Report on these lines dividends received and paid by the foreign corporation not previously taxed under subpart F in the current year or in any prior year. 2007-64, 2007-42 I.R.B. Is not related (using principles of section 954(d)(3)) to the foreign-controlled corporation. Enter the appropriate code from the table below for the separate category of income with respect to which the Schedule Q is being completed. Certain filers may be able to use alternative information (as defined in section 3.01 of Rev. Enter each shareholder's allocable percentage of the foreign corporation's subpart F income. Pre-1987 U.S. dollar PTEP should be translated into the foreign corporation's functional currency using the rules of Notice 88-70 and added to post-1986 amounts in the appropriate PTEP category. Foreign personal holding company income derived in the active conduct of a banking, finance, or similar business (section 954(h)). Category 1b, 1c, 5b, and 5c filers are not required to file Schedule J for foreign-controlled corporations. Add lines 1a through 1g" field, "3.Gross foreign base company sales income (see section 954(d))" field, "4.Gross foreign base company services income (see section 954(e))" field, "5.Gross foreign base company oil-related income (see section 954(g)) after application of section 954(b)(8)" field, "6.Gross foreign base company income. 2019-40 provides relief for certain types of Category 5 filers. field, "17. For details, see the Instructions for Form 8918. Proc. Enter the appropriate code on line a (at the top of page 1 of Schedule J). Column (e)(iii) is PTEP described in the following three subgroups (which are aggregated into a single PTEP group). During the tax year, was the CFC a qualifying insurance company (as defined in section 953(e)(3)) that derived qualified insurance income (as defined in section 954(i)(2))? Do not include any foreign currency gain or loss with respect to PTEP within the reclassified section 965(b) PTEP group or the section 965(b) PTEP group. However, see Certain Category 1 and Category 5 Filers, later, which may apply. Divide this amount by the number on line 2.)" Total each amount in column (i) and enter on line 3. CFC1 is deemed to pay the $4 of withholding tax paid by CFC2 in Year 2. Enter the U.S. dollar amount of the recipient foreign corporation's income taxes deemed paid that are properly attributable to the PTEP distribution reported in column (f) and not deemed to have been paid by the domestic corporation for any prior tax year. Schedule H is only prepared for the general, passive, and section 901(j) categories of income. The income groups include the subpart F income groups, the tested income group, and the residual income group. See Schedule H, line 2g. (i) Country Code (ii) Such tax is a tax related to previously taxed earnings and profits that were included as subpart F income and is reported on line 4, column (e)(x), of Schedule E1 of CFC2s Form 5471. Rule of thumb - always inquire about underlying partnerships and corporations when investing more than 10% in a foreign entity. Changes to separate Schedule M (Form 5471). See Schedule E, Lines a, b, and c, later, for details. Do not include foreign income taxes paid or accrued by the foreign corporation in its other tax years beginning after December 31, 2017, or that do not relate to the current tax year. If Yes, enter the amount from the prior year Form 8990, line 31. See section 381(c)(2)(B) and Regulations section 1.367(b)-7(d)(2)(ii). See Regulations section 1.960-1(d)(2)(ii)(C). Do not report these amounts on line 1b. Subtract line 16b from line 16a" field, "16d.Net foreign base company services income excluded under high-tax exception" field, "16e.Subtract line 16d from line 16c" field, "17.Adjusted net foreign base company oil-related income:", "17b.Expenses allocated and apportioned to line 5 under section 954(b)(5)" field, "17c.Subtract line 17b from line 17a" field, "18.Adjusted net full inclusion foreign base company income:", "18a.Enter the excess, if any, of line 12 over line 8" field, "18b.Expenses allocated and apportioned under section 954(b)(5)" field, "18c.Net full inclusion foreign base company income. The hovering deficit offset included in column (d) is reported as a positive number. During the tax year, did the CFC derive income (either directly or through a branch or similar establishment, for example, disregarded entity) in connection with the purchase or sale from, to, or on behalf of a related person, of personal property manufactured by the CFC within the meaning of Regulations section 1.954-3(a)(4)(iv)? Income, gain, deduction, or loss from any transaction (including a hedging transaction) and transactions involving physical settlement of a regular dealer in property, forward contracts, option contracts, and similar financial instruments (section 954(c)(2)(C)). For example: Enter the deductions (including taxes) properly allocable to the amount on line 4 (or to which such deductions would be allocable if there were such gross income). However, see the instructions for Schedule J, later, for changes that affect how the schedule is completed. The partnerships average adjusted basis in the depreciable tangible property of the partnership is generally determined based on the average of the adjusted basis in the property as of the close of each quarter of the partnerships tax year that ends with or within the CFCs tax year. Foreign taxes for which credit is allowed (U.S. dollars). Enter this amount on line 37a. For line 3(2), $150 of gross income is reported in column (ii), $10 of foreign tax is reported in each of columns (x) and (xii), and the checkbox in column (xiv) is not checked. Exception for certain income subject to high foreign taxes. For purposes of Category 1 filers, 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 section 965 SFC or, in the case of a tax year of a foreign corporation beginning after December 31, 2017, 10% or more of the total combined voting power or value of shares of all classes of stock of a section 965 SFC. Category 4 filers should list all direct owners of the CFC. A "reference ID number" is a number established by or on behalf of the U.S. person identified at the top of page 1 of the form that is assigned to a foreign corporation with respect to which Form 5471 reporting is required. Check the box in column (xiv) of the line corresponding to any