Schedule O (Form 5471)

Schedule O (Form 5471)

Schedule O of Form 5471: When it comes to preparing the IRS form 5471 — which is used by US Persons to report an interest or ownership in a Foreign Corporation — there are many twists and turns to navigate. For some individuals — such as those who are not participating in a Controlled Foreign Corporation — the 5471 Form is more of an annoyance and time-suck than anything else. But, for taxpayers who have ownership or interest in a controlled foreign Corporation, there are much more complicated issues at play involving:

• Subpart F
• GILTI
• FDII
• IRC 965 Transition Tax

Along with preparing the main form for form 5471, there are many different schedules that are also required. Luckily, out of all the schedules required — the schedule O on Form 5471 which is one of the less complicated requirements.

Let’s take a brief look at what the form requires:

Which Category of Filer for Schedule O?

As provided by the Form Instructions:

• • • Important: Complete a separate Schedule O for each foreign corporation for which information must be reported.

Part I To Be Completed by U.S. Officers and Directors

• • • • (a) Name of shareholder for whom acquisition information is reported

      • (b) Address of shareholder

      • (c) Identifying number of shareholder

      • (d) Date of original 10% acquisition

      • (e) Date of additional 10% acquisition

Part II To Be Completed by U.S. Shareholders

Note: If this return is required because one or more shareholders became U.S. persons, attach a list showing the names of such persons and the date each became a U.S. person.

Section A—General Shareholder Information

(a) Name, address, and identifying number of shareholder(s) filing this schedule

(b) For shareholder’s latest U.S. income tax return filed, indicate:

• • • • (1) Type of return (enter form number)

      • (2) Date return filed

      • (3) Internal Revenue Service Center where filed (c) Date (if any) shareholder last filed information return under section 6046 for the foreign corporation

Section B—U.S. Persons Who Are Officers or Directors of the Foreign Corporation

• • • (a) Name of U.S. officer or director

    • (b) Address

    • (c) Social security number

    • (d) Check appropriate box(es)

      • Officer

      • Director

Section C—Acquisition of Stock

• • (a) Name of shareholder(s) filing this schedule

  • (b) Class of stock acquired

  • (c) Date of acquisition

  • (d) Method of acquisition

  • (e) Number of shares acquired

    • (1) Directly

    • (2) Indirectly

    • (3) Constructively

  • (f) Amount paid or value given

  • (g) Name and address of person from whom shares were acquired

Section D—Disposition of Stock

• • • (a) Name of shareholder disposing of stock

    • (b) Class of stock

    • (c) Date of disposition

    • (d) Method of disposition

    • (e) Number of shares disposed of

      • (1) Directly

      • (2) Indirectly

      • (3) Constructively

    • (f) Amount received

    • (g) Name and address of person to whom disposition of stock was made

Section E—Organization or Reorganization of Foreign Corporation 

• • • (a) Name and address of transferor

    • (b) Identifying number (if any)

    • (c) Date of transfer

Section F—Additional Information

• • (d) Assets transferred to foreign corporation

    • (1) Description of assets

    • (2) Fair market value

    • (3) Adjusted basis (if transferor was U.S. person)

    • (e) Description of assets transferred by, or notes or securities issued by, foreign corporation

Schedule O (Form 5471) Instructions

Schedule O

• • • Schedule O is used to report the organization or reorganization of a foreign corporation and the acquisition or disposition of its stock. Every U.S. citizen or resident described in Category 2 must complete Part I. Every U.S. person described in Category 3 must complete Part II.

    • See Regulations section 1.6046-1(i) for rules on determining when U.S. persons constructively own stock of a foreign corporation and therefore are subject to the section 6046 filing requirements.

Name of person filing Form 5471

• • • The name of the person filing Form 5471 is generally the name of the U.S. person described in the applicable category or categories of filers (see Categories of Filers, earlier). However, in the case of a consolidated return, enter the name of the U.S. parent in the field for “Name of person filing Form 5471.”

