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I own two pieces of raw land in CR and am living in the states at this time, both are in corporations. I’m assuming that they are considered Dormant. No income is being generated from them. Do I need to submit the 5471 form. If so how much needs to be filled out.
Had you searched my site for “5471” you would have found two articles:
Ramifications of U.S. Crackdown on Foreign Tax Havens
Kevin Mullin, JD, CPA, LLM (Tax) – December 2009The Internal Revenue Service recently announced the opening of its first criminal investigation office in Panama and the agency is targeting far-flung jurisdictions which permit bank-secrecy, as well as tax havens around the world at:
[ https://www.welovecostarica.com/public/Ramifications_of_US_Crackdown_on_Foreign_Tax_Havens.cfm ]
And…
If You Are A U.S. Citizen Who Owns A Costa Rican Corporation – You’d better be filing IRS Form 5471.
US International Tax Expert – Jason WarnerU.S. citizens who move to, or acquire property in, Costa Rica often find it necessary or convenient to form a Costa Rican corporation to own their local real estate. Many such persons may not know that IRS rules require reporting the formation of the Costa Rican corporation and annual filings thereafter on Form 5471, even if the corporation earns no income or is dormant. . . . At:
[ https://www.welovecostarica.com/public/2270.cfm ]
Scott
Please try the links again rccrain
But important to remember that [b]these articles are very old[/b] so this information could be very wrong by now…
Please consult with an expert about any changes that may have taken place.
Scott
[quote=”rheeren”]I own two pieces of raw land in CR and am living in the states at this time, both are in corporations. I’m assuming that they are considered Dormant. No income is being generated from them. Do I need to submit the 5471 form. If so how much needs to be filled out.[/quote]
If you search for Margaritamomma’s question entitled “IRS Obligations” on 02/26/2015, you will see my response as well as others about the 5471 form. It is something I knew nothing about until I read about it here several years ago. You can also search the IRS website for form 5471 to see the rules. Like you, my husband and I own land and corporations. And, yes, you must file these forms. According to our tax guy, the forms can not be filed electronically. They have to be mailed in with your federal tax return. I don’t know if this is really true or not, but since we have been using the same guy for years, we trust what he told us.
Very large can of worms. While forming and holding an S.A. for the purpose of simply holding property (any type, not just Real Estate… it can be a car, horses, or any other material object) that does not generate income, which Uncle Sam is looking to tax… the forms require the documentation of the value of the assets within the corporation.
That itself has trouble written all over it! While the vast majority of S.A.s held by expats are non-functioning corporations generating no taxable income of any type the form fishes for an awful lot of information on what you have… and have most likely purchased with money already taxed.
The form’s instructions seem to provide a simplified reporting procedure for “dormant” corporations but one would have to wonder if that in itself might not generate more questions requiring further answers and surrender of personal information.
Income and tax reporting is one thing, giving up information that in no way is related to the declaration of income and the payment of required and appropriate taxes is another.
We’ve been filing this form for several years now. We were told that it cannot be filed electronically, so we have always mailed it with our other forms. The IRS has never had questions about our filing.
You absolutely, positively HAVE to file this form if you have any kind of corporation in Costa Rica (or any other country). I personally know of someone who had really immense tax/penalty problems because they were unaware this needed to be filed.
This form does have to be mailed via a “hard copy” to the IRS. I had my tax guy prepare all of our forms in hard copy and mailed them together. BTW, he actually “divorced” us after the first year of this because he was unable to feel really confident that he was giving me the correct advice about providing information on the form and this was after reading the IRS instructions.
Luckily, I had heard of this the first year we moved to Costa Rica. When we returned to the States, was relieved to only have to file this one more year.
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