Lynn Ching, Author at SF Tax Counsel

01Mar 2022 by Lynn Ching

A Win for Taxpayer in Non-Willful FBAR Penalty Case In The Ninth Circuit Court of Appeals

By Lynn K. Ching In March 2021, a taxpayer prevailed on a significant issue in a non-willful FBAR case. The issue was whether 31 U.S.C. § 5321(a)(5)(A) authorizes the IRS to impose multiple non-willful penalties - up to $10,000 for each foreign bank account that was required to be listed on the FBAR - when an untimely, but accurate FBAR has been filed. The Ninth Circuit Court of Appeals concluded that § 5321(a)(5)(A) authorizes the IRS to impose up to one non-willful penalty of $10,000 per FBAR filing when an untimely, but accurate, FBAR is filed, no matter the number of foreign accounts (as opposed to $10,000 per FBAR account as argued by the government). Ninth Circuit Court of Appeals In United States of America v. Boyd, 991 F 3d…

28Feb 2022 by Lynn Ching

What Constitutes a Foreign Branch?

Tax Law

By Lynn K. Ching In general, a foreign branch for U.S. tax purposes is a division which operates a trade or business in a foreign country and maintains a separate set of books and records. The foreign branch generally is subject to the income tax laws in the foreign country in which it operates. Under the treasury regulations, the term foreign branch means an integral business operation carried on by a U.S. person outside the United States. Whether the activities of a U.S. person outside the United States constitute a foreign branch operation must be determined under all the facts and circumstances. Activities outside the United States shall be deemed to constitute a foreign branch for purposes of this section if the activities constitute a permanent establishment under the terms…

15Feb 2022 by Lynn Ching

Limited Escape Hatch: Do You Need to File Form 8938 ‘Statement of Specified Foreign Financial Assets’?

Tax Law

By Lynn K. Ching Much has been written about the plethora of Foreign Financial Disclosure Forms and the insanely huge penalties that accompany a failure to file these forms. Form 8938 is one of several such forms which you may be required to file, depending on the facts of your specific circumstance. Basics Certain U.S. taxpayers (citizens, resident aliens, certain non-resident aliens) and specified domestic entities holding certain financial assets 1 outside the United States must report those assets to the IRS generally using Form 8938, ‘Statement of Specified Foreign Financial Assets’. In general, you are obligated to file the Form 8938 if the aggregate value of these assets exceeds $50,000, 2 but in some cases, the threshold may be higher as set forth below. ● Unmarried taxpayers living in…

28Jan 2022 by Lynn Ching

The Good, The Bad and The Unknown Inherited Family Property In California How Much Will Proposition 19 Cost Your Children?

Tax Law

By Lynn K. Ching In the State of California, real property is reassessed at market value if it is sold or transferred and property taxes can sometimes increase dramatically as a result. However, prior to November 2020, children could inherit their parents’ primary residence and a second home (or rental property) without triggering a reassessment of the property. This was a boon to families. Parents were able to leave their primary residence (no value limit) and $1 million in any real property to their children, without a property reassessment. The children were about to take over the inherited property, without a big increase in property taxes. No longer. All of that changed when Proposition 19 was narrowly passed by California voters in November 2020. Now, children who inherit their parents’…

26Jan 2022 by Lynn Ching

Has the IRS Assessed You a Penalty for a Late Filed Form 3520-A? You May Be Eligible For an Abatement of Penalties Assessed or a Refund of Penalties Paid

Tax Law

By: Lynn K. Ching Penalties For Failure to File Form 3520-A. A foreign trust (including a foreign retirement trust) with a U.S. owner must file Form 3520-A in order for the U.S. owner to satisfy its annual information reporting requirements under IRC 6048(b). Failure to timely file the Form 3520-A may result in significant penalties. However, U.S owners of certain foreign tax favored retirement trusts, and eligible foreign tax favored non-retirement trusts established almost exclusively to provide or to earn income for the provision of medical, disability, or educational benefits, may be eligible for an exemption and an abatement of penalties assessed or a refund of penalties paid. IRS Says Certain Tax Favored Retirement Trusts Are Exempt From 3520-A Reporting Under IRS Revenue Procedure 2020-17 (“Rev Proc 2020-17”), certain U.S.…

