Schedule O Part 1 & 2: Organization & Acquisition of Foreign Stock - IRS Form 5471

Summary

This video tutorial explains the filing requirements for Schedule O, parts 1 and 2, focusing on the organization or reorganization of foreign corporations and reporting of stock acquisitions or dispositions. It clarifies who needs to file, the conditions under which filing is necessary, and provides a step-by-step guide on completing the form, including details for officers, directors, and U.S. shareholders. The video also covers how to report additional stock acquisitions and changes in corporate structure, offering insights into the tax implications and the process for filing the initial and subsequent forms.

Takeaways

• 📘 Schedule O is used for the organization or reorganization of a foreign corporation and to report acquisitions or dispositions of stock.
• 🔍 Part 1 of Schedule O applies to Category 2 filers, while Part 3 applies to Category 3 filers, with John being an example of both.
• 📌 Schedule O is generally filed in the first year an entity is formed and not required every year unless there are specific events like reorganization or stock transactions.
• 📝 John, as a Category 2 and 3 filer, needs to complete both Part 1 and Part 2 of Schedule O for the initial filing.
• 🏢 Part 1 requires information about officers and directors who are U.S. persons, even if they are not shareholders.
• 📊 Part 2 is completed by U.S. shareholders when there is a Category 3 filing situation, such as when a U.S. person acquires enough stock to meet the 10% ownership requirement.
• 📅 The date of acquisition and any additional acquisitions of 10% or more must be reported, triggering another filing if such events occur.
• 📑 In Part 2, details about the type of return filed by the shareholder, the date it was filed, and the IRS office where it was submitted are required.
• 🤵 Section B lists U.S. persons who are officers or directors of the foreign corporation, including their names, addresses, and Social Security numbers.
• 💼 Section C details the acquisition of stock by U.S. shareholders, including the class of stock, date of acquisition, method, and amount of shares acquired.
• 🏢 Section E covers the organization or reorganization of the foreign corporation, detailing the shareholders who contributed capital and the assets transferred.

Q & A

What is Schedule O used for in the context of the video?

Schedule O is used for reporting the organization or reorganization of a foreign corporation and for reporting acquisitions or dispositions of the corporation's stock.

Who needs to file Schedule O?

Category two (Cat 2) and category three (Cat 3) filers need to file Schedule O.

When is Schedule O typically filed?

Schedule O is generally filed in the first year the entity is formed and then again if there are specific events such as a reorganization or a change in stock ownership.

What is a Cat 2 filer according to the script?

A Cat 2 filer is a U.S. person who is an officer or director of the foreign corporation, not necessarily an owner.

What is a Cat 3 filer?

A Cat 3 filer is a U.S. shareholder who has acquired enough stock to meet the 10% ownership requirement.

Why might a person file Schedule O in subsequent years after the initial filing?

A person might file Schedule O again in subsequent years if there is a reorganization of the company, an acquisition, or disposition of the stock that affects the corporate ownership structure.

What information is required in Part 1 of Schedule O for Cat 2 filers?

Part 1 of Schedule O for Cat 2 filers requires information about officers and directors, including their names, addresses, ID numbers, and the date they acquired shares.

What is the purpose of Part 2 of Schedule O?

Part 2 of Schedule O is completed by U.S. shareholders to report when they have a Cat 3 filing situation, such as when they acquire enough stock to meet the 10% ownership requirement.

What is the significance of the reference ID number in Schedule O?

The reference ID number is used to consistently identify the foreign corporation across different tax forms and filings.

What additional information might be required in Section F of Schedule O?

Section F of Schedule O might require information about whether the foreign corporation filed a U.S. income tax return in the last three years, the date of any reorganization in the last four years, and if the foreign corporation is part of a consolidated group, a chart showing its position in the ownership chain.

How does the script suggest handling the situation where a U.S. person is both an officer/director and a shareholder?

The script suggests that in such cases, the person would be identified in both Part 1 for their role as an officer/director and in Part 2 for their status as a U.S. shareholder.