item of income with respect to which the subpart F high-tax exception applies. Category 5b and 5c filers are not required to file Schedule H for foreign-controlled corporations. Subtract line 48 from line 47. For purposes of Category 5 filers, 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, in the case of a tax year of a foreign corporation beginning after December 31, 2017, 10% or more of the total combined voting power or value of shares of all classes of stock of a CFC; or. The amount of U.S. property held (directly or indirectly) by the CFC does not include any item that was acquired by the foreign corporation before it became a CFC, except for the property acquired before the foreign corporation became a CFC that exceeds the applicable earnings (as defined in section 956(b)) accumulated during periods before it became a CFC. Complete a separate Schedule Q for foreign source income in each separate category and U.S. source income in each separate category. A corporation that uses an accrual method of accounting must use accrued payments and accrued receipts for purposes of computing the total amount to enter on each line of Schedule M. Schedule O is used to report the organization or reorganization of a foreign corporation and the acquisition or disposition of its stock. .All persons identified in Item H must complete a separate Schedule P (Form 5471) if the person is a U.S. shareholder described in Category 1a, 1b, 4, 5a, or 5b. Proc. 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; See Regulations section 1.6038-2(d) for exceptions. See Regulations section 1.9601(d)(2)(ii). This is the case even if the Schedule I-1 also includes general category income. 2016-8 provides that as of December 22, 2015, section 901(j) no longer applies to Cuba. If the CFC has a tested loss on line 6, enter zero. Enter the factoring income (as defined in section 864(d)(1)) if no subpart F income is reported on line 1a of Worksheet A, because of the operation of the de minimis rule (see lines 1a and 10 of Worksheet A and the related instructions under Line 1a and Line 10, De minimis rule), later. Part I To Be Completed by U.S. Officers and Directors. Schedule M. In translating the amounts from functional currency to U.S. dollars, use the average exchange rate for the foreign corporation's tax year. U.S. shareholder's pro rata share of the amount on line 3" field, "5. Previously, column (c) requested amounts in functional currency. See Regulations section 1.6046-1(i) for rules on determining when U.S. persons constructively own stock of a foreign corporation and therefore are subject to the section 6046 filing requirements. Enter amounts included in gross income of the U.S. shareholder(s) under section 951(a)(1)(A) or section 951A with respect to the CFC. Use Schedule H to report the foreign corporation's current E&P for U.S. tax purposes. Because columns (b) and (c) are new this year, the prior year ending balances in columns (b) and (c) will not carry forward to new columns (b) and (c). In other words, are any amounts described in section 954(c)(2)(A) excluded from line 1a of Worksheet A? See the instructions for Schedule I-1, Line 4 and Line 6 , later, for details. If the filer is required to complete Schedule J (Form 5471) with respect to more than one category of income, the total of all amounts entered in Schedule R (Form 5471), column (d) should equal the amount entered on line 9, column (f) of the Schedule J (Form 5471) that is filed with code TOTAL entered on line a of that Schedule J. On pages 2 and 3, Schedule E-1, former line 15 is now line 13 and now requests filers to combine lines 8 through 12 in columns (a), (b), and (c). Do not report taxes that are not creditable, including taxes for which a credit is disallowed under section 901(j), (k), (l), or (m) or suspended under section 909. Thus, the sale of a partnership interest by a CFC that meets the ownership threshold constitutes subpart F income only to the extent that a proportionate sale of the underlying partnership assets attributable to the partnership interest would constitute subpart F income. See sections 6662(j) and 6664(c) for additional information. If a domestic corporation includes an amount in income under section 951A, such domestic corporation is deemed to pay foreign income taxes equal to 80% of the product of For the computation of such amount, see Form 1118, Schedule D. Amounts reported on line 9 should be negative numbers. However, do not enter a date for which information was reported on Section E. Instead, enter the date (if any) of any reorganization prior to that date (if it is within the last 4 years). See Regulations section 1.960-3(c)(1). An example of an adjustment entered on Line 6 is the foreign taxes imposed on receipt of a distribution of PTEP from a lowertier foreign corporation. Enter the applicable two-letter codes (from the list at IRS.gov/CountryCodes). In general, a dividend received by a CFC from another CFC is a tiered hybrid dividend to the extent of the sum of the receiving CFC's hybrid deduction accounts with respect to shares of stock of the CFC that pays the dividend. Enter foreign income taxes that are disallowed under section 901(j), generally foreign income taxes paid or accrued to certain sanctioned countries. Attach a statement with a description and the amount of any adjustments required before taking into account taxes deemed paid by the foreign corporation. Columns (e)(i) and (e)(ii) are PTEP originally attributable to inclusions under section 965(a) and E&P treated as PTEP under section 965(b)(4)(A), respectively, and reclassified as investments in U.S. property (section 959(c)(1)(A) amounts). Certain adjustments (required by Regulations sections 1.964-1(b) and (c)) must be made to the foreign corporation's line 1 net book income or (loss) to determine its current E&P. Enter foreign currency transaction gain or loss reported on the income statement. Enter the excess of gains over losses from transactions (including futures, forward, and similar transactions) in any commodities. Except for columns (a), (b), and (c), which are new this year, this amount should equal the amount that was reported as the balance on line 18 of the prior year Schedule E-1. See section 959(b). These numbers are used to uniquely identify the foreign corporation in order to keep track of the corporation from tax year to tax year.