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

01May 2023 by Anthony Diosdi

Can a Tax Treaty Tie-Breaker Provision Save Departing Residents from the Expatriation Tax?

By Anthony Diosdi During the past few years, a record number of individuals have expatriated from the United States. Much of this expatriation is from citizens of other countries who were issued green cards. People from around the world are attracted to the United States because of lucrative employment or business opportunities. However, a significant number of these individuals decide to either return to their home countries or seek opportunities elsewhere. The U.S. tax system (which taxes U.S. residents on their worldwide income) makes holding on to a green card too expensive to keep and many decide to relinquish it. To the surprise of many, the relinquishment of a green card can trigger a very expensive expatriation tax. This article will explain the mechanics of the expatriation tax. This article…

20Apr 2023 by Anthony Diosdi

Demystifying the 2023 IRS Form 5471 Schedule J

Tax Law

By Anthony Diosdi Form 5471 is used by certain U.S. persons who are officers, directors, or shareholders in respect of certain foreign entities that are classified as corporations for U.S. tax purposes. The Form 5471 and schedules are used to satisfy the reporting requirements of Internal Revenue Code Section 6038 and 6046 along with the applicable regulations. Substantively, it backstops various international sections of the Internal Revenue Code including Sections 901/904 (Code Section 901 and 904 provide rules governing foreign tax credits), Section 951(a) (Section 951a provide rules governing Subpart F income and Section 956. Section 956 is an anomaly and operates differently than the rest of subpart F. Generally, a U.S. shareholder of a foreign corporation must include in income his or her pro rata share of the foreign…

17Apr 2023 by Anthony Diosdi

California Tax Attorneys: Navigate the Complex Tax Landscape with Diosdi Ching & Liu

Tax Law

Navigating the complex tax landscape in California can be a daunting task for individuals and businesses alike. With ever-changing tax laws and regulations, staying on top of your tax obligations can be overwhelming. This is where experienced California tax attorneys like Diosdi Ching & Liu step in to provide guidance and assistance. In this blog post, we will discuss the services offered by Diosdi Ching & Liu and how they can help you with your tax concerns. Diosdi Ching & Liu: The Premier California Tax Attorneys Team Diosdi Ching & Liu is a leading law firm that focuses on providing top-notch tax law services in California. With a team of skilled and knowledgeable attorneys, they have helped numerous clients successfully address their tax-related issues. As California tax attorneys, their primary…

12Apr 2023 by Anthony Diosdi

How is Crypto Staking Taxed Post Jarrett?

Tax Law

By Anthony Diosdi In 2021, a Tennessee couple filed suit in federal district court in Tennessee seeking the refund of the federal income tax they paid on certain newly issued Tazos cryptocurrency units they acquired in 2019. See Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn. 2021)(May 26, 2021). The cryptocurrency units at issue were the rewards the couple had received for their “staking” activities on Tezos blockchain network. Rather than contest the matter, the Internal Revenue Service (“IRS”) refunded the tax paid by the couple. As a result, the court dismissed the case, depriving the cryptocurrency market of needed clarification in this area. This article discusses the current state of the taxation of crypto staking and how investors can calculate their basis in the block rewards from staking. An…

12Apr 2023 by Anthony Diosdi

The 2023 Tax Guide for Cryptocurrency and NFTs

Tax Law

By Anthony Diosdi Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency, that functions as a unit of account, a store of value, and a medium of exchange. Cryptocurrency allows parties to transact directly without an intermediary using blockchain technology, a shared distributed ledger that verifies, records, and settles transactions on a secure, encrypted network. Although some major retailers accept cryptocurrencies like Bitcoin and Ethereum, cryptocurrency is not money. Money means coin and paper money that Congress declares is legal tender. Because cryptocurrencies are sometimes other than money, what they are varies depending on the perspective from which they are viewed. For example, the Securities…

06Apr 2023 by Anthony Diosdi

TAXATION OF THE MODERN DAY CROSS-BORDER MERGER AND ACQUISITION

Tax Law, Uncategorized

In today’s global economy, corporations have operations all over the world. Typically, a U.S. parent corporation owns a group of subsidiary corporations formed within and outside the United States. In such a scenario, the foreign subsidiaries are largely held by one foreign parent corporation. In larger multinational corporations, frequently there are multiple foreign parent corporations. This article discusses a number of key tax considerations specific to cross-border reorganizations. This article does not provide an exhaustive overview of all tax considerations but rather provides commentary on the most overlooked and misunderstood factors involved in the taxation of an international corporate reorganization. Section 368(a)(1) corporate reorganizations Any discussion regarding the taxation of crossborder mergers and acquisitions must begin with Section 368(a)(1). In the domestic context, Section 368(a)(1) provides for nonrecognition of gain…

04Apr 2023 by Anthony Diosdi

Once the U.S.-Hungary Income Tax Treaty Terminates- Can Hungarian Owned Entities be Treated as “Equivalent Beneficiaries” For Tax Treaty Purposes?

Tax Law

By Anthony Diosdi On July 8, 2022, the Biden administration announced that it will terminate the U.S.-Hungary Income Tax Treaty that was enacted in 1979. The provisions of the tax treaty will no longer apply after January 1, 2024. According to a July 8 article in the Wall Street Journal, the Treasury Department explained its action 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 termination will apply to U.S.-source dividends, interest, and royalties for payments made on or after January 1, 2024. A new U.S. income tax treaty with Hungary was agreed…

31Mar 2023 by Anthony Diosdi

U.S. Taxation of International Cloud Computing and Digital Transactions

Tax Law

By Anthony Diosdi New technology and new transactions often raise difficult issues of tax policy and administration in part because existing rules were developed to deal with other situations. The dramatic expansion in electronic commerce facilitated by the use of the Internet and other technology is subjecting existing tax principles to new pressures. One area of concern is the application of source rules to electronic commerce transactions. Suppose, for example, that a corporation delivers software or a digital product to a customer on the Internet. The customer can download the product and use it commercially. Depending upon the nature of the transaction and the property interests involved, the income to the corporation might appropriately be characterized as a rent or royalty for the use of technology, profit from the sale…

31Mar 2023 by Anthony Diosdi

Tax Planning for Inbound Licenses of Intellectual Property in a Post 2017 Tax Cuts and Jobs Act World

Tax Law

By Anthony Diosdi The U.S. is the world’s largest recipient of foreign direct investment. Much of this investment is in the form of foreign owned intellectual property. Creators of foreign owned intellectual property typically will transfer some or all of their intellectual property rights through an inbound U.S. licensing agreement. Under U.S. domestic laws, a foreign person generally is subject to 30 percent U.S. federal tax on the gross amount of U.S. source income received from a licensing agreement. This is because all persons (“withholding agents”) making U.S.-sourced fixed, determinable, annual, or periodical or (“FDAP”) payments to foreign persons generally must report FDAP payments, such as royalties. Withholding agents are permitted to withhold at a lower rate if the beneficial owner of the intellectual property certifies their eligibility for the…

15Mar 2023 by Anthony Diosdi

Can Your Self-Directed IRA Hold Stock Options?

Tax Law

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…