Reference ID number of foreign corporation

Use the reference ID number shown on Form 5471, line 1b(2).

Part I Schedule O (Form 5471)

• • • Column (d). Enter the date the shareholder first acquired 10% or more (in value or voting power) of the outstanding stock of the foreign corporation.

    • Column (e). Enter the date the shareholder acquired (whether in one or more transactions) an additional 10% or more (in value or voting power) of the outstanding stock of the foreign corporation.

Part II Schedule O (Form 5471)

A—General Shareholder Information If the shareholder’s latest tax return was filed electronically, enter “e-filed” in column (b)(3) instead of a service center.

Section C—Acquisition of Stock

• • • Section C is completed by shareholders who are completing Schedule O because they have acquired sufficient stock in a foreign corporation. If the shareholder acquired the stock in more than one transaction, use a separate line to report each transaction.

    • Column (d). Enter the method of acquisition (for example, purchase, gift, bequest, trade).

    • Column (e)(2). Enter the number of shares acquired indirectly (within the meaning of section 958(a)(2)) by the shareholder listed in column (a).

    • Column (e)(3). Enter the number of shares constructively owned (within the meaning of section 958(b)) by the shareholder listed in column (a).

Section D—Disposition of Stock

• • • Section D must be completed by shareholders who dispose of their interest (in whole or in part) in a foreign corporation.

    • Column (d). Enter the method of disposition (for example, sale, bequest, gift, trade).

      • Example. In 1999, Mr. Jackson, a U.S. citizen, purchased 10,000 shares of common stock of foreign corporation X. The purchase represented 10% ownership of the foreign corporation.

      • On July 1, 2020, Mr. Jackson made a gift of 5,000 shares of foreign corporation X to his son, John. Because Mr. Jackson has reduced his holding in the foreign corporation, he is required to complete Form 5471 and Schedule O. To show the required information about the disposition, Mr. Jackson completes Section D as follows:

    • Enters his name in column (a).

    • Enters “common” in column (b).

    • Enters “July 1, 2020” in column (c).

    • Enters “gift” in column (d).

    • Enters “5,000” in column (e)(1).

    • Enters “-0-” in column (f) because the disposition was by gift.

    • Enters the name and address of his son, John, in column (g).

Section F—Additional Information

• • • Item (b). List the date of any reorganization of the foreign corporation that occurred during the last 4 years while any U.S. person held 10% or more in value or vote (directly or indirectly) of the corporation’s stock. If there is more than one such date, use the most recent date. However, do not enter a date for which information was reported on Section E. Instead, enter the date (if any) of any reorganization prior to that date (if it is within the last 4 years).

    • Example for Item (c). Mr. Lyons, a U.S. person, acquires a 10% ownership in foreign corporation F. F is the 100% owner of two foreign corporations, FI and FJ. F is also a 50% owner of foreign corporation FK. In addition, F is 90% owned by foreign corporation W. Mr. Lyons does not own any of the stock of corporation W.

    •  Mr. Lyons completes and files Form 5471 and Schedule O for the corporations in which he is a 10% or more shareholder. Mr. Lyons also is required to submit a chart if the foreign corporation is a member of a chain of corporations, and to indicate if he is a 10% or more shareholder in any of those corporations.

    • Mr. Lyons would prepare a list showing the corporations as follows.

      • • Corporation W.

        • Corporation F.

        • Corporation FI.

        • Corporation FJ.

        • Corporation FK.

Then Mr. Lyons is required to indicate that he is a 10% or more shareholder in corporations F, FI, and FJ.

Schedule O (Form 5471) is a Manageable Form

In conclusion, the form 5471 can be very complicated. oftentimes taxpayers may require an attorney to assist them with preparing this type of complex tax form. if a taxpayer is able to complete it themselves and navigates through the different schedules and makes it to schedule O — then they are nearly complete with preparing the form (and should be very proud of themselves).

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