San Francisco Tax Blogs | Diosdi, Ching, & Liu, LLP

21Sep 2023 by Pat Geddie

Demystifying the New 2022 IRS Form 5472

By Anthony Diosdi In order to effectively audit the transfer prices used by a U.S. subsidiary of a foreign corporation, the Internal Revenue Service (“IRS”) often must examine the books and records of the foreign parent corporation. Historically, foreign parties have resisted making their records available to the IRS, or have not maintained records sufficient to determine arm’s length transfer prices. In response, Congress enacted the requirement that each year certain reporting corporations must file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, and maintain certain records. See IRC Sections 6038A and 6038C. A domestic corporation is a reporting corporation if, at any time during the taxable year, 25 percent or more of its stock, by vote…

21Sep 2023 by Pat Geddie

Top Eight Considerations for Anyone Considering Expatriating from the United States

Tax Law

By Anthony Diosdi Because the United States subjects its citizens and residents to income tax on their worldwide income, and subjects those who are domiciled in the United States to estate and gift tax on their worldwide assets, many U.S. citizens and residents are actively considering expatriating from the United States. For U.S. tax purposes, the concept of expatriation can be very complicated. If you are considering expatriating from the United States, here are eight things to consider:Number One- You May be Subject to an Expatriation TaxAnyone expatriating from the United States may have to pay an exit or expatriation tax.The U.S. exit tax is assessed against individuals that “expatriate” from the United States. The definition of “expatriate” means (A) any United States citizen who relinquishes his or her citizenship,…

15Sep 2023 by Pat Geddie

Tax Law Attorneys in San Francisco, California: Why Choose Diosdi Ching & Liu, LLP?

Tax Law

In the bustling city of San Francisco, California, the intricacies of tax law can quickly become overwhelming. Whether you're a business owner navigating corporate taxes or an individual looking to ensure compliance, the expertise of a skilled tax law attorney can be invaluable. At Diosdi Ching & Liu, LLP, we pride ourselves on offering top-tier services in the realm of tax law. The Importance of Specialized Expertise When you're confronted with tax-related concerns, it's imperative to have specialists by your side. San Francisco, California tax law attorneys are well-acquainted with both state and federal tax regulations. Their understanding ensures that you are always a step ahead, equipped with accurate and timely advice. By choosing attorneys who are well-versed in this domain, you optimize your chances of favorable outcomes. How Diosdi Ching…

13Sep 2023 by Pat Geddie

Basic U.S. and Canadian Tax Considerations of Canadian Investment in U.S. Real Estate

Tax Law

By Anthony Diosdi Canadians actively invest in U.S. real estate by speculating on land and developing homes, condominiums, shopping centers, and commercial buildings. Canadian investors generally have the same goals of minimizing their income tax liabilities from their U.S. real estate investment as do their U.S. counterparts. Although their objectives are complicated by the very fact that they are not U.S. persons. That is, Canadian investors must be concerned not only with income taxes in the United States, but also Canadian taxes. Further, the United States has special income tax regimes that are applicable to foreign persons. This article attempts to summarize the cross-border consequences surrounding a Canadian’s acquisition of different U.S. real property interests. Holding U.S. Real Estate DirectlyThe simplest way for a Canadian investor to acquire U.S. real…

30Aug 2023 by Pat Geddie

A Closer Look at FTB Notice 2023-02 Offering Settlement for Micro-Captive Insurance and Syndicated Conservation Easement Tax Motivated Transactions

Tax Law

By Anthony Diosdi Some time ago, California enacted some unique penalties for taxpayers who are considered to have participated in abusive “sham transactions” or tax shelters. One of the penalties is an interest based penalty. The other penalty is a so-called noneconomic substance transaction (“NEST”) penalty. These penalties are significant and can be combined in cases where the Franchise Tax Board (“FTB”) has determined an individual has participated in a sham tax shelter.Once these penalties are assessed, they are not easily removed or abated.Federal and State Law Differences Regarding the Assessment of Tax Shelter PenaltiesLike the Internal Revenue Service (“IRS”), the FTB has taken a tough stand against taxpayers claiming tax deductions on certain transactions classified as sham transactions. Both federal and state law imposes harsh penalties against individuals who…

