What does Form 5472 ask about Section 267A hybrid payments?

November 14, 2026 · 1 min read

Form 5472 line 40a asks whether the reporting corporation paid or accrued interest or royalties whose deduction was disallowed under Section 267A. If yes, line 40b requests the total amount disallowed.

What to check

The provision can apply when a hybrid arrangement produces a U.S. deduction without corresponding foreign income inclusion. The IRS instructions also cover imported mismatches, an exception for small amounts and the allocable share of affected partnership amounts. The analysis depends on the arrangement and tax treatment in each jurisdiction.

Example

A corporation accrues a $20,000 royalty and determines that Section 267A disallows $7,000. It uses $7,000 for the line 40b calculation.

Before you proceed

Identify the interest or royalty under review.
Document its treatment in each jurisdiction.
Reconcile the disallowed amount to the return.

Do all royalties paid to a foreign affiliate go on line 40b?

Line 40b totals the amounts whose deductions Section 267A disallows.