Form 5471 filer categories [Pre-tax reform]

In Part 1 of the IRSMedic Controlled Foreign Corporation (CFC)/Form 5471 series, we discussed what CFCs are, in Part 2 we discussed the the insane history behind Form 5471 filing requirements. In this, Part 3, we will do our best to explain what type of filer you are.
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You are NOT a Category 1 Form 5471 filer

How do I know this? Because the Category 1 Form 5471 filing requirement has been repealed by section 413(c)(26) of the American Jobs Creation Act of 2004, which repealed 26 USC section 6035.

Now look at that — with only 4 categories remaining, we are 20% through! Talk about progress.

Why do I need to know what type of Form 5471 Category filer I am?

The answer is that with Form 5471, there are numerous additional schedules to file. Your Form 5471 category determines which additional Form 5471 Schedules you need to file:

A Category 2 Form 5471 filer has to file Form 5471 Schedules G an O.
A Category 3 Form 5471 filer has to file Form 5471 Schedules A, B, C, E, F, G, and Schedule O Part II.
A Category 4 Form 5471 filer has to file Form 5471 Schedules A, B, C, E, F, G, H, I, J, and M.
A Category 5 Form 5471 filer has to file Form 5471 Schedules A, G, H, I, and J.

There really is no other way to find out which type of filer you are, than to read the Form 5471 instructions from irs.gov copied below. This part could be consequential.

Category 2 Form 5471 Filer

This includes a U.S. citizen or resident who is an officer or director of a foreign corporation in which a U.S. person (defined below) has acquired (in one or more transactions):

Stock which meets the 10% stock ownership requirement (described below) with respect to the foreign corporation or
An additional 10% or more (in value or voting power) of the outstanding stock of the foreign corporation.

A U.S. person has acquired stock in a foreign corporation when that person has an unqualified right to receive the stock, even though the stock is not actually issued. See Regulations section 1.6046-1(f)(1) for more details.

Stock ownership requirement.

For purposes of Category 2 and Category 3,the stock ownership threshold is met if a U.S. person owns:

10% or more of the total value of the foreign corporation’s stock or
10% or more of the total combined voting power of all classes of stock with voting rights.

U.S. person.

For purposes of Category 2 and Category 3, a U.S. person is:

A citizen or resident of the United States,
A domestic partnership,
A domestic corporation, and
An estate or trust that is not a foreign estate or trust defined in section 7701(a)(31) .

See Regulations section 1.6046-1(f)(3) for exceptions.

Category 3 Form 5471 Filer

This category includes:

A U.S. person (defined above) who acquires stock in a foreign corporation which, when added to any stock owned on the date of acquisition, meets the 10% stock ownership requirement (described above) with respect to the foreign corporation
A U.S. person who acquires stock which, without regard to stock already owned on the date of acquisition, meets the 10% stock ownership requirement with respect to the foreign corporation;
A person who is treated as a U.S. shareholder under section 953(c) with respect to the foreign corporation;
A person who becomes a U.S. person while meeting the 10% stock ownership requirement with respect to the foreign corporation; or A U.S. person who disposes of sufficient stock in the foreign corporation to reduce his or her interest to less than the stock ownership requirement.

For more information, see section 6046 and Regulations section 1.6046-1.

Category 4 Form 5471 Filer

This includes a U.S. person who had control (defined below) of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of the foreign corporation.

U.S. person.

For purposes of Category 4, a U.S. person is:

A citizen or resident of the United States;
A nonresident alien for whom an election is in effect under section 6013(g) to be treated as a resident of the United States.
An individual for whom an election is in effect under section 6013(h), relating to nonresident aliens who become residents of the United States during the tax year and are married at the close of the tax year to a citizen or resident of the
United States;
A domestic partnership;
A domestic corporation; and
An estate or trust that is not a foreign estate or trust defined in section 7701(a)(31).

See Regulations section 1.6038-2(d) for exceptions.

Control.

A U.S. person has control of a foreign corporation if, at any time during that person’s tax year, it owns stock possessing:

More than 50% of the total combined voting power of all classes of stock of the foreign corporation entitled to vote or
More than 50% of the total value of shares of all classes of stock of the foreign corporation. A person in control of a corporation that, in turn, owns more than 50% of the combined voting power, or the value, of all classes of stock of another corporation is also treated as being in control of such other corporation.

Example.

Corporation A owns 51% of the voting stock in Corporation B. Corporation B owns 51% of the voting stock in Corporation C. Corporation C owns 51% of the voting stock in Corporation D. Therefore, Corporation D is controlled by Corporation A.

For more details on “control,” see Regulations sections 1.6038-2(b) and (c).

Category 5 Filer

This includes a U.S. shareholder who owns stock in a foreign corporation that is a CFC for an uninterrupted period of 30 days or more during any tax year of the foreign corporation, and who owned that stock on the last day of that year.

U.S. shareholder.

For purposes of Category 5, a U.S. shareholder is a U.S. person who:

Owns (directly, indirectly, or constructively, within the meaning of sections 958(a) and (b)) 10% or more of the total combined voting power of all classes of voting stock of a CFC or
Owns (either directly or indirectly, within the meaning of section 958(a)) any stock of a CFC (as defined in sections 953(c)(1)(B) and 957(b)) that is also a captive insurance company.

U.S. person.

For purposes of Category 5, a U.S. person is:

A citizen or resident of the United States,
A domestic partnership,
A domestic corporation, and
An estate or trust that is not a foreign estate or trust defined in section 7701(a)(31). See section 957(c) for exceptions. CFC. A CFC is a foreign corporation that has U.S. shareholders that own (directly, indirectly, or constructively, within the meaning of sections 958(a) and (b)) on any day of the tax year of the foreign corporation, more than 50%

The total combined voting power of all classes of its voting stock, or
The total value of the stock of the corporation.

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