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

13Jan 2020 by Anthony Diosdi

Is 2020 the New 2018 for Estate, Gift, and Generation-Skipping Tax Purposes?

By Anthony Diosdi This year may be a very busy year for estate and gift tax planning professionals. This is because this year is somewhat reminiscent of 2012. In 2012, the Economic Growth and Tax Relief Reconciliation Act of 2001 was scheduled to expire. The Economic Growth and Tax Relief Reconciliation Act excluded $5,120,000 from estate and gift taxes, and the generation-skipping transfer taxes (“GST”). The expiration of the Economic Growth and Tax Relief Reconciliation Act would have resulted in the tax exemption for estate and gift taxes, and the GST reverting back to only $1 million. Any estates valued over $1 million could have been subject to estate and/or gift tax of up to 55 percent. Fortunately for many American families, President Obama signed the American Taxpayer Relief Act…

13Jan 2020 by Anthony Diosdi

Should Your LLC be Taxed as a Disregarded Entity or a Corporation?

Tax Law

By Anthony Diosdi Probably one of the most frequent questions any tax professional receives from his or her clients is how should my limited liability company (“LLC”) be taxed. As usual in any area of tax planning, there is no one-size-fits-all approach. Each individual’s circumstances must be carefully considered in determining how an LLC should be taxed.An LLC is an entity formed under state law. Once an LLC is formed under state law, a determination must be made for federal (and in some cases for state tax purposes) how the LLC will be taxed. The Income Tax Regulations typically treat an LLC that has a single owner as a “tax nothing.” This means that a single-owner LLC is disregarded for tax purposes and treated as an extension of its owner.…

06Jan 2020 by Anthony Diosdi

Tax Return Changes for 2020

tax return

Every year, certain states or the IRS might make changes that impact the tax returns of certain households or businesses. The following are brief overviews of some changes taking place for 2020. Adjustments for Inflation Tax laws are adjusted based on inflation, and recent adjustments that will impact your returns include an increase in standard deductions ($200 for individual filers and $400 for joint returns), two percent increases in tax brackets, and an increased alternative minimum tax exemption. New Forms for Seniors In the past, people over the age of 65 used the same tax forms as younger adults. This year, the IRS has a new form for seniors over 65, which is the 1040-SR. This form has no maximum income limit, and it looks more like the older 1040A…

06Jan 2020 by Anthony Diosdi

Demystifying the Form 5471 Part 6. Schedule O

Tax Law

By Anthony Diosdi Schedule O is used to report the organization or reorganization of a foreign corporation and the acquisition or disposition of its stock. This is the sixth of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule O of IRS Form 5471. Who Must Complete Schedule OFive different categories of filers of Form 5471 have been defined by the Income Tax Regulations. They are as follows:Category 1 FilerCategory 1 (previously reserved) is now used by U.S. shareholders of a Specified Foreign Corporation (“SFC”) that is subject to the provisions of Internal Revenue Code Section 965. Category 2 FilerCategory 2 filers are U.S. persons who are officers or directors…

06Jan 2020 by Anthony Diosdi

The District Court Allows a Suit to Proceed Challenging the Regulations to Section 965 of the Internal Revenue Code

Tax Law

By Anthony Diosdi As part of the Tax Cuts and Jobs Act of 2017 (“TCJA”), Congress enacted certain “transition tax” provisions applicable to “controlled foreign corporations” (“CFC”) owned by United States persons. See Pub. L. 115-97, 131 Stat. 2054 (2017). On January 15, 2019, the Internal Revenue Service (“IRS”) and United States Department of Treasury (hereinafter “Defendants”) published final regulations to effectuate these tax provisions.Monte Silver, is the sole shareholder of Monte Silver, Ltd, a CFC incorporated in Israel. Monte Silver (hereinafter “Plaintiffs”) brought an action against the United States in the United States District Court for the District of Columbia. The case is entitled Monte Silver, et al v. Internal Revenue Service, et al. Civil No. 19-cv-247 (APM). The Plaintiffs challenged Defendant’s alleged failure, in connection with promulgating the…

