Instructions For Schedule S (Form 1120-F) - 2016 (Page 3 of 4) in pdf

Part III — Stock Ownership

corporation, is held through bearer shares

of all the CFC's outstanding stock,

that are not maintained in a dematerialized

including the value of any bearer shares.

Test for Controlled

or immobilized book-entry system during

Line 12. Specify the days of the foreign

Foreign Corporations

the relevant period. See Regulations

corporation's tax year during which more

section 1.883-2(d)(3)(ii).

A foreign corporation satisfies the stock

than 50% of the total value of its

ownership test of Regulations section

For purposes of the above rules, a 5%

outstanding stock was owned (within the

1.883-1(c)(2) if it satisfies the qualified

shareholder is a person who owns at

meaning of section 958(a) and

U.S. person ownership test (see below)

least 5% of the total vote and value of the

Regulations section 1.883-3(b)(4)) by

and it satisfies the substantiation

outstanding shares of a class of stock. For

qualified U.S. persons.

requirements of Regulations section

these purposes, persons related within the

Line 13. Specify the days of the foreign

1.883-3(c).

meaning of section 267(b) shall be treated

corporation's tax year during which it was

as one person. In determining whether two

Qualified U.S. person ownership test.

a CFC (as defined in section 957(a)).

or more corporations are members of the

This test is met only if:

same controlled group under section

Part IV — Qualified

1. The foreign corporation is a CFC

267(b)(3), a person is considered to own

(as defined in section 957(a)) for more

Shareholder Stock

stock owned directly by such person,

than half the days in the corporation's tax

stock owned through the application of

Ownership Test

year, and

section 1563(e)(1), and stock owned

A foreign corporation satisfies the stock

through the application of section 267(c).

2. More than 50% of the total value of

ownership test of Regulations section

In determining whether a corporation is

its outstanding stock is owned (within the

1.883-1(c)(2) if more than 50% of the

related to a partnership under section

meaning of section 958(a) and

value of its outstanding shares is owned,

267(b)(10), a person is considered to own

Regulations section 1.883-3(b)(4)) by one

or treated as owned, by applying the

the partnership interest owned directly by

or more qualified U.S. persons (defined

attribution rules of Regulations section

such person and the partnership interest

below) for more than half the days of the

1.883-4(c), for at least half of the number

owned through the application of section

CFC's tax year, provided such days of

of days in the foreign corporation's tax

267(e)(3).

ownership are concurrent with the time

year by one or more qualified

period during which the foreign

shareholders, as defined below. A

Note. An investment company (as

corporation was a CFC (as defined in item

shareholder may be a qualified

defined in Regulations section 1.883-2(d)

1 above).

shareholder with respect to one category

(3)(iii)(B)) shall not be treated as a 5%

of income while not being a qualified

shareholder.

shareholder with respect to another. A

A qualified U.S. person is a U.S. citizen,

Line 8. Enter on line 8 a description of

foreign corporation will not be considered

resident alien, domestic corporation, or

each class of stock the foreign corporation

to satisfy the qualified shareholder stock

domestic trust described in section 501(a),

relied upon to satisfy the requirements of

ownership test unless the foreign

but only if the person provides the CFC

the “regularly traded” test described

corporation meets the substantiation and

with an ownership statement as described

earlier. The description must include:

reporting requirements described in

in Regulations section 1.883-3(c)(2), and

An indication as to whether the class of

Regulations section 1.883-4(d) and (e).

the CFC meets the reporting requirements

stock was issued in registered or bearer

of Regulations section 1.883-3(d) with

A shareholder is a qualified

form and whether such bearer shares

respect to that person.

shareholder only if the shareholder:

were maintained in a dematerialized or

immobilized book-entry system.

1. With respect to the category of

Line 11a. Enter the percentage of the

The number of issued and outstanding

income for which the foreign corporation is

value of the shares of the CFC that is

shares in that class of stock as of the

owned by all qualified U.S. persons

seeking an exemption, is:

close of the tax year, and

identified in the qualified ownership

(A) An individual who is a resident of a

The value of each class of stock in

statements. In determining the percentage

qualified foreign country. An individual

relation to the total value of all the

to enter on line 11, the numerator is the

is a resident of a qualified foreign

corporation's shares outstanding as of the

total value of the CFC's outstanding stock

country only if the individual is fully

close of the tax year.

that is owned (within the meaning of

liable to tax as a resident in such

section 958(a) and Regulations section

country (e.g., an individual who is

Line 9. See Regularly traded, earlier, for

1.883-3(b)(4)) by all qualified U.S.

liable to tax on a remittance basis in a

instructions for completing this line 9.

persons, not including the value of any

foreign country will not be treated as a

Line 10. If the answer to line 9 is “Yes”

bearer shares (unless such shares are

resident of that country unless all

with respect to more than one class of the

maintained in a dematerialized or

residents of that country are taxed on

corporation's stock, the foreign

immobilized book-entry system). The

a remittance basis only) and, in

corporation must complete lines 10a and

denominator is the total value of the CFC's

addition (1) the individual has a tax

10b with respect to each such class. To do

outstanding stock, including the value of

home, within the meaning of

so, complete these lines as follows:

any bearer shares.

Regulations section 1.883-4(b)(2)(ii),

Complete line 10 of the actual schedule

in that qualified foreign country for 183

Line 11b. Enter the percentage of the

for the class of stock with respect to which

days or more of the tax year or (2) the

value of the outstanding shares of the

5% shareholders own the largest

individual is treated as a resident of a

CFC that are bearer shares maintained in

percentage of the vote and value of the

qualified foreign country based on

a dematerialized or immobilized

outstanding shares of the class of stock.

special rules pursuant to Regulations

book-entry system. In determining the

For all other classes of stock, attach a

section 1.883-4(d)(3).

percentage to enter on line 11b, the

statement that uses the same format as

(B) The government of a qualified

numerator is the total value of bearer

lines 10a and 10b.

foreign country (or a political

shares owned by the qualified U.S.

subdivision or local authority of such

Line 10b(ii). Enter the applicable

persons and maintained in a

country).

two-letter codes from the list of country

dematerialized or immobilized book-entry

codes at

system. The denominator is the total value

organized in a qualified foreign

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Instructions For Schedule S (Form 1120-F) - 2016 Page 3

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