Abusive Offshore Tax Avoidance Schemes -
Facts (Section V)
From: http://www.irs.gov/businesses/small/article/0,,id=106560,00.html

V. Filing Requirements

There are multiple filing requirements associated with legitimate foreign transactions. Failure to file required returns may subject the taxpayer to substantial civil and criminal penalties. Also, failure to file these returns may extend the statute of limitations for assessment and collection of the related taxes (IRC 6501(c)(8)).

• Form 3520 - Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts - (IRC §§6039F and 6048 - effective for returns due after August 20, 1996)

  There are several situations in which a Form 3520 (or statement with similar information) is required to be filed. The most common circumstances are where a U.S. person:

  1. Creates or transfers money or property to a foreign trust ( IRC 6048(a)).
  2. Receives (directly or indirectly) any distributions from a foreign trust (IRC 6048(c)).
  3. Receives certain gifts or bequests from foreign entities (IRC 6039F).

• Form 3520-A - Annual Information Return of Foreign Trust with a U.S. Owner - (IRC § 6048(b))

  Any U.S. person who is considered to be the "U.S. owner" of a foreign trust must ensure that the trust files Form 3520-A. The determination of what constitutes a "U.S. owner" is made pursuant to IRC §§671 through 679.

• Form 5471 - Information Return of U.S. Persons With Respect to Certain Foreign Corporations - (IRC §6038)

  Form 5471 is required of a U.S. shareholder who acquires, disposes of, or owns certain proportions of the stock of a foreign corporation, or who controls or serves as an officer or director of a "controlled foreign corporation" (IRC §§6038 or 6046). A controlled foreign corporation (CFC) is a foreign corporation, the stock of which is more than 50 percent owned (by vote, or value, at any time during the year) by "U.S. Shareholders". The determination of what constitutes a "controlled foreign corporation" is made pursuant to IRC § 951.

• Form 5472 - Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business - (IRC §§6038A and 6038C)

  Form 5472 is required to be filed by a "reporting corporation" that has "reportable transactions" with foreign or domestic related parties. A "reporting corporation" is one that is either a 25% foreign-owned corporation or a foreign corporation engaged in a trade or business within the United States. A corporation is 25% foreign-owned if it has at least one direct or indirect 25% foreign shareholder at any time during the tax year.

• Form 926 - Return by a U.S. Transferor of Property to a Foreign Corporation - (IRC §6038B)

  Form 926 is required to be filed by each U.S. person who transfers property to a foreign corporation in an exchange described in IRC §§332, 351, 354, 355 , 356,
  or 361. The form is also required if the U.S. person makes a distribution described in §336 to a non-U.S. person. For special rules regarding the filing of Form 926, refer to the instructions on the form.

• Form 8865 - Return of U.S. Persons With Respect to Certain Foreign Partnerships - (IRC §§6038, 6038B, and 6046A)

  Form 8865 is used to report the information required under §6038 (with respect to controlled foreign partnerships), §6038B (transfers to foreign partnerships), or §6046A (acquisitions, dispositions, and changes in foreign partnership interests). For more information about the requirements to file, refer to the Form 8865 Instructions. Within the instructions, there are four categories of filers. If a U.S. person falls into one of the four categories, that person must file Form 8865.

Note: This page contains one or more references to Internal Revenue Code (IRC) sections. A link to the Internal Revenue Code is included for the convenience of those who would like to read the technical reference material. To access the applicable Internal Revenue Code sections visit the Tax Code, Regulations, and Official Guidance page.

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