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

09Apr 2024 by Anthony Diosdi

A Case Study of an Outbound Forward Triangular Reorganization Part II- The Limited Interest Exception

Tax Law

This article provides an overview of the rules governing outbound forward triangular mergers. This article uses a hypothetical Singapore corporation which acquires a U.S. corporation to discuss the issues commonly faced by tax professionals in outbound forward triangular merger. A forward triangular reorganization occurs when an acquiror uses the shares of its parent as merger consideration when the target merges into the acquiror, resulting in the acquiror receiving substantially all of the target’s assets. Let’s assume that a Singaporean corporation (“SingCo”) is entering into a forward triangular merger and for that it is setting up a new Delaware entity as NewCo with the purpose of acquiring business of the target corporation as TargetCo. The consideration is in the form of shares (50 percent) and the balance will be paid in…

21Mar 2024 by Anthony Diosdi

A Closer Look at the W-8BEN-E Used by Foreign Entities to Document their Status for U.S. Tax Withholding Purposes

Tax Law

By Anthony Diosdi Form W-BBEN-E is used by foreign entities to document their status for purposes of Chapter 3 and Chapter 4, as well as for certain other Internal Revenue Code provisions.Generally, withholding agents are required to withhold U.S. tax at the source on certain payments made to nonresident aliens and foreign corporations. A withholding agent for Chapter 3 means any person required to deduct and withhold any tax under Internal Revenue Code Sections 1441, 1442, 1443, or 1461. The withholding rate is typically 30%. FATCA introduced Chapter 4, a documentation regime imposed in addition to the existing Chapter 3 for certain payments to foreign payees that include FFIs and NFFEs. Chapter 4 withholding can be considered a penalty tax imposed when certain withholding payments are made and the U.S.…

21Mar 2024 by Anthony Diosdi

A Closer Look at the W-8BEN Used by Foreign Individuals to Document their Status for U.S. Tax Withholding Purposes

Tax Law

By Anthony Diosdi Form W-BBEN is used by foreign individuals to document their status for purposes of Chapter 3 and Chapter 4, as well as for certain other Internal Revenue Code provisions.Generally, withholding agents are required to withhold U.S. tax at the source on certain payments made to nonresident aliens and foreign corporations. A withholding agent for Chapter 3 means any person required to deduct and withhold any tax under Internal Revenue Code Sections 1441, 1442, 1443, or 1461. The withholding rate is typically 30%. FATCA introduced Chapter 4, a documentation regime imposed in addition to the existing Chapter 3 for certain payments to foreign payees that include FFIs and NFFEs. Chapter 4 withholding can be considered a penalty tax imposed when certain withholding payments are made and the U.S.…

19Mar 2024 by Anthony Diosdi

IRS Form 5472: Do You Need to File it?

Tax Law

By Anthony Diosdi The Form 5472 is a mandatory return that must be filed with the Internal Revenue Service (“IRS”) for reportable transactions between a reporting corporation and its foreign related party. This article will discuss whether an entity has an obligation to file a Form 5472.Form 5472: Basic TerminologyA Form 5472 is required to be filed by a domestic corporation (or a disregarded entity) that can be classified as a reporting corporation. An entity can be classified as a reporting corporation, if, at any time during the taxable year, 25% or more of its stock, by vote or value, is owned directly or indirectly by at least one foreign person.A foreign person is:1) An individual who is a citizen or resident of a U.S. possession who is not otherwise…

19Mar 2024 by Anthony Diosdi

Dynamo Holdings L.P. v. Commissioner- A Blueprint of How Related-Party Inbound Foreign Investment in U.S. Real Estate Should and Should Not be Handled for FIRPTA and FDAP Purposes

