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

15Mar 2023 by Pat Geddie

Can Your Self-Directed IRA Hold Stock Options?

By Anthony Diosdi The growth of 401(k) plans and other defined contribution plans (as opposed to traditional defined pension plans) has generated additional opportunities for employees and retirees to use IRAs. To postpone taxation of the account balance in such a plan, the individual must rollover some or all of the account balance to an IRA or other qualified plan. This has resulted in the growth of “self-directed” IRAs. Since 1974, the IRS has permitted individuals to totally “self-directed” investments made within their IRAs. Self-directed IRAs are held by a trustee or custodian. They permit investment in a broader range of investments than is permitted by traditional IRAs. Although a self-directed IRA allows individuals to invest in numerous illiquid assets, investments in some assets are prohibited. These include but may…

15Mar 2023 by Pat Geddie

From Investment Vehicles to Treaties- What Foreign Investors Need to Know About Cross-Border Estate Planning

Tax Law, Uncategorized

By Anthony Diosdi Foreign investors generally have the same goal of minimizing their tax liabilities from their U.S. real estate and other U.S. investments, as do their U.S. counterparts, although their objective is complicated by the very fact that they are not domiciled in the U.S. The U.S. has a special estate and gift tax regime that is applicable to foreign investors that are not domiciled in the U.S. This article summarizes the basic estate and gift tax issues that affect foreign investors investing in the U.S. This article also discusses international tax planning opportunities that may be available to individuals that are not-U.S. citizens.An Overview of the Estate and Gift TaxU.S. Federal law imposes a transfer tax upon the privilege of transferring property by gift, bequest or inheritance. During…

14Mar 2023 by Pat Geddie

Criminal Tax Law in San Francisco, California: What You Need to Know

Tax Law

If you are facing criminal tax charges in San Francisco, California, it is crucial to have a knowledgeable and experienced criminal tax attorney on your side. Diosdi Ching & Liu, LLP is a law firm that has extensive experience representing clients in criminal tax cases. Our attorneys are well-versed in the intricacies of tax law and have a deep understanding of the criminal justice system. In San Francisco, criminal tax charges can arise from a variety of circumstances, including tax evasion, failure to file tax returns, and fraud. If you are under investigation for a criminal tax matter, it is critical to take action quickly to protect your rights and interests. Our criminal tax attorneys will work closely with you to develop a strategy that addresses your specific needs and…

10Mar 2023 by Pat Geddie

How to Calculate the Tax on Sale of a Partnership Interest of a Foreign Investor

Tax Law

By Anthony Diosdi Foreign investors generally have the same goals of minimizing their income tax liabilities from their business investments, as do their U.S. counterparts, although their objective is complicated by the very fact that they are not U.S. persons. That is, foreign investors must be concerned not only with income taxes in the United States, but also income taxes in their home country. Further, the United States has a special income tax regime that is applicable to foreign persons. Specifically, if the foreign investor derives certain types of passive income, it is typically taxed at a flat 30% rate (without allowance for deductions), unless an applicable U.S. tax treaty reduces this statutory rate. In contrast, if the U.S. activities of the foreign investor rises to the level of constituting…

10Mar 2023 by Pat Geddie

Form 5472- The Hidden Reporting Requirement for Foreign-Held Disregarded Entities

Tax Law

By Anthony Diosdi There is a perception by many countries that the United States is the world’s largest tax shelter. This is because unlike many countries, the United States does not require public disclosure of ownership of its entities, (in particular Limited Liability Companies (LLCs)), or publishing of year-end financial statements for public viewing. The lack of transparency has allowed nonresidents of the United States to form a domestic shell to avoid paying foreign income taxes, hide money or commit other acts of wrongdoing. Historically, nonresidents established shell companies in the United States as domestic disregarded entities.On December 13, 2016, the Treasury Department and the IRS issued final regulations regarding new reporting requirements for domestic disregarded entities wholly owned by a nonresident of the United States. For the purposes of…