30Aug 2023 by Pat Geddie

Dynasty Trusts- the Most Powerful Planning Available to Combat the Estate, Gift, and the Generation Skipping Tax

Tax Law

By Anthony Diosdi Introduction On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act of 2017. The 2017 Tax Cuts and Jobs Act increased the exemptions for federal estate tax, gift tax, and generation-skipping tax (“GST”) to $11,180,000 per person for 2018. The exemptions are indexed for inflation. In 2023, the exemption was increased to $12.92 million. The tax rates on estates, gifts, and GST transfers is forty percent. The 2017 Tax Cuts and Jobs Act contains a sunset provision. The exemption for federal estate tax, gift tax, and GST are scheduled to revert back to $5.5 million effective January 1, 2026. As a result of the 2017 Tax Cuts and Jobs Act, individuals are presented with a number of estate planning opportunities to transfer significant amounts…

30Aug 2023 by Pat Geddie

A Deep Dive Into the New 2022 IRS Form 3520-A

Tax Law

By Anthony Diosdi United States persons with foreign assets are subject to an ever expanding universe of reporting requirements. A prime example of this can be found in Internal Revenue CodeSection 6048(b). This Internal Revenue Code Section provides that a foreign trust owner must file Internal Revenue Service (“IRS”) Form 3520-A. Each U.S. person is treated as an owner of any portion of a foreign trust under the grantor trust rules (Internal Revenue Code Sections 671 through 679) is responsible for ensuring that the foreign trust files Form 3520-A and furnishes the required annual statements to its U.S. owners and U.S. beneficiaries. The penalty for failure to file IRS Form 3520-A will be imposed directly on the U.S. owner of the foreign trust. The penalty is equal to five percent…

30Aug 2023 by Pat Geddie

A Deep Dive Into the New 2022 IRS Form 3520

Tax Law

By Anthony Diosdi United States persons with foreign assets are subject to an ever expanding universe of reporting requirements. A prime example of this can be found in Internal Revenue Code Section 667(a). This Internal Revenue Code Section provides that if a United States person beneficiary receives (directly or indirectly) a distribution from a foreign trust, that person is required to make a return with respect to such a trust using Internal Revenue Service (“IRS”) Form 3520, and show thereon the name of the trust, the amount of the aggregate distribution received, and any other data the IRS may require. A foreign gift, bequest, or inheritance that exceeds $100,000 from a nonresident must also be disclosed on a Form 3520. This article will take a deep dive into Form 3520…

22Aug 2023 by Pat Geddie

What Hungarian High Tech Companies Need to Know Now that the U.S.-Hungarian Tax Treaty Will be Terminated

Tax Treaty

By Anthony Diosdi and Istvan Csovari On July 8, 2022, the Biden administration announced that it will terminate the United States-Hungary Income Tax Treaty that was enacted in 1979. The provisions of the tax treaty will no longer apply beginning on January 1, 2024. According to a July 8, 2022, article in the Wall Street Journal entitled “U.S. Moves to End Tax Treaty With Hungary”, the U.S. Department of the Treasury (the “Treasury”) explained that its action was based on long-standing concerns with Hungary’s tax system and the treaty itself, and a lack of satisfactory action by Hungary to remedy these concerns in coordination with other EU member countries that are seeking to implement the OECD Pillar Two global minimum tax proposal. The treaty’s termination will apply to U.S.-source dividends,…

22Aug 2023 by Pat Geddie

What is an RRSP and How is it Taxed Under the United States- Canada Income Tax Treaty

Tax Treaty

By Anthony DiosdiThe Canadian diaspora in the United States comprises approximately 3.1 million individuals who were either born in Canada or reported Canadian ancestry. Many of these individuals have Canadian registered retirement accounts or (“RRSPs”). An RRSP is a retirement savings and investing vehicle for employees and self-employed individuals in Canada. Under Canadian tax law, money that is placed into an RRSP grows tax-free until it is withdrawn from the account. An RRSP is similar to a U.S. 401(k) plan. There are a number of retirement plans available to Canadian residents to save for retirement. These plans provide tax deferral benefits and are intended to promote savings for retirements. Some common Canadian retirement plans are RRSPs, registered retirement income funds (“RRIFs”), tax-free savings accounts (“TFSAs”), registered education savings plans (“RDSPs”),…