# How to Report a Foreign Bond Investment Company



## Alltimegreat1 (Feb 25, 2015)

I am an American expat who has been living outside the US for a while, currently in Germany. I have always made sure to be compliant with US tax and account-reporting requirements.

Now I am planning to invest about $25,000 in bonds in a different country, and to register a company in that country to do this.

Will this company cause a huge headache for my US tax return or can it easily be reported using the normal tax software programs?

Thanks in advance for the insight!


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## 255 (Sep 8, 2018)

Alltimegreat1 -- Congratulations on forming your new company! Unfortunately, the U.S. doesn't necessarily make it easy. I have no knowledge of readily available software, like TurboTax or TaxAct (I utilize the fillable forms the IRS provides, for free.) You definitely have more research to do to determine how you ultimately want to structure your new entity. You have two main areas to do research: a. Controlled Foreign Corporations (CFC) rules which would generally require you to file an IRS form 5471 and b. Passive Foreign Investment Company (PFIC) rules that might require filing IRS form 8621. An alternative for you, might be to also open a U.S. State based entity and have your new foreign entity classified as a disregarded entity, utilizing IRS form 8832. I suppose, depending on the entity selected, your U.S. entity could also be disregarded, so you could use the normal commercial tax reporting software. Good luck! Cheers, 255


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## Moulard (Feb 3, 2017)

This is at the edge of my knowledge, so you would want to verify, but I am pretty sure that if the company is closely held by you (sole proprietorship, wholly owned s-corp or LLC equivalent), you can also treat it as a flow-through entity and simply treat company income as personal income.

This approach would greatly simplify your US tax returns as form 5471 and the like are some of the most complex to complete correctly and while you technically may be able to use normal software to complete the form, you won't get too hand-holding by way of say a Q&A workflow.


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