What is Form 5472?
Form 5472, officially titled “Information Return of a 25% Foreign-Owned US Corporation or a Foreign Corporation Engaged in US Trade or Business,” is used to report information required under sections 6038A and 6038C when reportable transactions occur between a reporting corporation and a related foreign or domestic party during the tax year.
This form serves two main purposes:
- It requires any domestic corporation that is at least 25% foreign-owned (including a foreign-owned US disregarded entity) or any foreign corporation engaged in a US trade or business at any time during the tax year to report certain information to the IRS.
- The transactions to be reported involve related parties, whether foreign or domestic.
What are ‘related parties’ for Form 5472 reporting purposes?
The IRS definition of related parties is far more complex than just close family members. The IRS provides intricate definitions for related parties. To clarify, we’ll outline each category of related party with examples to help understand what a related party entails for reporting purposes.
According to the instructions on Form 5472:
A related party is:
1. Any direct or indirect 25% foreign shareholder of the reporting corporation,
2. Any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the reporting corporation,
3. Any person who is related (within the meaning of section 267(b) or 707(b)(1)) to a 25% foreign shareholder of the reporting corporation, or
4. Any other person who is related to the reporting corporation within the meaning of section 482 and the related regulations. “Related party” does not include any corporation filing a consolidated federal income tax return with the reporting corporation.
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