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Understanding Substantial United States Owner [Income Tax]: A Comprehensive Guide
Definition & Meaning
A substantial United States owner refers to a specific individual or entity that holds a significant ownership stake in a corporation, partnership, or trust. This designation is important for tax reporting purposes, particularly concerning foreign accounts. In general, a substantial United States owner is defined as:
For a corporation: Any U.S. person who directly or indirectly owns more than 10 percent of the stock (based on voting rights or value).
For a partnership: Any U.S. person who directly or indirectly holds more than 10 percent of the profits or capital interests.
For a trust:
Any U.S. person treated as an owner of any part of the trust under specific tax regulations.
Any U.S. person holding more than 10 percent of the beneficial interests, as determined by the Secretary of the Treasury.
Table of content
Legal Use & context
This term is primarily used in tax law, particularly in the context of reporting foreign financial accounts. Substantial United States owners must comply with specific reporting requirements to avoid penalties. This designation is relevant in various legal areas, including tax compliance and international finance. Users can manage their obligations using legal templates available through US Legal Forms, which are drafted by experienced attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Here are a couple of examples to illustrate the concept:
Example 1: Jane owns 15 percent of the shares in a corporation. She is considered a substantial United States owner and must report her ownership accordingly.
Example 2: John is a partner in a business and owns 12 percent of the profits. He qualifies as a substantial United States owner, necessitating compliance with specific tax reporting rules.
Relevant laws & statutes
The definition of a substantial United States owner is primarily governed by:
26 USCS § 1473 - This statute outlines the criteria for determining substantial ownership in corporations, partnerships, and trusts.
Common misunderstandings
What to do if this term applies to you
If you believe you qualify as a substantial United States owner, take the following steps:
Review your ownership interests in corporations, partnerships, or trusts to determine if you exceed the 10 percent threshold.
Ensure compliance with all relevant tax reporting requirements.
Consider using US Legal Forms to access legal templates that can help you manage your reporting obligations.
If your situation is complex, consult a legal professional for tailored advice.
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