Are stock issuance & capital contributions a reportable transaction for Delaware C Corps in Form 5472. Google says true for LLC what about C Corp, is it also simply a Line 26 "other amounts received" item?
Form 5472 is a tax form that must be filed by certain foreign-owned corporations that are engaged in a reportable transaction with a related party. If you are a foreign founder of a C corporation and you engage in a reportable transaction with the corporation, you may be required to file Form 5472.
A reportable transaction is defined as any transaction between a foreign corporation and a related party that is not in the ordinary course of the corporation's trade or business. Some examples of reportable transactions include the sale of property to a related party, the lending of money to a related party, and the transfer of intangible property to a related party.
Whether or not the issuance of stock to a foreign founder is a reportable transaction will depend on the specific circumstances of the transaction. If you are unsure whether the issuance of stock to a foreign founder is a reportable transaction, you should consult with a tax professional or refer to the instructions for Form 5472.
Form 5472 is used to report transactions between a U.S. corporation or a foreign-owned U.S. corporation (including C corporations).Generally, stock issuance under Form 5472 by a C corporation to foreign founders may have reporting requirements , especially if the foreign founders are considered related parties to the corporation. But this requirements can depend on various factors, such as transaction amounts, ownership percentage, , and other necessary details.
Good question. If a domestic C corporation issues stock to a foreign founder, that is generally not considered a reportable transaction, so it is not disclosed on the Form 5472.
The Form 5472 Part IV (Monetary Transactions Between Reporting Corporation and Foreign Party) is used to report transactions between the corporation and foreign party to the extent that those amounts are used in determining the taxable income of the reporting income. That is the key point. If a transaction is treated as income or an expense of the reporting corporation, it is used in determining the taxable income of the corporation, so they would be disclosed in Part IV.
When a corporation issues stock to a founder in exchange for cash or other property, the issuance of stock is not a deductible expense that would be used in calculating the taxable income of the reporting corporation. It is generally only a balance sheet entry, so it doesn't make sense to report those amounts on either Line 21 or Line 35 for other amounts received or paid.
The Form 5472 is generally still required because a foreign founder is participating in management of the company, so the corporation must still complete Part VI for nonmonetary transactions between the corporation and foreign party.
Corporations must also include an IRC Section 351 statement with the tax filing when it issues stock.
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