How to Complete Form 5471 Schedule M: Filers, Columns, and Line Entries

Schedule M of Form 5471 reports every transaction that occurred during the year between a controlled foreign corporation and its U.S. shareholders or other related parties. Only Category 4 filers complete it, and the schedule is organized into six columns that sort each transaction by counterparty and 34 lines that sort each transaction by type. Every dollar figure must be converted to U.S. dollars at the average exchange rate for the CFC’s tax year.¹

Who Has to File Schedule M

You attach Schedule M if you are a Category 4 filer. That means you are a U.S. person who controlled the foreign corporation at any point during the tax year — controlled meaning more than 50% of the total combined voting power of all voting stock, or more than 50% of the total value of all shares.²

The 50% test isn’t limited to shares you hold in your own name. Under the constructive ownership rules of IRC Section 958, you’re treated as owning stock held by your spouse, children (including adopted children), grandchildren, and parents. Stock attributed to you through one family member cannot then be reattributed to another. Shares held by a nonresident alien family member are generally not attributed to a U.S. citizen or resident under the modified Section 318 rules that apply here.³ Work through the full ownership chain before concluding you’re under the threshold.

One boundary worth naming: a CFC that qualifies as dormant under Revenue Procedure 92-70 can skip Schedule M and file only page one of Form 5471 with the notation “Filed Pursuant to Rev. Proc. 92-70 for Dormant Foreign Corporations.” Dormancy requires meeting every condition in the revenue procedure for the entire year, including no business activity, no distributions, gross income of no more than $5,000, and assets of no more than $100,000. If any single condition fails, the full filing — Schedule M included — is required.

How the Six Columns Sort Your Counterparties

Schedule M has one column for the transaction description and five columns for related-party categories. You enter each dollar amount in the column that matches who was on the other side of the transaction.⁴

Column (b) is for the U.S. person filing this return.
Column (c) is for any domestic corporation or partnership you control.
Column (d) is for any other foreign corporation or partnership you control.
Column (e) is for any 10%-or-more U.S. shareholder of the CFC, other than the person filing.
Column (f) is for any 10%-or-more U.S. shareholder of a corporation that controls the CFC.

The same “more than 50% of vote or value” test that made you a Category 4 filer determines whether another entity belongs in column (c) or (d).² Walk through your structure entity by entity. If you control it and it’s domestic, its transactions with the CFC go in column (c); if you control it and it’s foreign, column (d). Everything else that meets the 10% ownership thresholds falls into (e) or (f).

What Goes on Each Line

The form has three blocks: amounts the CFC received (lines 1–15), amounts the CFC paid (lines 16–30), and outstanding balances (lines 31–34). Most receipt lines have a mirror payment line, so the same category of transaction shows up twice depending on direction.⁴

Amounts Received by the CFC (Lines 1–15)

Line 1: sales of stock in trade (inventory).
Line 2: sales of tangible property other than inventory.
Line 3: sales of property rights such as patents and trademarks.
Line 4: platform contribution transaction payments received. Report these gross, without netting against amounts paid.¹
Line 5: cost-sharing transaction payments received. Complete only if the CFC itself incurred intangible development costs.¹
Line 6: compensation received for technical, managerial, engineering, construction, or similar services.
Line 7: commissions received.
Line 8: rents, royalties, and license fees received.
Line 9: hybrid dividends received (tiered hybrid dividends during the CFC’s tax year).¹
Line 10: dividends received, excluding hybrid dividends, deemed subpart F distributions, and distributions of previously taxed income.
Line 11: interest received.
Line 12: premiums received for insurance or reinsurance.
Line 13: loan guarantee fees received.
Line 14: other amounts received (requires an attached statement).
Line 15: total of lines 1 through 14.

Amounts Paid by the CFC (Lines 16–30)

Line 16: purchases of stock in trade (inventory).
Line 17: purchases of tangible property other than inventory.
Line 18: purchases of property rights such as patents and trademarks.
Line 19: platform contribution transaction payments paid.
Line 20: cost-sharing transaction payments paid. If the CFC didn’t incur intangible development costs itself, report cost-sharing payments here rather than on line 5.¹
Line 21: compensation paid for technical, managerial, engineering, construction, or similar services.
Line 22: commissions paid.
Line 23: rents, royalties, and license fees paid.
Line 24: hybrid dividends or tiered hybrid dividends paid.
Line 25: dividends paid, excluding hybrid dividends.
Line 26: interest paid.
Line 27: premiums paid for insurance or reinsurance.
Line 28: loan guarantee fees paid.
Line 29: other amounts paid (requires an attached statement).
Line 30: total of lines 16 through 29.