30Dec 2019 by Anthony Diosdi

New York Estate of Mind

Tax Law

By James Huang Ranked among the highest taxing jurisdictions in the country, New York is one of the few states that also has a state-level estate tax. Ranging from 3.06% to a top rate of 16%, New York's estate tax is imposed on decedents domiciled in New York. This tax is also imposed on those who are not New York domiciliaries, but who own real or tangible personal property located in the state. Described below are some of the key features of New York's estate tax and how these features interact with the federal regime. Exclusion Gap Like the federal estate tax, New York's estate tax allows estates a "basic exclusion amount" (BEA) — i.e., an amount up to which a decedent's estate is not subject to estate tax. Historically,…

30Dec 2019 by Anthony Diosdi

The IRS Continues to Aggressively Audit RaPower3 Investors

Tax Law

By Anthony Diosdi Over the past few years, a company known as RaPower3 has marketed ownership in solar lenses to investors throughout the United States. Investors were promised ownership in solar lenses located throughout the Southwestern United States. Investors were also told that they could tax generous deductions on their tax returns associated with these solar lenses. Everything seemed fine until the United States Department of Justice showed up. and obtained an injunction against the promoters of RaPower3 from marketing ownership in the solar lenses.The U.S. Department of Justice obtained an injunction against RaPower3, International Automated Systems, LTB1, Gregory Shepard, Neldon Johnson, and Roger Freeborn. The Department of Justice asked a federal district court to shut down a multi-level marketing business involving solar lenses that were “purchased” and then alternatively…

30Dec 2019 by Anthony Diosdi

Top Four Ways to be Audited by the IRS in 2020

Tax Law

By Anthony Diosdi It’s no secret, the Internal Revenue Service (“IRS”) is auditing fewer tax returns these days, mostly due to federal budget cuts that have affected the IRS’ staff size. Even though IRS has been auditing much fewer tax returns, there are certain things that individual taxpayers can do that will likely certainly result in a costly IRS audit. Below, please find our list of the top four ways to get audited by the IRS in 2020.1. Invested in a Syndicated Conservative Easement Over the years, charitable contributions of conservation easements have allowed taxpayers to obtain a federal tax deduction for the purpose of conserving land for public use, public enjoyment, or to preserve historic building structures. For tax purposes, a conservation easement creates a discounted value for the…

20Dec 2019 by Anthony Diosdi

New Rules Governing Disregarded Entities Owned by Nonresidents Impose Significant New Reporting and Compliance Requirements

Gift Tax

By Anthony Diosdi There is a perception by many countries that the United States is the world’s largest tax shelter. This is because unlike many countries, the United States does not require public disclosure of ownership of its entities, (in particular Limited Liability Companies (LLCs)), or publishing of year-end financial statements for public viewing. The lack of transparency has allowed nonresidents of the United States to form domestic shell to avoid paying foreign income taxes, hide money or commit other acts of wrongdoing. Historically, nonresidents established shell companies in the United States as a domestic disregarded entities.The Treasury Department and the Internal Revenue Service (“IRS”) recently published regulations to combat perceived misuse of U.S. shell companies. On December 13, 2016, the Treasury Department and the IRS issued final regulations regarding…

20Dec 2019 by Anthony Diosdi

Changes to the 2019 Tax Return that Will Impact All Holders of Cryptocurrency

Gift Tax

By Anthony Diosdi Recently, the IRS announced a significant compliance measure that will impact anyone with financial interests in virtual currency. Taxpayers with a financial interest in digital currency such as bitcoin will be required to check a new checkbox on Form 1040. This checkbox is on the early release draft of the 2019 Form 1040 and it will appear on Schedule 1. This schedule is entitled “Additional Income and Adjustments to Income.” The checkbox is at the top of Schedule 1.The question the checkbox asks taxpayers is:“At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”This questions sounds eerily similar to Schedule B Part III Line 7. Schedule B Part III Line 7 asks taxpayers if they had…