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

28Sep 2021 by Anthony Diosdi

A Deep Dive Into the United States-United Kingdom Income, Gift, and Estate Tax Treaties

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 U.S. 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 U.S. currently has income tax treaties with approximately 58 countries. This article discusses the implications of the United States -United Kingdom 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…

20Sep 2021 by Anthony Diosdi

The Cross-Border Tax Implications of Canadians Holding U.S. Real Property

Tax Law

By Anthony Diosdi Canadians actively invest in U.S. real estate by speculating on land and developing homes, condominiums, shopping centers, and commercial buildings. The article attempts to summarize the Canadian and U.S. tax consequences surrounding a Canadian’s acquisition of different U.S. real property interests. The most common way Candians hold U.S. real property is by direct ownership. Direct ownership by an individual Canadian resident of U.S. real estate is generally not recommended because the individual will be exposed to the commercial risks associated with the property. Personal ownership may also give rise to the U.S. estate tax and gift tax. Personal ownership of U.S. real property may also trigger cross-border tax filing requirements. If a Canadian owns real property that is income producing, he or she will likely be required…

20Sep 2021 by Anthony Diosdi

Unraveling the United States-Canada Income Tax Treaty

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 U.S. 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 U.S. currently has income tax treaties with approximately 58 countries. This article discusses the implications of the United States.-Canada 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…

13Sep 2021 by Anthony Diosdi

Unraveling the United States- Republic of Korea Income Tax Treaty

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 U.S. 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 U.S. currently has income tax treaties with approximately 58 countries. This article discusses the implications of the United States.-Republic of Korea 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…

13Sep 2021 by Anthony Diosdi

Unraveling the United States- People’s Republic of China Income Tax Treaty

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 U.S. 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 U.S. currently has income tax treaties with approximately 58 countries. This article discusses the implications of the United States.-People’s Republic of China 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…

09Sep 2021 by Anthony Diosdi

Four Lines of Defense to a Form 5472 Penalty

Tax Law

By Anthony Diosdi In order to effectively audit the transfer prices used by a U.S. subsidiary of a foreign corporation, the Internal Revenue Service (“IRS”) often must examine the books and records of foreign parent corporations. Historically, foreign parties have resisted making their records available to the IRS, or have not maintained records sufficient to determine arm’s-length transfer prices. In response, Congress enacted the requirement that each year certain reporting corporations must file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, and maintain certain books and records. See IRC Sections 6038A and 6038C. A domestic corporation is a reporting corporation if, at any time during the taxable year, 25% or more of its stock, by vote or…

08Sep 2021 by Anthony Diosdi

Tax-Free Demergers in the International Context

Tax Law

By Anthony Diosdi There are many good business reasons that a corporate group may decide to enter a corporate division transaction to separate one or more trades or businesses from another distinct trade or business. The three types of corporate divisions are commonly known as spinoffs, split-offs, and split-ups. Such corporate divisions are also referred to as demergers or Type D reorganizations. To illustrate the elements of these transactions, assume that Alexis and Bob each own 50 percent of the stock of Diverse Corporation (“D”), which for many years has operated a winery and a cattle ranch as separate divisions. For reasons to be elaborated below, the shareholders wish to divide the business into two separate corporations on a tax-free basis. From a tax perspective, the possibilities are:Spin-off, Assume that…

08Sep 2021 by Anthony Diosdi

Four Lines of Defense to a Form 5471 Penalty

Tax Law

By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with information necessary to ensure compliance with Global Intangible Low-Taxed Income (“GILTI”) and the Subpart F provisions of the Internal Revenue Code, each year a U.S. person who owns more than 50% or more of the stock, by vote or value, of a foreign corporation must file a Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations. See Treas. Reg. Section 1.6038-2(a) and (b). Other persons who must file a Form 5471 include 1) U.S. persons who acquire a 10% ownership interest, acquire an additional 10% ownership interest, or dispose of stock holdings to reduce their ownership in the foreign corporation to less than 10% and 2) U.S. citizens and residents who are officers…

31Aug 2021 by Anthony Diosdi

Cryptocurrency for Businesses: Reporting Considerations for Businesses Wishing to Accept Cryptocurrency as a Form of Payment

Tax Law

By Anthony Diosdi Cryptocurrency or virtual currency is a medium of exchange to make payments and facilitate consumer and business transactions. Cryptocurrency has gained a lot of attention from the press and social media. While cryptocurrency is gaining in popularity, its user base in commercial transactions is relatively small. Most consumers pay for goods and services through credit cards, debit cards, and electronic transfers. However, a growing number of businesses are adopting virtual currency as a method of payment. Although a number of businesses have jumped on the cryptocurrency bandwagon, there are a number of reporting requirements and other procedures that a business must understand before accepting cryptocurrency as a form of payment. This article examines the potential registration and filing requirements a business should consider before accepting cryptocurrency. .A…

25Aug 2021 by Anthony Diosdi

Bringing the 3520 Penalty Fight to the IRS- Contesting a 3520 Penalty in Tax Court

Tax Law

By Anthony Diosdi Under Internal Revenue Code Section 6677(a), if any United States Person beneficiary receives (directly or indirectly) a distribution from a foreign trust, that person is required to make a return with respect to such a trust using Internal Revenue Service (“IRS”) Form 3520, and show thereon the name of the trust, the amount of the aggregate distribution received, and any other data the IRS may require. A foreign gift, bequest, or inheritance that exceeds $100,000 must also be disclosed on a Form 3520. The IRS may assess an annual penalty equal to 35 percent of the gross value of the trust or 35 percent of the gross value of the property transferred from the trust if a Form 3520 is not timely filed. The IRS may also…