# Do I need to file form 5471?



## cescolar

I just learned about form 5471 and I am shaking!

I just filed my 2012 return and included forms 8938s disclosing my two foreign corporations (They exceed the value limit.)


One, in Brazil, started just go get an investor's visa. I own 50%.
The other, in Spain, I got in an inheritance. I own 49%
In neither one I have signing authority. They don't make any money, so they are more a liability than an asset!

I thought that I only needed to report them if I owned more than 50%, but now I read that it takes only 10% to have to report them! Is it a new law?
My accountant is clueless, so he did not inform me about it...

Do I need to file forms 5471 for them? Also for 2011? And for 2010?

Thanks!


----------



## cescolar

*Even they don't know!*

Reading the instructions again, I see that it says that you need to file if you own STOCK of a corporation. I don't. I Just own a percentage of the social capital.

Am I home free?

I called the international office of the IRS, at -1267-941-1000 and they told me my question, (whether I had to file form 5471 or not) was beyond the scope of the knowledge of the people at the hotline. That I should get a lawyer or a CPA to answer me.


----------



## Bevdeforges

All this FATCA stuff is beyond the ken of anyone, or so it seems. Basic rule of thumb for situations like this is to disclose, but to the strict letter of any instructions you read. By filing the 8938 for your ownership interest in the companies, you have disclosed. If you are deemed to need to file some other form about this stuff, the IRS will get back to you about it - but they cannot accuse you of "failure to file" or "failure to disclose." 

I'd take the "stock" part of the instructions seriously, and if they should come back to you on it, say that's how you interpreted the instructions. There is a good chance they won't come back to you at all, but if they do, say "sorry" and offer to fill out the extra forms. 
Cheers,
Bev


----------



## cescolar

Thanks Bev, that makes me feel better...

Since I am retired and have lots of time, I am even thinking of asking for a private letter ruling (PLR) from the IRS Office of Chief Counsel. There is normally a fee associated with the request, but they say you can request a waiver, based on hardship.

The fact is that my companies are bleeding! I am going to sell the one in Brazil, at a loss. So there is a silver lining: I was planning on eating up the loss, but now that they know about it, I can claim the loss in next year's return!
In the one in Spain I had to lend it 200K euros to keep it floating...
Perhaps I can convince them it is a hardship, to have to pay a fee for corporations that are in the red (and therefore are not going to generate one dime of income for them!)

It is amazing that the IRS does not define "stock" anywhere! I have been searching their website and the entire web, but no luck...


----------



## cescolar

The thing that worried me after talking to the IRS: I asked if I could send them a letter explaining my circumstances, asking if I needed to file form 5471 or not. The answer was: "Don't write the letter: if you needed to file, you needed to file"!
If they really wanted to make an easy buck, the penalties are of $10K for each form and attached schedule, multiply that for each year! That would be really unfair, specially when no taxes would be due as a result...but we are starting already with an unfair situation, requiring US citizens to pay taxes in the US regardless of their country of residence...


----------

