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Why the IRS Does Not Have the Authority to Assess and Collect a Section 6039F Penalty in Connection With a Late Filed Form 3520

Why the IRS Does Not Have the Authority to Assess and Collect a Section 6039F Penalty in Connection With a Late Filed Form 3520

Tax Law
By Anthony Diosdi There are a number of cases challenging the IRS’s ability to assess and collect penalties associated with failing to timely disclose foreign gifts on a Form 3520 making their way through various federal courts. This article discusses the IRS’s statutory ability to assess and collect Section 6039F Penalties associated with failing to timely disclose a foreign gift on a Form 3520. Introduction Section 6039F of the Internal Revenue Code requires U.S. persons (other than certain exempt organizations) to furnish information regarding the gifts (including bequests) that such person receives from a non-U.S. donor if the U.S. person treats the property so received as a gift for tax purposes, and the aggregate value of such gifts from the donor in a taxable year exceeds an annual threshold, which…
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An Introduction to the Taxation of U.S. Real Estate Held by Foreign Investors

An Introduction to the Taxation of U.S. Real Estate Held by Foreign Investors

Tax Law
By Anthony Diosdi Foreign investors actively invest in U.S. real estate by speculating on land and developing homes, condominiums, and commercial buildings. Many foreign investors own recreational property in popular U.S. beach and ski destinations. This article summarizes the U.S. tax consequences associated with a foreign investor’s acquisition of different U.S. property interests. This article also provides a number of tax planning options that should be considered by foreign investors when acquiring U.S. real estate.Types of U.S. Taxes For Investors Should Consider When Investing in U.S. Real PropertyThe acquisition of U.S. real property has no immediate U.S. tax consequences to the foreign investor. Although the acquisition of U.S. real property by a foreign investor will have no immediate U.S. tax consequences, there are a number of future tax consequences that…
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FIRPTA and the IRS’ Ability to Assess Interest When No Tax is Due 

FIRPTA and the IRS’ Ability to Assess Interest When No Tax is Due 

Tax Law
By Anthony Diosdi When a U.S. income tax nonresident alien or a foreign corporation (hereinafter referred to as a “Foreign Taxpayer”) disposes of a U.S. real property interest (“USRPI”), the Foreign Taxpayer is subject to the Foreign Investment in the U.S. Real Property Tax Act of 1980 (“FIRPTA”). FIRPTA is designed to ensure that a foreign investor is taxed on the disposition of a U.S. property interest. The term “disposition” means transfer. To ensure collection of FIRPTA, any transferred acquiring a U.S. real property interest must deduct and withhold a tax on the amount realized on the disposition. A transferee is any person, foreign or domestic, that acquires a U.S. real property interest by purchase, exchange, gift, or any other type of transfer. See Treas. Reg. Section 1.1445-1(g)(4). The amount…
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Understanding the Vital Role of San Francisco Tax Lawyers at Diosdi & Liu, LLP

Understanding the Vital Role of San Francisco Tax Lawyers at Diosdi & Liu, LLP

Tax Law
In the complex landscape of tax law, individuals and businesses in the Bay Area face unique challenges that require professional guidance and expertise. Diosdi & Liu, LLP, a premier law firm based in San Francisco, stands at the forefront of providing specialized tax legal services to a diverse clientele. Our experienced San Francisco tax lawyers are dedicated to delivering comprehensive solutions tailored to meet your specific needs, ensuring compliance and optimizing your tax position. Why Choose San Francisco Tax Lawyers at Diosdi & Liu, LLP? Tax law is not only intricate but also constantly evolving. It demands a deep understanding of both federal and state regulations to effectively manage liabilities and seize opportunities for tax savings. The tax attorneys at Diosdi & Liu, LLP bring a wealth of knowledge and…
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The U.S. Taxation of Foreign Trusts

The U.S. Taxation of Foreign Trusts

Tax Law
By Anthony Diosdi This article provides an overview of the U.S. federal tax rules governing U.S. beneficiaries of foreign trusts. The term “U.S. person means:1. A citizen or resident of the United States;2. A domestic partnership;3. A domestic corporation;4. Any estate other than a foreign estate;5. A domestic U.S. trust.The first step is to determine whether the entity at issue is a trust. A trust is a fiduciary relationship in which a trustee gives another party, known as the trustee, the right to hold title to property or assets for the benefit of a third party. Thus, in order to have a trust, there must be an arrangement, written or oral, in which a trustee takes title to property, which is protected or conserved for beneficiaries of the trust.Once a…
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The Reshoring or Domestication of a Controlled Foreign Corporation

