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

15Feb 2022 by Anthony Diosdi

Unraveling the United States- Philippines Income Tax Treaty and a Closer Look at the Treaty’s Provision Regarding the Taxation of U.S. Based Retirement Accounts Such as 401K Plans and IRAs

Tax Law

By Anthony Diosdi The major purpose of an income tax treaty is to mitigate international double taxation through tax reduction or exemptions on certain types of income derived by residents of one treaty country from sources within the other treaty country. Because tax treaties often substantially modify United States and foreign tax consequences, the relevant treaty must be considered in order to fully analyze the income tax consequences of any outbound or inbound transaction. The United States currently has income tax treaties with approximately 58 countries. This article discusses the United States- Philippines Income Tax Treaty. There are several basic treaty provisions, such as permanent establishment provisions and reduced withholding tax rates, that are common to most of the income tax treaties to which the U.S. is a party. In…

15Feb 2022 by Anthony Diosdi

Unraveling the United States- Spain Income Tax Treaty and the Treaty’s Impact on the Global Taxation on Cross-Border Pension Plans

Tax Law

By Anthony Diosdi The major purpose of an income tax treaty is to mitigate international double taxation through tax reduction or exemptions on certain types of income derived by residents of one treaty country from sources within the other treaty country. Because tax treaties often substantially modify United States and foreign tax consequences, the relevant treaty must be considered in order to fully analyze the income tax consequences of any outbound or inbound transaction. The United States currently has income tax treaties with approximately 58 countries. This article discusses the United States- Spain Income Tax Treaty. There are several basic treaty provisions, such as permanent establishment provisions and reduced withholding tax rates, that are common to most of the income tax treaties to which the U.S. is a party. In…

15Feb 2022 by Anthony Diosdi

Unraveling the United States- Switzerland Income Tax Treaty and the Treaty’s Impact on the Global Taxation on Cross-Border Pension Plans

Tax Law

By Anthony Diosdi The major purpose of an income tax treaty is to mitigate international double taxation through tax reduction or exemptions on certain types of income derived by residents of one treaty country from sources within the other treaty country. Because tax treaties often substantially modify United States and foreign tax consequences, the relevant treaty must be considered in order to fully analyze the income tax consequences of any outbound or inbound transaction. The United States currently has income tax treaties with approximately 58 countries. This article discusses the United States- Switzerland Income Tax Treaty. There are several basic treaty provisions, such as permanent establishment provisions and reduced withholding tax rates, that are common to most of the income tax treaties to which the U.S. is a party. In…

15Feb 2022 by Lynn Ching

Limited Escape Hatch: Do You Need to File Form 8938 ‘Statement of Specified Foreign Financial Assets’?

Tax Law

By Lynn K. Ching Much has been written about the plethora of Foreign Financial Disclosure Forms and the insanely huge penalties that accompany a failure to file these forms. Form 8938 is one of several such forms which you may be required to file, depending on the facts of your specific circumstance. Basics Certain U.S. taxpayers (citizens, resident aliens, certain non-resident aliens) and specified domestic entities holding certain financial assets 1 outside the United States must report those assets to the IRS generally using Form 8938, ‘Statement of Specified Foreign Financial Assets’. In general, you are obligated to file the Form 8938 if the aggregate value of these assets exceeds $50,000, 2 but in some cases, the threshold may be higher as set forth below. ● Unmarried taxpayers living in…

14Feb 2022 by Anthony Diosdi

A Discussion as to How Foreign Investors Can Use Shared Appreciation Mortgages to Avoid FIRPTA Withholding Associated with the Sale of U.S. Real Estate

Tax Law

By Anthony Diosdi When U.S. real estate became a popular investment with foreign investors in the 1970s, the favorable tax treatment accorded foreign investors in U.S. real property became a domestic political issue. Congress responded in 1980 by enacting the Foreign Investment in Real Property Tax Act of 1980 (or “FIRPTA”), which attempted to equalize the tax treatment of real property gains realized by domestic and foreign investors. Prior to FIRPTA, foreign persons generally were not taxed on gains from the disposition of a U.S. real property interest. Under FIRPTA, gains or losses realized by foreign corporations or nonresident alien individuals from any sale, exchange, or other disposition of a U.S. real property interest are taxed in the same manner as income effectively connected with the conduct of a U.S.…