13Jan 2022 by Lynn Ching

Civil Asset Forfeiture What To Do If Your Assets Have Been Seized by the U.S. Government

Tax Law

By Lynn K. Ching If your assets have been seized by the U.S. Government you must file a timely claim to contest the asset seizure in the United States District Court. A timely filed claim stops the administrative forfeiture proceeding, and the seizing agency forwards the timely claim to the U.S. Attorney’s Office for further proceedings Failure to file a claim by the deadline date may result in the property being forfeited to the United States. Where To File a Claim: A claim must be filed with the agency that gave notice of the seizure and intent to forfeit. To contest the forfeiture, the claim must be sent to the notifying agency's address which is identified within the notice. A claim may be filed online (subject to the online exclusion below) or…

10Jan 2022 by Lynn Ching

Why Disclose Your Foreign Assets to the IRS in 2022?

Tax Law

By Lynn K. Ching Perhaps you had a foreign bank account or securities account from prior years of your youth, or maybe you inherited income-producing rental property located in a foreign country, or was the beneficiary of a gift from a foreign person - to name a few. If so, you may have an obligation to disclose your interest in foreign assets to the Internal Revenue Service (IRS) and The Financial Crimes Enforcement Network (FinCen). These disclosure forms include but are not limited to FBAR, Forms 3520 and 3520A, Form 8938 and Form 5471. Failure to do so may subject you to onerous civil penalties and/or criminal liability. Non-Willful Failure to File Disclosure Forms For those taxpayers who just did not know of their filing obligation or perhaps knew about it but…

14Jun 2021 by Lynn Ching

TAXPAYER PREVAILS IN FBAR CASE NON-WILLFUL FBAR PENALTY COMPUTED PER YEAR – NOT PER ACCOUNT

Tax Law

By: Lynn K. Ching A taxpayer-friendly opinion recently issued from the Ninth Circuit Court of Appeals regarding a non-willful failure to file an FBAR. FBAR Violations Recap: Under Section 5314(a), “the Secretary of the Treasury shall require [U.S. citizens and others] … to keep records, file reports, or keep records and file reports, when the [U.S. citizen or other person] makes a transaction or maintains a relation for any person with a foreign financial agency.” Id. Under corresponding regulations to section 5314(a), United States citizens must report on an annual basis any “financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country” exceeding $10,000. The required form is the FBAR (TDF 90-22.1). A person who fails to timely file an…

10Jun 2021 by Lynn Ching

Tax Free Mergers and Acquisitions under IRC 368 What Worked and What Didn’t

Tax Law

By Lynn K. Ching The federal tax code provides for tax free mergers and acquisitions in certain situations. In tax-free mergers, the acquiring company uses its stock as a significant portion of the consideration paid to the acquired company. The purpose of the statutory non-recognition of gain or loss from reorganization transactions, as indicated by the legislative history, was in part to prevent losses being established by bondholders, as well as stockholders, who received new securities without substantially changing their original investment. (All) Four conditions must be met to qualify a transaction for tax-free treatment under Internal Revenue Code (IRC) Section 368. 1. Continuity of Ownership Interest doctrine - The continuity of ownership interest rule was introduced by the United States Supreme Court in Pinellas Ice & Gold Storagw v.…

20May 2021 by Lynn Ching

When Can the Administrative Record in an IRS WhistleBlower Case Be Supplemented?

Tax Law

By Lynn K. Ching The Internal Revenue Service (IRS) Whistleblower Awards Program pays money to people who blow the whistle on persons who fail to pay taxes they owe, subject to meeting certain statutory requirements. If the Whistleblower claim is denied by the IRS Whistleblower Office (WBO), the claimant may petition the Tax Court to review (for abuse of discretion) the determination by the WBO not to pay an award. In reviewing a determination of the WBO, the Tax Court generally confines its review to the administrative record (i.e. the IRS’ records) in reaching its determination. In a recent case, Bemmelen v. Comm’r of the IRS, 154 T.C. No. 4 (2020), the petitioner asked the Court to allow him to supplement the administrative record in reviewing the denial of his…