The Reshoring or Domestication of a Controlled Foreign Corporation

Tax Law
By Anthony Diosdi The Internal Revenue Code provides that a United States shareholder of a Controlled Foreign Corporation or (“CFC”) is subject to tax on the CFC’s Subpart F or “global intangible low-taxed income” or (“GILTI”). The Subpart F and GILTI are anti-deferral tax regimes. Subpart F and GILTI results in most income earned by foreign corporations being subject to current U.S. taxation. All U.S. shareholders other than U.S. C corporations are disadvantaged under the Subpart F and GILTI regimes, because foreign tax credits and certain deductions (i.e., Section 250 permits a deduction of 50 percent of the GILTI amount calculated under Section 951A) apply only to domestic corporations. Unless an affected U.S. shareholder undertakes planning to minimize their tax exposure on Subpart F income and GILTI, such as the…
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The Reshoring or Domesticate of a Controlled Foreign Corporation

The Reshoring or Domesticate of a Controlled Foreign Corporation

Tax Law
By Anthony Diosdi The Internal Revenue Code provides that a United States shareholder of a Controlled Foreign Corporation or (“CFC”) is subject to tax on the CFC’s Subpart F or “global intangible low-taxed income” or (“GILTI”). The Subpart F and GILTI are anti-deferral tax regimes. Subpart F and GILTI results in most income earned by foreign corporations being subject to current U.S. taxation. All U.S. shareholders other than U.S. C corporations are disadvantaged under the Subpart F and GILTI regimes, because foreign tax credits and certain deductions (i.e., Section 250 permits a deduction of 50 percent of the GILTI amount calculated under Section 951A) apply only to domestic corporations. Unless an affected U.S. shareholder undertakes planning to minimize their tax exposure on Subpart F income and GILTI, such as the…
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The 962 Election vs. The High-Tax Exception: The Epic Showdown

The 962 Election vs. The High-Tax Exception: The Epic Showdown

Tax Law
By Anthony Diosdi Prior to the enactment of the 2017 Tax Cuts and Jobs Act, Controlled Foreign Corporations (“CFCs”) were able to defer the U.S. taxation of foreign source income through tax planning. The 2017 Tax Cuts and Jobs Act significantly reduced (but did not eliminate) a CFC’s U.S. shareholder’s ability to defer the U.S. taxation of foreign source income. This article will discuss two remaining options available to CFC shareholders to defer the recognition of U.S. tax on foreign source income. CFC shareholders can make either a so-called 962 election or a high-tax exception (also known as a Section 954 election) to defer the taxation on foreign income. This article will compare and contrast each of these elections.Section 962 ElectionInternal Revenue Code Section 962 allows an individual U.S. shareholder…
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No, No, No, No….Prohibited Transactions and Disqualified Persons in Self-Directed IRAs

No, No, No, No….Prohibited Transactions and Disqualified Persons in Self-Directed IRAs

Tax Law
By Anthony Diosdi A self-directed retirement plan is a type of structure that allows the holder to transfer tax free funds from a retirement account to acquire real estate. There are a number of rules however that must be followed in order to make such a transaction work.  Let’s first start with a basic retirement account. Retirement accounts (such as IRAs and 401K plans) can be created by contribution subject to annual dollar limits or by rollover from a qualified plan. The owner usually cannot take out distributions prior to age 59 ½ without penalty.  Since 1974, the IRS has permitted individuals to totally “self-direct” investments made within their Individual Retirement Plans (“IRAs”). Self-directed IRAs are also authorized by federal law and are held by a trustee or custodian that…
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The Reshoring or Domesticate of a Controlled Foreign Corporation

The Reshoring or Domesticate of a Controlled Foreign Corporation

Tax Law
By Anthony Diosdi The Internal Revenue Code provides that a United States shareholder of a Controlled Foreign Corporation or (“CFC”) is subject to tax on the CFC’s Subpart F or “global intangible low-taxed income” or (“GILTI”). The Subpart F and GILTI are anti-deferral tax regimes. Subpart F and GILTI results in most income earned by foreign corporations being subject to current U.S. taxation. All U.S. shareholders other than U.S. C corporations are disadvantaged under the Subpart F and GILTI regimes, because foreign tax credits and certain deductions (i.e., Section 250 permits a deduction of 50 percent of the GILTI amount calculated under Section 951A) apply only to domestic corporations. Unless an affected U.S. shareholder undertakes planning to minimize their tax exposure on Subpart F income and GILTI, such as the…
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