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

04Nov 2022 by Anthony Diosdi

A Walk through the Cost Sharing Arrangement and Platform Contribution Rules

Tax Law

By Anthony Diosdi Multinational corporations usually engage in a variety of cross-border intercompany transactions. A common arrangement is for a U.S. parent corporation to license its intangibles to a foreign subsidiary for exploitation abroad. When such a transfer takes place, a “transfer price” must be computed in order to satisfy various financial reporting, tax, and other regulatory requirements. Internal Revenue Code Section 482 governs the transfer pricing rules and provides that multinational corporations must allocate their worldwide profits among the various countries in which they operate. To this end, Section 482 and its regulations adopt an arm’s-length standard for evaluating the appropriateness of a transfer price. To arrive at an arm’s-length result, a multinational corporation must select and apply the method that provides the most reliable estimate of an arm’s-length…

04Nov 2022 by Anthony Diosdi

The High-Tax or Section 954 Election for Multinational Corporations

Tax Law

By Anthony Diosdi For many years, U.S. multinational corporations were able to utilize a high-tax election to defer Subpart F income. However, when the global intangible low-tax income (or “GILTI”) taxing regime was announced in late 2017, a corresponding high-tax election was not available. Shortly after the enactment of the GILTI taxing regime, U.S. multinational corporations and their advisors began lobbying the Department of Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) to issue regulations to permit the use of a high-tax election for GILTI income. On July 20, 2020, the Department of Treasury (“Treasury”) promulgated final regulations which permit a high-tax election for global intangible low-taxed income (“GILTI”). This was welcome news to many U.S. multinational corporations and their advisors. In general, the Final Regulations enable U.S. multinationals to…

02Nov 2022 by Anthony Diosdi

Think You Can Delete Incriminating Evidence From Your Computer and an IRS Criminal Tax Investigator Won’t Notice? Think Again

Tax Law

By Anthony Diosdi The world is becoming a smaller place in which to live and work. A technological revolution in communications and information exchange has taken place within business, industry, and our homes. America is substantially more invested in information and management than manufacturing goods, and this has affected our professional and personal lives. We bank and transfer money electronically, and we are much more likely to receive an email than a letter. In this information technology age, the needs of the Internal Revenue Service ( or “IRS”) Criminal Investigation are changing as well. Some traditional tax crimes, especially those concerning finance and commerce, continue to be upgraded technically. Paper trails have become electronic trails. As a result, the IRS has been training agents to closely look at the computers…

02Nov 2022 by Anthony Diosdi

The IRS’s Ability to Access Electronic Communications Under the Stored Communication Act

Tax Law

By Anthony Diosdi There are more ways for people to connect with other people now than ever. The widespread use of social media organizations such as Facebook, Instagram, Linkedin, and Twitter means there is more evidence being created everyday. In some cases, this evidence can be used by the Internal Revenue Service (or “IRS”) to build a tax fraud case against an individual. For example, let’s assume Bob lives in San Francisco, California. Let’s also assume that Bob reports an annual income on his tax returns of $50,000. Bob’s posts on social media regarding expensive vacations or a luxurious lifestyle would be highly probative in an IRS criminal tax fraud investigation. Financial documents uploaded to cloud storage services (such as Google Cloud) may also be highly relevant in an IRS…

28Oct 2022 by Anthony Diosdi

Dual American British Residents- Will Uncle Sam or King Charles Tax Your Estate?

Tax Law

By Anthony Diosdi Both the United States and the United Kingdom allow dual citizenship so Americans who would like to apply for British citizenship are able to maintain both citizenships and vice versa. In the alternative, United States citizens can also become residents of the United Kingdom and United Kingdom citizens can become residents of the United States. Being a dual citizen or resident can trigger unexpected estate, gift, and inheritance tax consequences. This article takes a look at these potential tax consequences and examines the big picture impact of the U.S.-U.K.- Estate, Gift, and Generation-Skipping Tax Treaty. An Overview of the U.S. Estate and GiftTax RulesThe United States imposes estate and gift taxes on certain transfers of U.S. situs property by “nonresident citizens of the United States.” U.S. citizens…

