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Determining U.S. Shareholder and CFC Status

Defining U.S. Shareholders and CFCs; Direct, Indirect and Constructive Ownership; Form 5471 Categories

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A

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Friday, May 16, 2025

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

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This webinar will analyze the rules for determining U.S. shareholder and controlled foreign corporation (CFC) status, including determining direct, indirect, and constructive ownership. Our panel of knowledgeable global tax veterans will provide real world examples that walk international practitioners through these complex determinations.

Description

A U.S. person includes a citizen or resident of the United States, a domestic partnership, a domestic corporation, domestic estates, and certain trusts (IRC Sec 7701(a)(30)).

A U.S. shareholder is any U.S. person who owns or is considered as owning 10 percent or more of the total combined voting power or 10 percent or more of the total value of shares of stock of a foreign corporation (IRC Sec 951(b)).

And, a CFC is a foreign corporation owned (directly, indirectly, or constructively) by U.S. shareholders, whose ownership is more than 50 percent of the combined voting power or value of the stock of a foreign corporation (IRC Sec 957(a)).

Many tax professionals struggle with determining who qualifies as a U.S. shareholder, which foreign entities meet the definition of a CFC, and whether direct, indirect, and particularly constructive ownership rules may apply. The Tax Cuts and Jobs Act of 2017 (TCJA) further complicated these analyses with the repeal of Section 958(b)(4). This Section prevented the attribution of stock ownership from foreign entities to lower-level U.S. persons. Consequently, more U.S. persons are now treated as U.S. shareholders.

These determinations, however, are necessary. The IRS has in place a practice unit under the Large Business & International (LB&I) Division devoted to Section 958 Rules for Determining Stock Ownership. These same determinations impact whether Form 5471, Information Return of U.S. Persons With Respect to CFCs, must be filed. Not filing or incorrectly filing Form 5471 when required can generate harsh penalties.

Listen as our panel of experienced international tax advisers provides actionable steps and examples for determining U.S. shareholder and CFC status.

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Outline

  1. Determining U.S. shareholder and CFC status: introduction
  2. U.S. person
  3. U.S. shareholder
  4. CFCs
  5. Attribution rules
    1. Direct ownership
    2. Indirect ownership
    3. Constructive ownership
  6. Safe harbor relief
  7. Form 5471

Benefits

The panel will cover these and other critical issues:

  • Which categories of Form 5471 filers apply based on CFC status
  • Common misunderstandings that lead to incorrect CFC classifications
  • Attribution rules and ownership thresholds for U.S. shareholders
  • Real life examples clarifying the complexities of CFC status determinations

Faculty

McCormick, Patrick
Patrick J. McCormick, J.D., LL.M.
Partner
Rimon Law

Mr. McCormick specializes in the areas of international taxation and multinational trusts and estates. He has...  |  Read More

Tshilumba, Laura
Laura M. Tshilumba, CPA
International Tax Expert and CPE Instructor

Ms. Tshilumba, CPA, is an international tax expert and CPE instructor with over 20 years of experience in public...  |  Read More

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CPE On-Demand

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