Form 5472: Definitions

Filling out an IRS Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business and feeling lost?

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Let us break down the terms used on Form 5472 and their definitions for you!

Terms to Know

Reporting Corporation:

Either:

• A 25% foreign-owned U.S. corporation (at least one direct or indirect 25% foreign shareholder during the tax year)
  • 25% foreign shareholder: a foreign person that owns at least 25% of the total voting power of all classes of stock entitled to vote OR the total value of all classes of stock
  • Direct 25% foreign shareholder: A foreign person who owns directly at least 25% of the reporting corporation
  • Indirect 25% foreign shareholder: A foreign shareholder whose stock ownership of the reporting corporation is NOT attributed to another 25% shareholder.
• A foreign corporation engaged in trade or business within the U.S.

Related Party:

• Any direct or indirect 25% foreign shareholder of the reporting corporation
• Any person related to the reporting corporation (family, members of same controlled group, a grantor or fiduciary of any trust)
• Any person related to a 25% foreign shareholder of the reporting corporation
• any other person who is related to the reporting corporation

However, a related party does not include any corporation filing a consolidated federal income tax return with the reporting corporation

Reportable Transaction:

A transaction (sales, commissions, rents, loans, etc) between a foreign related party and the reporting corporation in which:

• Monetary consideration was the sole consideration paid or received

• Nonmonetary considerations are present

Foreign Person:

An individual who is:

• not a citizen or resident of the U.S.
• a citizen or resident of a U.S. possession that is not otherwise a citizen or resident
• an entity not created or organized in the U.S.
• A foreign estate or trust
• A foreign government engaged in commercial activity

Disregarded Entity (DE):

An entity that is disregarded from being separate from its sole owner for U.S. taxation

Foreign-owned U.S. DE:

A disregarded entity, as described above, owned entirely by a foreign person

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We hope that we provided some clarification on the terminology used on IRS Form 5472. If so, let us know in the comment!

Sources for definitions: Instructions for IRS Form 5472 (Rev. December 2024) and Form 5472 (Rev. December 2023)