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

22Jun 2022 by Anthony Diosdi

IRS Form 3520 in a Nutshell

Tax Law

By Anthony Diosdi This article is designed to provide the reader with an understanding of the Internal Revenue Service (“IRS”) Form 3520. U.S. persons who receive distributions, directly or indirectly, from a foreign trust are required to report a number of matters relevant to the trust on Form 3520, including the name of the trust and the aggregate distributions received during the taxable year. For this purpose, a distribution from a foreign trust includes any gratuitous transfer of money or property from a foreign trust, whether or not the trust is deemed to be owned by another person (such as a foreign grantor). A reportable distribution from a foreign trust includes the receipt of trust corpus and the receipt of a gift or bequest even though such amounts may not…

20Jun 2022 by Anthony Diosdi

A Closer Look at Gain Recognition Agreements in the Context of Cross-Border Transfers and Reorganizations

Tax Law

By Anthony Diosdi Internal Revenue Code Section 367(a) provides a general rule of taxability with respect to outbound transfers of property in exchange for other property in transactions described in Section 332, 351, 354, 356 or 361 by stating that a foreign corporation will not be considered a corporation that could qualify for nonrecognition of gain under one of the enumerated Code sections. Section 367 requires U.S. persons transferring appreciated property to a foreign corporation to recognize a gain on the transfer. This result is achieved by denying the foreign corporation corporate status, in which case the general rules for taxable exchanges apply. The types of corporate transactions that typically fall within the scope of Section 367(a) include: 1) Incorporations- A U.S. person’s contribution of property to a foreign corporation…

20Jun 2022 by Anthony Diosdi

Reporting Cross-Border Transfers and Reorganizations on IRS Form 926

Tax Law

By Anthony Diosdi If a U.S. corporation is liquidated and its assets are distributed to foreign shareholders, U.S. tax will be imposed on the gain realized by the distributing corporation except to the extent that a tax-free-exchange provision provides otherwise. Likewise, if the stock or assets of a corporation are acquired by a foreign corporation in exchange for stock of the foreign corporation, or if, conversely, a foreign corporation is acquired for stock of a U.S. corporation, gain realized by U.S. shareholders and the U.S. corporation will also be subject to tax, except to the extent that the gain is sheltered by a tax-free-exchange provision. Even an acquisition of one foreign corporation by another foreign corporation involving U.S. shareholders who exchange their stock in the acquired corporation for stock in…

16Jun 2022 by Anthony Diosdi

An In Depth Look at the IRS Form 8865 and the Foreign Partnership Reporting Provisions of the Internal Revenue Code

Tax Law

By Anthony Diosdi This article discusses most of the Form 8865 questions and schedules. This article is designed to supplement the instructions promulgated by the Internal Revenue Service (“IRS”) for Form 8865. Foreign partnerships controlled by U.S. persons have informational reporting requirements that are similar to the information reporting rules that have been applied to controlled foreign corporations or CFCs. Under Internal Revenue Code Section 6038(a), a U.S. partner that controls a foreign partnership must annually file a Form 8865 with the IRS. A U.S. partner is considered to be in control of a foreign partnership if the U.S. partner holds, directly or indirectly, a greater than 50 percent interest in the capital, profits, or, to the extent provided in the regulations, deductions or losses of the partnership. See IRC…

16Jun 2022 by Anthony Diosdi

An In Depth Look at the IRS Form 8858 Used With Respect to Foreign Disregarded Entities and Foreign Branches

Tax Law

By Anthony Diosdi This article discusses most of the Form 8858 questions and schedules. This article is designed to supplement the instructions promulgated by the Internal Revenue Service (“IRS”) for Form 8858. Form 8858 is used by certain U.S. persons that operate a foreign branch or own a foreign disregarded entity directly, indirectly, or constructively. A foreign disregarded entity is an entity that is not created or organized in the United States and that is disregarded as an entity separate from its owner for U.S. income tax purposes. A foreign branch is defined as a “qualified business unit” or “QBU.” Section 989(a) of the Internal Revenue Code defines a QBU as “any separate and clearly identified unit of a trade or business of a taxpayer which maintains separate books and…