Tax Law

By Anthony Diosdi In Dynamo Holdings L.P. v. Commissioner, T.C. Memo 2018-61 (2018), (hereinafter Dynamo Holdings) the U.S. Tax Court issued an opinion finding, in part, in favor of a Canadian U.S. family that engaged in successful real estate developments both in Canada and the U.S. that certain bona fide indebtedness existed with respect to cross-border restructuring as described below, but also finding that certain transfers were not made at fair market value, thus also finding that certain transfers were not made at fair market value, thus, triggering a constructive distribution, withholding tax exposure, and other hazards. This article analyzes the Dynamo Holdings case, which is a blueprint of how inbound restructuring should be carefully addressed and handled.Factual BackgroundThe Canadian-based Moog family had a strong track record in successful real…

15Mar 2024 by Anthony Diosdi

Mastering Tax Issues in San Francisco: Why Diosdi & Liu, LLP Stands Out

Tax Law

When it comes to tax matters in San Francisco, finding reliable legal counsel is paramount. With the ever-evolving tax landscape, individuals and businesses alike need adept guidance to ensure compliance and optimize their financial strategies. Diosdi & Liu, LLP emerges as a trusted ally, offering comprehensive tax services tailored to the unique needs of clients in the Bay Area. Understanding San Francisco Tax Laws San Francisco's tax regulations can be complex, requiring a nuanced understanding to handle effectively. Whether it's individual tax planning, corporate tax obligations, or resolving IRS disputes, having a proficient San Francisco tax attorney by your side is essential. Diosdi & Liu, LLP specializes in deciphering the intricacies of local tax laws, ensuring clients remain compliant while maximizing their financial well-being. Personalized Tax Solutions At Diosdi & Liu, LLP, we recognize…

15Mar 2024 by Anthony Diosdi

How to Report Cross-Border Payments to the IRS on Form 1042-S

Tax Law

By Anthony Diosdi The United States often taxes the gross income received by foreign persons. In addition, the person controlling the payment of the income may need to deduct and withhold U.S. taxes before payment is made to a foreign person. The following types of foreign persons may be subject to U.S. withholding taxes:(i) Nonresident alien individuals;(ii) Foreign corporations;(iii) Foreign partnerships, and(iv) Foreign estates and trusts.A nonresident alien is an individual who is neither a citizen nor resident of the United States. A foreign corporation is a corporation organized or created under the laws of a foreign country. Likewise, a foreign partnership is a partnership organized or created under the laws of a foreign country. An estate is foreign if its foreign-source income, other than any income effectively connected with…

15Mar 2024 by Anthony Diosdi

How to Report Cross-Border Payments to the IRS on Form 1042

Tax Law

By Anthony Diosdi The United States often taxes the gross income received by foreign persons. In addition, the person controlling the payment of the income may need to deduct and withhold U.S. taxes before payment is made to a foreign person. The following types of foreign persons may be subject to U.S. withholding taxes:(i) Nonresident alien individuals;(ii) Foreign corporations;(iii) Foreign partnerships, and(iv) Foreign estates and trusts.A nonresident alien is an individual who is neither a citizen nor resident of the United States. A foreign corporation is a corporation organized or created under the laws of a foreign country. Likewise, a foreign partnership is a partnership organized or created under the laws of a foreign country. An estate is foreign if its foreign-source income, other than any income effectively connected with…

15Mar 2024 by Anthony Diosdi

IRS Form 5472: Do You Need to File it?

Tax Law

By Anthony Diosdi The Form 5472 is a mandatory return that must be filed with the Internal Revenue Service (“IRS”) for reportable transactions between a reporting corporation and its foreign related party. This article will discuss whether an entity has an obligation to file a Form 5472.Form 5472: Basic TerminologyA Form 5472 is required to be filed by a domestic corporation (or a disregarded entity) that can be classified as a reporting corporation. An entity can be classified as a reporting corporation, if, at any time during the taxable year, 25% or more of its stock, by vote or value, is owned directly or indirectly by at least one foreign person.A foreign person is:1) An individual who is a citizen or resident of a U.S. possession who is not otherwise…

21Feb 2024 by Anthony Diosdi

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…