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USA-incorporated disregarded entities wholly owned by foreign persons proposed to file IRS Form 5472 (single Canadian owner of LLC)

September 14, 2016

Recently Internal Revenue Bulletin 2016-21 was released and proposes amendments to the regulations concerning Form 5472 applicable for taxable years ending on or after the date that is twelve months after the date these regulations are published as final regulations.

 

IRS Form 5472 is filed if there is a “reporting corporation” that has “reportable transactions”.

 

Presently, “Reporting Corporation” is either a USA-incorporated corporation that is 25% foreign-owned or a US branch of a Canadian company 25% owned by Canadians.

 

The proposed regulations will treat “domestic disregarded entities” that are wholly owned by foreign persons as “domestic corporations” for purposes of filing IRS Form 5472. Therefore if a disregarded single member LLC has “reportable transactions”, IRS Form 5472 will have to be filed. Late filing or non-compliance of 5472 filing bears a $10,000 penalty per instance per company per year.

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