to provide information specified in any return required by section 6046 absent a showing of reasonable cause for the failure.

. 09 Criminal penalties (fines and imprisonment) are imposed by section 7203 for a willful failure to file a return, including an information return required by section 6038 or 6046.

SEC. 3. SCOPE

This revenue procedure applies to persons required under section 6038(a)(1), 6038(a)(4) or 6046(a)(3) to file a Form 5471 with respect to a foreign corporation that is a dormant foreign corporation. For purposes of this revenue procedure, a foreign corporation is a dormant foreign corporation if, at all times during the foreign corporation’s annual accounting period (within the meaning of section 6038(e)(2)):

(1) the foreign corporation conducted no business and owned no stock in any other corporation other than another dormant foreign corporation;

(2) no shares of the foreign corporation (other than directors’ qualifying shares) were sold, exchanged, redeemed, or otherwise transferred, nor was the foreign corporation a party to a reorganization;

(3) no assets of the foreign corporation were sold, exchanged, or otherwise transferred, except for de minimis transfers described in (4) and (5) below;

(4) the foreign corporation received or accrued no more than $5,000 of gross income or gross receipts;

(5) the foreign corporation paid or accrued no more than $5,000 of expenses;

(6) the value of the foreign corporation’s assets as determined pursuant to U.S. generally accepted accounting principles (but not reduced by any mortgages or other liabilities) did not exceed $100,000;

(7) no distributions were made by the foreign corporation; and

(8) the foreign corporation either had no current or accumulated earnings and profits or had only de minimis changes in its beginning and ending accumulated earnings and profits balances by reason of income or expenses specified in (4) or (5) above.

SEC. 4. GENERAL PROCEDURE

.01 In lieu of filing a complete Form 5471 for each dormant foreign corporation, the filer may use the summary filing procedure described in this section. A filer may not use this summary filing procedure to report an interest in a foreign corporation that was a dormant foreign corporation in a prior year but that does not meet the requirements of section 3 above in the current filing year.

.02 To elect the summary filing procedure, the filer must attach and file Page One of the Form 5471 (the summary return) for each dormant foreign corporation with its regularly filed income tax return. The filer also must file a copy of each summary return with the Internal Revenue Service Center, Philadelphia, PA, along with the filer’s other Forms 5471 (if any). The top margin of each summary return must be labeled “Filed Pursuant to Rev. Proc. 92-70 for Dormant Foreign Corporations.”

.03 The summary return must be completed for the following filer items: the filer’s name and address, identifying number, filing category, stock ownership percentage, and tax year.

.04 The summary return must be completed for the following corporate items: the dormant foreign corporation’s annual accounting period (within the meaning of section 6038(e)(2)), name and address, employer identification number (if any), country of incorporation, and date of incorporation.

.05 By using the summary filing procedure, the filer agrees that it will provide any information required by sections 6038 and 6046, the regulations thereunder, or on Form 5471 and not specified in sections 4.03 or 4.04, within 90 days of being asked to do so on audit.

SEC. 5. RELIEF

.01 Persons complying with the summary filing procedure described in section 4 satisfy their Form 5471 filing obligations arising under sections 6038(a)(1), 6038(a)(4), and 6046(a)(3) as to the specified dormant foreign corporations. Accordingly, sections 6038(b)(1), 6038(c), 6679, and 7203 will not apply to a filer properly employing the procedure. However, penalties and foreign tax credit reductions under sections 6038(b)(2) and 6038(c)(1) can be imposed (pursuant to sections 1.6038-2(k)(l)(ii) and l.6038-2(k)(2)(iv) of the regulations) for a failure to timely furnish information under section 4.05 of this revenue procedure.

.02 To the extent that a Form 5471 filing by a filer could satisfy the filing obligation of another person (the “other person”) under section 1.6038-2(j) of the regulations, such other person may use the provisions of section 1.6038-2(j) if the other person satisfies the requirements of section 1.6038-2(j)(3) and the filer complies with this revenue procedure and attaches a statement providing the name, address, identifying number, and corporate status of the other person. If the provisions of section 1.6038-2(j) are used as provided in this section 5.02, the other person on whose behalf the Form is filed satisfies his Form 5471 filing obligations arising under sections 6038(a)(1) and 6038(a)(4) as to the specified dormant foreign corporations and is not liable for penalties as specified in section 5.01 above.

.03 Persons described in section 6046(a)(3) are treated, for purposes of this revenue procedure, as described in section 1.6046-1(c)(1) of the regulations. Therefore, to the extent that a Form 5471 filing by a filer could satisfy the filing obligation of another person (the “other person”) under section 1.6046-1(e) of the regulations, such other person may use the provisions of section 1.6046-1(e) if the other person satisfies the filing requirement of section 1.6046-1(e)(5) (if applicable) and the filer complies with this revenue procedure and attaches a statement providing the name, address, identifying number, and corporate status of the other person. If the provisions of section 1.6046-l(e) are used as provided in this section 5.03, the other person on whose behalf the Form is filed satisfies his Form 5471 filing obligations arising under section 6046(a)(3) as to the specified dormant foreign corporations and is not liable for penalties as specified in section 5.01 above.

.04 The relief afforded by this revenue procedure relates solely to a filer’s information reporting obligations and does not affect a filer’s liability for tax on income distributed or deemed distributed from a dormant foreign corporation. Thus, for example, de minimis amounts of subpart F income derived by a controlled foreign corporation that qualifies as a dormant foreign corporation under section 3 above are taxable to the corporation’s United States shareholders to the extent provided in sections 951 and 952 and should be reported on each shareholder’s federal income tax return.

SEC. 6. EFFECTIVE DATE

This revenue procedure is effective for Forms 5471 required to be filed (including extensions) on or after September 15, 1992.

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