IRS Form 5472

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Jason B. Freeman

Jason B. Freeman

Managing Member

214.984.3410
jason@freemanlaw.com

Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine , a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

What is Form 5472?

Form 5472 is an information return used to fulfill federal reporting obligations under Internal Revenue Code (IRC) sections 6038A and 6038C. A reporting corporation that engages in a monetary or non-monetary reportable transaction with a foreign or domestic related party is required to file Form 5472 with its income tax return. Failing to timely file Form 5472 or maintain proper records results in a $25,000 penalty, with an additional $25,000 penalty for failing to rectify the deficiency within 90 days of IRS notification. Filing a substantially incomplete Form 5472 constitutes a failure to file.

Reporting corporations fall into two categories: (1) 25% foreign-owned U.S. corporations, or (2) foreign corporations engaged in a trade or business inside the United States. The first category applies when a corporation has at least one foreign shareholder owning at least 25% of the total voting power of all classes of voting stock, or 25% of the total value of all classes of stock.

Reportable transactions are any monetary transactions listed in Part IV of Form 5472 (e.g., sales, rents, commissions, interest, etc.) between reporting corporations and foreign related entities. Transactions involving non-monetary consideration, or the exchange of less than the full amount of consideration, are reportable under Part VI of the form.

Related parties are 25% foreign shareholders of the reporting corporation, or any persons related to (1) the reporting corporation, (2) a 25% foreign shareholder of the reporting corporation, or (3) any other person related to the reporting corporation. Corporations filing a consolidated federal  income tax return with the reporting corporation are not considered related parties.

Reporting corporations are exempt from filing Form 5472 in six situations.

Special rules for disregarded entities: a U.S. disregarded entity that is wholly owned by a foreign person cannot claim an exception from filing Form 5472 relying on the filing of Form 5471 or the qualification as a foreign sales corporation. Since this type of entity is not required to file an income tax return, it must instead file Form 5472 with a pro forma Form 1120.

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