28Oct 2022 by Anthony Diosdi

A Brief Look at the Hurdles Involved in a Type F Cross-Border Reorganization

Tax Law

By An By Anthony Diosdi In the corporate tax context, the term “reorganization” is a statutory term of art. Rather than providing a general definition, the Internal Revenue Code attempts to provide precise definitions for the term “reorganization” in Section 368(a)(1) with an exclusive list of seven specific types of transactions that will be considered “reorganizations.” Subparagraphs (A) through (G) of Section 368(a)(1) each provide a description of a particular reorganization transaction. Unless a transaction fits into one of the seven categories stated in subparagraphs (A) through (G), it is not a corporate reorganization. A Type F reorganization involves “a mere change in identity, or place of organization of one corporation, however effected.” See IRC Section 368(a)(1)(F). The major tax advantage to classification as a Type F reorganization is a…

17Oct 2022 by Anthony Diosdi

Thinking About Starting a Private Foundation? Proceed With Extreme Caution

Tax Law

By Anthony Diosdi Promoters of private foundations make private foundations sound like the perfect tax planning option. Here is how one promoter describes private foundations-“Private Foundation or Family Foundation (PF) can let you control your legacy, reduce your income taxes and impact your values to future generations. Family foundations provide living donors with flexibility as to the trimming of gifts. For instance, a donor may in one year have particularly high income and wish to take full advantage of the income tax deduction for a cash gift to a foundation (individual taxpayers may deduct up to 30% of their adjusted gross income for cash gifts), without deciding in that same year on the final charitable recipients. In a subsequent lean year, the foundation will have available additional funds for giving…

17Oct 2022 by Anthony Diosdi

Cross-Border Corporate Reorganizations and the Use of Gain-Recognition Agreements to Avoid Significant Adverse Tax Consequences

Tax Law

By Anthony Diosdi Whenever a U.S. person decides to establish a foreign corporation (or foreign business entity), it will be necessary to capitalize the foreign corporation with a transfer of cash and other property in exchange for its stock. When appreciated property, such as equipment or certain property rights, is transferred to a foreign corporation, gain will often be realized by a U.S. person. The basic problem is the need to protect the right of the country of residence of the transferor corporation or shareholder to tax gains realized by its taxpayer in the transaction. The concern of that country is that, if not taxed immediately, the gain will escape its tax net permanently. Since 1932, Internal Revenue Code Section 367 has provided the mechanism for protecting the U.S. taxing…

14Oct 2022 by Anthony Diosdi

An Introduction to the Secure Act for Qualified Retirement Plans and IRA Minimum Distribution Rules

Tax Law

By Anthony Diosdi The policy behind creating tax advantage qualified retirement plans and Individual Retirement Accounts or “IRAs” under the Internal Revenue Code is to provide income to employees when they retire from employment. This goal would not be satisfied if employees could infinitely defer the receipt of income from these plans. The regulations under Internal Revenue Code Section 401(a)(9) provides guidance to plan participants, IRA owners and beneficiaries as to the amounts which must be distributed from a qualified plan or IRA on an annual basis and be subjected to income tax. All qualified retirement plans and individual retirement accounts are subject to the minimum distribution rules. The minimum distribution rules also apply to SEPS, tax sheltered annuities, and certain deferred compensation plans for employees of tax-exempt organizations or…

14Oct 2022 by Anthony Diosdi

Why the Anti-Inversion Rules Make the Holding of U.S. Real Property through Multi-Tiered Blocker Structures Worthless to Foreign Investors

Tax Law

By Anthony Diosdi Many foreign investors (who are not domiciled in the U.S.) are advised to hold U.S. real property through U.S. corporations which in turn are owned by foreign corporations. Foreign investors are told to use these multi-tiered corporate blocker structures to avoid the U.S. estate and gift tax. At one time, multi-tiered corporate blocker structures could protect foreign investors from U.S. federal estate and gift tax.All this was possible because prior to the 2004 calendar year, a U.S. corporation may reincorporate in a foreign jurisdiction and thereby replace the U.S. parent corporation with a foreign parent corporation. These transactions were commonly referred to as asset inversion transactions. In asset inversions, a U.S. corporation generally recognized gain (but not loss) under Section 367(a) of the Internal Revenue Code as…