14Jun 2022 by Anthony Diosdi

Will ‘Chrisley Knows Best’ Reality TV Stars Face Prison Sentences? A Brief Discussion Regarding the Sentencing of Defendants Convicted of Tax Fraud

Tax Law

By Anthony Diosdi Todd and Julie Chrisley, stars of the reality TV show “Chrisley Knows Best,” were recently found guilty by a federal court jury of tax evasion, conspiracy to commit bank fraud, and conspiracy to defraud the Internal Revenue Service (“IRS”). Julie Chrisley was also charged with wire fraud and obstruction of justice. As with the Chrisleys, there is a tendency in criminal tax prosecutions to pile up charges and indict an individual for multiple years with a combination of revenue offenses and general federal criminal offenses as the situation warrants. According to the United States Sentencing Commission, 68.7 percent of individuals convicted of tax fraud (tax crimes such as tax evasion) were sentenced to prison. The average sentence for tax fraud offenders was 16 months. Todd and Julie…

14Jun 2022 by Anthony Diosdi

Todd and Julie Chrisley Were Found Guilty of Tax Evasion- So What is Tax Evasion?

Tax Law

By Anthony Diosdi Todd and Julie Chrisley, stars of the reality TV show “Chrisley Knows Best,” were recently found guilty by a federal court jury of tax evasion. Tax evasion is probably one of the most misunderstood criminal tax provisions in the Internal Revenue Code. This article discusses the elements of criminal tax evasion and potential defenses to a charge of tax evasion. Internal Revenue Code Section 7201 defines what is commonly known as “tax evasion” or “tax fraud.” Section 7201 reads as follows:“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, shall be fined not more than $250,000 ($500,000 for corporations)…

08Jun 2022 by Anthony Diosdi

A Closer Look at the Title 31 Anti-Money Laundering Rules Governing Cryptocurrency Exchangers

Tax Law

By Anthony Diosdi On January 1, 2021, the Anti-Money Laundering Act of 2020 was enacted into law. Under the Anti-Money Laundering Act of 2020, the Department of Treasury has the power to declare that cryptocurrency is a monetary instrument. As a result, certain cryptocurrency transactions must be reported to the Financial Crimes Enforcement Network or FinCEN (The Financial Crimes Enforcement Network is a bureau of the Department of the Treasury) as part of a financial institution’s anti-money laundering (“AML”) program. This article will discuss cryptocurrency trader’s obligation under the Anti-Money Laundering Act of 2020. Money Transmitter Laws- What Cryptocurrency Traders Need to KnowIf you are in the business of trading cryptocurrency, it is imperative that you understand the money transmitter laws. There are federal and state money transmitting laws. We…

08Jun 2022 by Anthony Diosdi

The Rising Significance of Self-Cancelling Installment Notes as a Estate-Planning Tool for U.S. Citizens and Nonresidents

Tax Law

By Anthony Diosdi Federal law imposes a transfer tax upon the privilege of transferring property by gift, bequest or inheritance. This transfer tax takes the form of a gift tax in the case of completed lifetime gifts and an estate tax in the case of property owned by the decedent at the time of death. Gift and estate taxes are computed on the progressive unified rate schedule set forth in Section 2001 of the Internal Revenue Code with rates as high as 40 percent. As of 2022, the lifetime estate and gift tax exemption for U.S. domiciled single filers is $12.06 million and $24.12 million for married couples U.S. domiciliaries filing jointly. For nonresident aliens not domiciled in the United States, there is only a credit equivalent to $60,000 against…

07Jun 2022 by Anthony Diosdi

A Tax Professional’s Guide to Form 5471 Schedule E and Schedule H

Tax Law

By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to ensure compliance with the “global intangible low-taxed income” or “GILTI” and Subpart F income, each year certain U.S. persons must file a Form 5471 with the IRS. A Form 5471 must be 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 its schedules are used to satisfy the reporting requirements of Internal Revenue Code Sections 6038 and 6046. The Form 5471 serves as a reporting form to various international provisions of the Internal Revenue Code such as Sections 901/904 (Foreign Tax Credit), 951(a) (Subpart F and Section 956), Section 951A (“GILTI”), Section 965…