5471 Category

blairgoates · Post by **blairgoates** » Thu Nov 17, 2011 11:35 pm

For a husband\wife Canadian corporation owned 50/50 where only one spouse is a USC, is this a catagory 5 for reporting on form 5471 ? Is it a Controlled Foreign Corp ?

Many thanks

blairgoates · Post by **blairgoates** » Thu Nov 17, 2011 11:36 pm

oooops...I met catagory 4

looking4advice · Post by **looking4advice** » Sun Nov 27, 2011 8:47 am

Same issue for me. You are a 5 and it is a CFC due to attribution rules according to our CPA in Canada.

JGCA · Post by **JGCA** » Sun Nov 27, 2011 5:58 pm

YOu still have to file the form by virtue of your 10% holdings and or being an officer oor director as a catagory 2.

As far as catagory 5 disclosure requirements under section 318 of the IRS tax code you are not deemed to be constuctively the owner of your wifes shares since she is not a USC if she was then you would be . So I do not believe that you should be inb that catagory unless you can be shown to controll teh corp in an other fashion

looking4advice · Post by **looking4advice** » Sun Nov 27, 2011 6:18 pm

I think if you check closer you will find that you do constructively own all the shares, regardless of whether your wife is a USC or not. I don't have the precise location in the legislation here but if you check it is was pretty obvious that you are a 5.

JGCA · Post by **JGCA** » Sun Nov 27, 2011 7:07 pm

As I said you could be but not simply because your wife owns the shares sec 318 has said this fact alone will exempt you from the constructive ownership but they also look at other items such as indebtedness, who runs the day to day, who signed at the bank, who signs the etc. so its not because of the 50% ownership of shares only that is why sec 318 is in there you have to look at the whole picture, in your case it may well be but its not because of the share stucture only.

JGCA · Post by **JGCA** » Sun Nov 27, 2011 7:26 pm

To further elaborate on the article in question once you read throught sec 318(1)(a) then refer to sec 958(b) this specifically excludes non resident spouse based solely on ownership it will not be constuctively owned by you.

looking4advice · Post by **looking4advice** » Sun Nov 27, 2011 7:27 pm

Ok, you may know more about this than I do, but this is what I was reading which seemed pretty clear:

Members of family
(A) In general
An individual shall be considered as owning the stock owned,
directly or indirectly, by or for -
(i) his spouse...

JGCA · Post by **JGCA** » Sun Nov 27, 2011 7:39 pm

Fine what you are referring to is sec 318 as you state, BUT

sec 958 ( b) clearly says that a NON RESIDENT SPOUSE who owns shares will not be constuctively owned by the US taxpayer this is an overriding provision in the tax code so yes you can quote to me but if you want an answer read the related section on NON RESIDENT sec 958 (b) exempts NON RESIDENT spouse

looking4advice · Post by **looking4advice** » Sun Nov 27, 2011 8:14 pm

Thank you for the clarification. You appear to be correct on this matter.

What is the overall effect of completing the 5471 as a #2 instead of a #5? It seems that the #2 option requires significantly more to be disclosed regarding the financial statements of the business.

Thank you.

JGCA · Post by **JGCA** » Sun Nov 27, 2011 10:04 pm

yes # 2 is more f/s oriented but # 5 is far more involved and requires a lot more than # 2 , read it your self and see what it is exactly # 2 is far easier.