14Feb 2022 by Anthony Diosdi

Demystifying the 2021 IRS Form 5471 Schedule Q

Tax Law

By Anthony Diosdi Schedule Q is used to report a controlled foreign corporation’s (“CFC”) income, deductions, and assets by CFC income groups. A CFC shareholder required to complete Schedule Q is required to disclose subpart F income in functional currency by relevant country. In particular, the CFC shareholder must disclose dividends, rents, royalties, net gains from certain property, net gain from commodities, and net currency gains. It will also be necessary to disclose foreign base company sales income, foreign base company services income, insurance income, international boycott income, bribes, kickbacks, and recaptured subpart F income on Schedule Q. Each of these aforementioned items of subpart F income will be required to be categorized into a number of different categories. Schedule Q also requires the CFC shareholder to categorize tested income…

09Feb 2022 by Anthony Diosdi

Unraveling the United States- Philippines Income Tax Treaty and a Closer Look at the Treaty’s Provision Regarding the Taxation of U.S. Based Retirement Accounts Such as 401K Plans and IRAs

Tax Law

By Anthony Diosdi The major purpose of an income tax treaty is to mitigate international double taxation through tax reduction or exemptions on certain types of income derived by residents of one treaty country from sources within the other treaty country. Because tax treaties often substantially modify United States and foreign tax consequences, the relevant treaty must be considered in order to fully analyze the income tax consequences of any outbound or inbound transaction. The United States currently has income tax treaties with approximately 58 countries. This article discusses the United States- Philippines Income Tax Treaty. There are several basic treaty provisions, such as permanent establishment provisions and reduced withholding tax rates, that are common to most of the income tax treaties to which the U.S. is a party. In…

08Feb 2022 by Anthony Diosdi

The Taxation of Cross-Border Currency and Hedging Transactions

Tax Law

By Anthony Diosdi The foreign branches and subsidiaries of U.S. companies often conduct business and maintain their books and records in the currency of the host country. This creates a currency translation problem for the domestic parent corporation, which must restate into U.S. dollars the results from its foreign operations. Tax attributes that require translation include the taxable income or loss of a foreign branch, earnings remittances from a foreign branch, actual and deemed distributions from a foreign corporation, and foreign income taxes. Foreign currency translation would be the only issue if currency exchange did not fluctuate. However, the U.S. dollar floats freely against other currencies, and this results in currency exchange gains and losses on assets and liabilities denominated in other currencies. Translational exchange gains and losses arise when…

08Feb 2022 by Anthony Diosdi

How An IC-DISC Can be Used to Defer Tax On Commissions Related to $10 Million of Export Sales Per Year

Tax Law

By Anthony Diosdi In 1971, Congress enacted the domestic international sales corporation (“DISC”) in an attempt to stimulate U.S. exports. A DISC allowed a U.S. exporter to avoid U.S. tax on a portion of its export profits by allocating those profits to a special type of domestic subsidiary known as a DISC. In 1984, Congress enacted the foreign sales corporation (“FSC”) provisions as a replacement for the DISC regime. A domestic corporation that established a FSC allocated a portion of its qualified export profits to the FSC and a pre-specified portion of the FSC’s profits were exempt from U.S. tax. The net effect of this arrangement was that a portion of a domestic corporation’s export profits was permanently excluded from U.S. tax at both the FSC and U.S. shareholder levels.…

08Feb 2022 by Anthony Diosdi

Demystifying the 2021 IRS Form 5471 Schedule J

Tax Law

By Anthony Diosdi Schedule J of Form 5471 tracks the earnings and profits (“E&P”) of a controlled foreign corporation (“CFC”) in its functional currency. In most cases, special ordering rules under Section 959 of the Internal Revenue Code apply in determining how E&P is reported on Schedule J. For the 2021 tax year, Schedule J was revised. This article will take a deep dive into each column and line of 2021 Schedule J of the Form 5471. Who Must Complete the Form 5471 Schedule JAnyone preparing a Form 5471 knows that the return consists of many schedules. Schedule J is just one schedule of the Form 5471. Whether or not a CFC shareholder is required to complete Schedule J depends on what category of filer he or she can be…