Discussion:5471 issue: Japan Limited Company
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| Revision as of 06:06, 31 May 2007 Riley2 (Talk | contribs) (Sorry, I stand c) ← Previous diff |
Revision as of 11:35, 31 May 2007 IntlTax (Talk | contribs) (Axia, if your cl) Next diff → |
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| {{ForumReplyPost|UserID=Riley2|Date=31 May 2007|Text=Sorry, I stand corrected. As IntlTax indicates, a foreign eligible entity is a corporation if all of the members have limited liability, unless a check the box election is made to elect out of corporate status. Therefore, if no 8832 election is made, a 5471 would be required for this entity since it defaults to a corporation.}} | {{ForumReplyPost|UserID=Riley2|Date=31 May 2007|Text=Sorry, I stand corrected. As IntlTax indicates, a foreign eligible entity is a corporation if all of the members have limited liability, unless a check the box election is made to elect out of corporate status. Therefore, if no 8832 election is made, a 5471 would be required for this entity since it defaults to a corporation.}} | ||
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| + | {{ForumReplyPost|UserID=IntlTax|Date=31 May 2007|Text=Axia, if your client makes a check the box election, then your client will be required to annualy file Form 8858 and the income/loss from the TYK will flow directly to Form 1040. Note that the election to convert the TYK from corporation to disregarded entity will be treated as a taxable liquidation. Your client may recognize [http://www.andrewmitchel.com/html/sub_f_summary.html subpart F income] as a result of the deemed liquidation. In addition, gain recognized may be characterized as ordinary income under [[Sec. 1248]].}} | ||
Revision as of 11:35, 31 May 2007
Discussion Forum Index --> Tax Questions --> 5471 issue: Japan Limited Company
| 7 May 2007 | |
| I have a client who is an owner of a Japanese limited company, namely yuugengaishi in Japanese. Is it considered as foreign corporation for 5471 purpose which might trigger the filing of this form? I kind of heard that the check-the-box rule might make this entity not become a foreign corp for this purpose?? Anyone had prior experience in these? Many thanks | |
| 7 May 2007 | |
| Apparently, On 5/1/2006, all existing Yugengaishi's were converted to Tokurei Yugen Kaisha's which are eligible entities for which a check the box election to be taxed as a corporation is available. See Rev. Ruling 2006-3. | |
| 7 May 2007 | |
| Presumably, if the check the box election is not made, the taxpayer must file a Form 8865 (controlled foreign partnership). | |
| 30 May 2007 | |
| So if my client (a US citizen) is the single owner of this yugenkaisha, is it that there would be no filing requirement for 8865 or 5471 forms? | |
| 30 May 2007 | |
| As Riley says, in 2006 YKs were converted to TYKs. Rev. Rul. 2006-3 says that TYKs are not "per se" corporations. This means that they are eligible entities and can be treated as partnerships or disregarded entities. My understanding is that TYKs have limited liability. Because the owners of a TYK have limited liability, the entity would default to being treated as a corporation unless an entitiy classification election (a.k.a. "check the box" election, Form 8832) was made.
If your client owns more than 50% of the TYK and no entity classification election has been made, then Form 5471 would be required annually. If your client owns more than 50% of the TYK and such an election has been made, then Form 8865 or Form 8858 would be required annually. The penalty for failing to file each of these forms is US$10,000. | |
| 31 May 2007 | |
| Thank you for above. Just to make sure - since my client is a single owner, so in his case it could be elected to be treated as a disregarded entity, and the income/loss will flow to his 1040 without additional 8865 or other informaion reporting filing requirements? | |
| 31 May 2007 | |
| Sorry, I stand corrected. As IntlTax indicates, a foreign eligible entity is a corporation if all of the members have limited liability, unless a check the box election is made to elect out of corporate status. Therefore, if no 8832 election is made, a 5471 would be required for this entity since it defaults to a corporation. | |
| 31 May 2007 | |
| Axia, if your client makes a check the box election, then your client will be required to annualy file Form 8858 and the income/loss from the TYK will flow directly to Form 1040. Note that the election to convert the TYK from corporation to disregarded entity will be treated as a taxable liquidation. Your client may recognize subpart F income as a result of the deemed liquidation. In addition, gain recognized may be characterized as ordinary income under Sec. 1248. | |
