QUESTION: I have an IBC in Panama. It is not an SA corporation. I
set it up for the express purpose of using it a way to access offshore
investments and as a means of asset protection. All of the stock is
owned by an PIF (private interest foundation), also in Panama.
I am an officer of the IBC and the
protector and General Manager of the foundation. I have no money in
either of these entities. So the question is: What filing do I need
to do with these entities? They have been in existence for 13 months.

REPLY: Unless an offshore IBC or LLC or corporation elects to be
treated as a disregarded entity (one owner) or a foreign partnership
(multiple owners), within 75 days after it is formed, it will be
treated as a foreign corporation. A dormant foreign corporation with
less than $5,000 of income AND expenses AND less than $100,000 of
assets can file Form 5471 as a dormant foreign corporation. Basically,
only the information on page one is required. The instructions to the
Form 5471 include information about filing as a dormant corporation.

A foreign foundation is generally treated as a foreign trust by the
IRS, but in some cases, it might be treated as a foreign corporation
-- depending on how it is used. As I understand the Panama rules, a
private interest foundation is prohibited by Panama law from engaging
in a trade or business, in which case it probably needs to file
returns as a foreign trust. That might require filing form 3520 and
3520-A. I don't recall any abbreviated filing procedures for a dormant
foreign trust. However, some lawyers might argue that a valid trust
does not exist until some assets are transferred to the trustee. If I
were the preparer I would have to seek guidance from qualified legal
counsel to use that argument as a basis for non-filing.

If there are any bank or other financial accounts with a combined
balance of more than $10,000 at any time in 2007, then it will be
necessary to file a Form TDF 90-22.1 (FBAR)to disclose the foreign
accounts. However, if no money or other financial assets have been
transferred to either of these two entities, then the FBAR disclosure
form should not be required.

The preceding information is not intended to constitute personal tax
advice and is not intended to be a "covered opinion" with which
certain penalties can be avoided. For further details on that subject
see http://www.offshorepress.com/vkjcpa/disclosurerules.htm

Vern

For more information on the FBAR form see
http://www.offshorepress.com/fbar.htm

For more information on foreign corporations see
http://www.offshorepress.com/cfc-ibc-tax.htm