Instructions For Form 8858 - 2011 (Page 2 of 5) in pdf

An eligible entity uses Form 8832 to

agrees to have another person file the

Submit all requests for approval to:

elect how it will be classified for federal

form and schedules for him or her may be

Internal Revenue Service, Attention:

tax purposes. A copy of Form 8832 is

subject to the above penalties if the other

Substitute Forms Program,

attached to entity’s federal tax return for

person does not file a correct and proper

SE:W:CAR:MP:T:M:S, 1111 Constitution

the tax year of the election; however,

form and schedule.

Avenue NW, IR-6526, Washington, DC

special rules apply if the entity is not

20224.

Other Reporting

required to file a tax return. For more

Important: Be sure to attach the

information, see Where To File in the

approval letter to Form 8858.

Requirements

instructions for Form 8832.

Every year, the IRS issues a revenue

Note. New rules, effective September

Reporting Exchange Rates on

procedure to provide guidance for filers of

28, 2009, allow an eligible entity to

computer-generated forms. In addition,

Form 8858

request a late entity classification

every year the IRS issues Pub. 1167,

When translating amounts from functional

election. See Rev. Proc. 2009-41,

General Rules and Specifications For

currency to U.S. dollars, you must use the

2009-39 I.R.B. 439 for more information.

Substitute Forms and Schedules, which

method specified in these instructions.

reprints the most recent applicable

Tax Owner of FDE

But, regardless of the specific method

revenue procedure. Pub. 1167 can be

required, all exchange rates must be

The tax owner of the FDE is the person

ordered by calling 1-800-TAX-FORM

reported using a “divide-by convention”

that is treated as owning the assets and

(1-800-829-3676). This publication is also

rounded to at least 4 places. That is, the

liabilities of the FDE for purposes of U.S.

available from the IRS website at

exchange rate must be reported in terms

income tax law.

IRS.gov.

of the amount by which the functional

Direct Owner of FDE

Dormant FDEs

currency amount must be divided in order

The direct owner of an FDE is the legal

to reflect an equivalent amount of U.S.

Announcement 2004-4, 2004-4 I.R.B.

owner of the disregarded entity.

dollars. As such, the exchange rate must

357, provides for a summary filing

be reported as the units of foreign

For example, assume A, a U.S.

procedure for filing Form 8858 for a

currency that equal one U.S. dollar,

individual, is a 60% partner of CFP, a

dormant FDE. A dormant FDE is an FDE

rounded to at least 4 places. Do not

controlled foreign partnership. FDE 1 is a

that would be a dormant controlled

report the exchange rate as the number

foreign disregarded entity owned by CFP,

foreign corporation (CFC) if it were

of U.S. dollars that equal one unit of

and FDE 2 is a foreign disregarded entity

treated as a foreign corporation for U.S.

foreign currency.

owned by FDE 1. In this example, FDE 1

tax purposes.

is the direct owner of FDE 2, and CFP is

Note. You must round the result to more

If you elect the summary procedure,

the direct owner of FDE 1. CFP is the tax

than 4 places if failure to do so would

complete only the identifying information

owner with respect to both FDE 1 and

materially distort the exchange rate or the

above Schedule C on page 1 of Form

FDE 2. A would be required to file the

equivalent amount of U.S. dollars.

8858 for each dormant FDE as follows:

Forms 8858 relating to FDE 1 and FDE 2

•

The top margin of the summary return

Example. During its annual

with the Form 8865 it files with respect to

must be labeled “Filed Pursuant to

accounting period, an FDE owned by a

CFP.

Announcement 2004-4 for Dormant FDE.”

U.S. person had current income of

•

Include the name, address, identifying

30,255,400 Yen on Schedule H, line 6.

Penalties

number, and tax year of the U.S. person

The Schedule H instructions specify that

filing Form 8858 (see definition on page

Failure to file information required by

the filer must translate these amounts into

1).

section 6038(a) (Form 8858 and

U.S. dollars at the average exchange rate

•

Include the annual accounting period of

Schedule M (Form 8858)).

for the tax year in accordance with the

•

the dormant FDE (below the title of the

A $10,000 penalty is imposed for each

rules of section 989(b). The average

form) and complete items 1a through 1e

annual accounting period of each CFC or

exchange rate is 118.5050 Japanese Yen

and 1g.

CFP for failure to furnish the required

to 1 U.S. dollar (0.00843846 U.S. dollars

•

Complete items 3a through 3d, if

information within the time prescribed. If

to 1 Japanese Yen). Divide 30,255,400

applicable.

the information is not filed within 90 days

Yen by 118.5050 to determine the U.S.

•

Complete items 4a through 4c, if

after the IRS has mailed a notice of the

dollar amount to enter on line 7 of

applicable.

failure to the U.S. person, an additional

Schedule H. Enter 118.5050 after the

$10,000 penalty (per CFC or CFP) is

flush language following line 7.

File this summary return in the manner

charged for each 30-day period, or

described in When and Where To File on

Electronic Filing of Form 8858

fraction thereof, during which the failure

page 1.

If you file your income tax return

continues after the 90-day period has

expired. The additional penalty is limited

electronically, see the instructions for your

to a maximum of $50,000 for each failure.

income tax return for general information

Specific Instructions

•

Any person who fails to file or report all

about electronic filing.

of the information required within the time

Important: If the information required in

Note. If you are filing Form 1120 or 1065

prescribed will be subject to a reduction of

a given section exceeds the space

electronically, you must attach Form 8858

10% of the foreign taxes available for

provided within that section, do not write

electronically (as an attachment to your

credit under sections 901, 902, and 960.

“see attached” in the section and then

electronically filed Form 5471, Form

If the failure continues 90 days or more

attach all of the information on additional

8865, Form 1120, or Form 1065). If you

after the date the IRS mails notice of the

sheets. Instead, complete all entry spaces

are filing Form 1040 or Form 1041

failure to the U.S. person, an additional

in the section and attach the remaining

electronically (with or without a Form

5% reduction is made for each 3-month

information on additional sheets. The

5471 or Form 8865), attach Form 8858 to

period, or fraction thereof, during which

additional sheets must conform with the

the applicable Form 8453.

the failure continues after the 90-day

IRS version of that section.

period has expired. See section

Computer-Generated Form

6038(c)(2) for limits on the amount of this

Identifying Information

8858 and Schedules

penalty.

A computer-generated Form 8858 and its

Annual Accounting Period

Criminal penalties. Criminal penalties

schedules may be filed if they conform to

under sections 7203, 7206, and 7207

and do not deviate from the official form

Enter, in the space provided below the

may apply for failure to file the information

and schedules. Generally, all

title of Form 8858, the annual accounting

required by section 6038.

computer-generated forms must receive

period of the FDE for which you are

Note. Any person required to file Form

prior approval from the IRS and are

furnishing information. The annual

8858 and Schedule M (Form 8858) who

subject to an annual review.

accounting period of an FDE is the annual

-2-

Instructions For Form 8858 - 2011 Page 2

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