09Mar 2023 by Pat Geddie

How to Make a Competent Authority Request to Resolve a Tax Treaty Dispute

Tax Law

By Anthony Diosdi The competent authority process is a dispute resolution mechanism available to taxpayers involved in a cross-border tax dispute involving a tax treaty. The taxpayer may invoke this procedure to require the tax administration’s competent authority function to “endeavor” to resolve the dispute by “mutual agreement” with a treaty partner. A taxpayer (or taxpayer’s representative) normally initiates a competent authority proceeding with a written request for assistance under the tax treaty. Tax treaties typically do not specify requirements for the competent authority request. The related procedures for requesting competent authority relief is described in IRS Rev. Proc. 2015-40, 2015-35 I.R.B. 236.On August 31, 2015, the Internal Revenue Service or IRS released updated competent authority procedures in Revenue Procedure 2015-40, 2015-35 IRB 236. The updated revenue procedure provided guidance…

09Mar 2023 by Pat Geddie

The Foreign Trust “Throwback Tax” and a Guide to Reporting the “Throwback Tax” on a Form 3520

Tax Law

By Anthony Diosdi This article discusses the “throwback tax” which imposes harsh federal consequences for U.S. beneficiaries of certain foreign trusts. We will begin this article by discussing the grantor trust provisions of the Internal Revenue Code and the significance of a foreign trust being classified as a nongrantor trust compared to a grantor trust. Next, this article will describe the serious consequences of the throwback tax. We will conclude this article with a discussion on how to potentially mitigate the impacts of the throwback tax. Overview of Federal Taxation of TrustsThe Internal Revenue Code has several regimes for taxing trusts, depending upon whether they are “grantor,” simple or complex trusts. There are also several special rules applicable to foreign trusts. If a trust is a grantor trust, its income…

28Feb 2023 by Pat Geddie

Filing Tax Forms for Employees and Contractors

Tax Law

Tax day comes sooner than expected for many taxpayers that have been procrastinating. One thing that should not slow them down is receiving their tax form from the employer that paid them. Under federal tax regulations, employers and companies that use the services of independent contractors must upload tax information to the IRS no later than January 31 of each year. Employees will receive a W-2 form, while independent contractors are each sent a 1099. The employer can use Business Services Online to submit the information to the IRS. They could then send an electronic or paper copy to the employee or an independent contractor. It is essential that businesses prepare early to meet these deadlines. The IRS can assess a penalty on the employer when they do not submit…

16Feb 2023 by Pat Geddie

Are IRS Assessed Foreign Information Reporting Penalties Associated with Forms 3520, 5471, and 5472 Ripe for a Prepayment APA Suit?

Tax Law

By Anthony Diosdi Penalties for failing to timely file foreign information returns such as Form 3520, Form 5471, and Form 5472 with the Internal Revenue Service or IRS can be serious. Penalties for failing to timely file a foreign information return can range from a minimum of $10,000 to several million dollars. The authority to assess most international penalties can be found in Sections 6038 and 6039 of the Internal Revenue Code. Originally, these penalties were assessed manually against taxpayers during an audit. However, beginning January 1, 2009, the IRS began systematically assessing monetary penalties for failing to disclose interests in offshore/foreign assets and holdings on a foreign information return. The IRS treats international penalties as summarily assessable, as they are not subject to deficiency procedures, wherein individuals receive a…

16Feb 2023 by Pat Geddie

Is the Statute of Limitation for IRS Assessed Foreign Information Reporting Penalties for Collections Five or Ten Years?

Tax Law

By Anthony Diosdi Penalties for failing to timely file foreign information returns such as Form 3520, Form 5471, and Form 5472 with the Internal Revenue Service or IRS can be serious. Penalties for failing to timely file a foreign information return can range from a minimum of $10,000 to several million dollars. The authority to assess most international penalties can be found in Sections 6038 and 6039 of the Internal Revenue Code. Originally, these penalties were assessed manually against taxpayers during an audit. However, beginning January 1, 2009, the IRS began systematically assessing monetary penalties for failing to disclose interests in offshore/foreign assets and holdings on a foreign information return. The IRS treats international penalties as summarily assessable, as they are not subject to deficiency procedures, wherein individuals receive a…