Outstanding Balances (Lines 31–34)

Lines 31 and 33 report the largest aggregate outstanding accounts payable and accounts receivable balances during the year with the related parties in columns (b) through (f). Include only balances that arose from sales or processing of property or from services. Net the payable against the receivable only if the CFC’s own books do so.¹

Lines 32 and 34 report the largest outstanding gross loan balances during the year — amounts borrowed from related parties on line 32, amounts loaned to them on line 34. Enter the peak balance, not the year-end balance, the average, or the net. Account balances from property sales or services that never exceeded what’s ordinary and necessary for the business don’t have to appear on the loan lines, though they may still belong on lines 31 or 33 and on the CFC’s balance sheet.¹

The Statement Required for Lines 14 and 29

Any amount on line 14 or line 29 triggers a required attached statement. Set it up with the same column structure as Schedule M itself: column (a) describes the type of payment, columns (b) through (f) break the amounts out by related-party category, and a totals line ties back to the figure on line 14 or 29.¹ Anything that doesn’t fit on lines 1–13 or 16–28 ends up here, so treat the statement as a small schedule rather than a one-line note.

Converting Foreign Currency to U.S. Dollars

The CFC probably keeps its books in a functional currency other than the dollar. Under IRC Section 985, the functional currency is the currency of the economic environment in which the business unit operates and keeps its records.⁵ For Schedule M, convert every amount to U.S. dollars using the average exchange rate for the CFC’s tax year under Section 989(b), and enter that rate at the top of the schedule using the divide-by convention described in the general Form 5471 instructions.¹

The divide-by convention means expressing the rate as units of foreign currency per one U.S. dollar. If the CFC’s functional currency is the euro and the average rate is 0.92 euros per dollar, enter “0.92” as the rate and divide each euro figure by 0.92 to reach the dollar amount. Keep a record of the rate and the source you used; the Treasury’s published yearly averages are standard.

Cost-Sharing Arrangements Trigger a Second Schedule

If the CFC participates in a cost-sharing arrangement, the dollar amounts flow onto Schedule M as described above (lines 4, 5, 19, and 20, reported gross with no netting), but the arrangement’s terms — participants, scope, and method — go on Schedule G-1. File one Schedule G-1 for each cost-sharing arrangement in which the CFC was a controlled participant during the year.⁶

What Happens If Schedule M Is Missing or Wrong

Failing to file Form 5471 and its schedules on time carries a $10,000 penalty per annual accounting period. If the failure continues more than 90 days after the IRS mails a notice, an additional $10,000 accrues for each 30-day period (or fraction) that passes, capped at $50,000 per accounting period on top of the initial $10,000.⁷

Section 6038(c) adds a separate hit to your foreign tax credits: taxes paid or deemed paid to foreign countries for the relevant year are reduced by 10%, with a further 5% reduction for each three-month period the failure continues past the 90-day notice window.⁸ For filers who rely on the credit to avoid double taxation, that reduction can outweigh the dollar penalty.

The IRS can waive penalties for reasonable cause, which requires showing you exercised ordinary business care and prudence. Reliance on a professional advisor can support that claim if the reliance was itself reasonable — meaning you gave the advisor accurate and complete information.

The missed filing has one more consequence that outlives the penalty. Under Section 6501(c)(8), the normal three-year assessment period for any return to which Form 5471 information relates doesn’t start running until the required information reaches the IRS.⁹ If you never file, the IRS can assess additional tax on that return with no time limit. Filing a late or corrected Form 5471 starts the three-year clock from the date the IRS receives it, so fixing a missed filing later is usually better than leaving it.

Records to Keep Behind the Numbers

The figures on Schedule M should reconcile directly to the CFC’s general ledger and any intercompany sub-ledgers. Amounts the CFC reports as income from a related party should match what the related party reports as an expense, and the reverse. Unexplained discrepancies between Schedule M and the corresponding deductions on a domestic filer’s return draw examiner attention.

Keep the CFC’s trial balance, intercompany invoices, loan agreements, and any transfer pricing documentation supporting the reported amounts. Lines 13 and 28 (loan guarantee fees) specifically reference Section 482, the transfer pricing rules.¹ If the IRS questions whether fees, royalties, or service charges between the CFC and related parties reflect what unrelated parties would have agreed to, contemporaneous transfer pricing documentation is the defense. Building that file before you file the return is far easier than reconstructing it during an audit.

1
Internal Revenue Service. Instructions for Form 5471 (Rev. December 2025)
2
eCFR. 26 CFR 1.6038-2 – Information Returns Required of United States Persons With Respect to Annual Accounting Periods of Certain Foreign Corporations
3
Internal Revenue Service. IRC 958 Rules for Determining Stock Ownership
4
Internal Revenue Service. Schedule M (Form 5471) (Rev. December 2021)
5
Office of the Law Revision Counsel. 26 US Code 985 – Functional Currency
6
Internal Revenue Service. About Form 5471, Information Return of US Persons With Respect To Certain Foreign Corporations
7
Office of the Law Revision Counsel. 26 US Code 6038 – Information Reporting With Respect to Certain Foreign Corporations and Partnerships
8
GovInfo. 26 USC 6038 – Information Reporting With Respect to Certain Foreign Corporations and Partnerships
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Office of the Law Revision Counsel. 26 US Code 6501 – Limitations on Assessment and Collection