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Form
5471 vs. Form 1120-F
QUESTION: If a U.S.
individual owns a foreign corporation, and that corporation has income
from U.S.
sources,
are both Form 5471 and Form 1120-F required?
On www.offshorepress.com, two different "Who Must Use This Form?"
sections
seem to provide contradictory answers.
First, http://www.offshorepress.com/AICPA/form5471.htm
implies both forms are needed: "However, if a foreign corporation has
any U.S.
source
income it will be required to pay corporate taxes on that income, using
Form
1120-F ."
Then, http://www.offshorepress.com/AICPA/form1120f.htm
implies only Form 5471 is needed: "This form is to be used by a foreign
corporation (other than a foreign corporation controlled by U.S. shareholders) that has income that
is
"effectively connected" with a U.S. trade or business."
I am puzzled by the "other than a foreign corporation controlled by U.S.
shareholders" portion of the 1120-F explanation. To me, that quotation
implies these forms are "either/or"; however, I have not found any
other hint of this "exception" to filing Form 1120-F in reading IRS
requirements (such as the form instructions themselves).
REPLY: I appreciate
your finding this contradiction and bringing it to my
attention. I wrote that description a few years ago and don't recall
why I said
that the Form 1120F is not required for a foreign corporation
controlled by U.S.
shareholders. Whatever the reason, my present thinking is that ANY
foreign
corporation with U.S. source income derived from a trade or business in
the
U.S. is required to file a Form 1120-F to report that income and to pay
any tax
that may be due, as if the corporation were a U.S. corporation.
In addition, if that foreign corporation has U.S.
officers, directors or shareholders who meet the filing requirements
(in the
instructions to the Form 5471), then the U.S. officers, directors or
shareholders must also file the Form 5471.
Vern
http://www.offshorepress.com/AICPA/form1120f.htm