It has come to my attention that some advertisers have made vague references to helping individual taxpayers claim the same “tax breaks” as “the big boys.” What exactly is meant by “tax breaks” or “big boys” is neither here nor there, (although I assume for purposes of this article that what is referred to as the “big boys” are large C corporations). What is clear is the tax planning opportunities that arise through the new tax on global intangible low-taxed income (“GILTI”). Unlike the hazy references of said tax advertisers, GILTI may offer tax planning opportunities to individual shareholders of controlled foreign corporations (“CFCs”). C corporate shareholders of CFCs are now entitled to important benefits that are unavailable to their non-corporate counterparts: they are entitled to a 50 percent deduction…

We all have guilty pleasures (no pun intended). One of my guilty pleasures used to be watching WWE wrestling. WWE battles were always epic and you never knew who was going to be the hero or villain in any given match. Just like WWE characters, tax regulations can be a hero in one case and become a dreaded villain in another. For those that have had the pleasure of trying to make sense of the new Global Intangible Low-Tax Income (“GILTI”) regime and the Foreign-Derived Intangible Income (“FDII”) tax rules, you may feel like you are in the middle of a WWE battle. Not only is GILTI and FDII needlessly complicated, it’s unclear which of these provisions is the hero or the villain. What Exactly is the GILTI Tax Regime…

Introduction to GILTI For years, tax planning for international outbound taxation remained the same, mitigation of Subpart F income, maximization of foreign tax credits, and transfer pricing. The 2017 Tax Cuts and Jobs Act has broken the monotony associated with international tax planning for outbound transactions and added a new category for tax planning. In addition to the anti-deferral regime built into Subpart F, the Tax Cuts and Jobs Act has introduced a new anti-deferral category known as the Global Intangible Low-Taxed Income (“GILTI”). GILTI is now a provision that can found in Internal Revenue Code Section 951A. The Tax Cuts and Jobs Act requires a U.S. shareholder of a controlled foreign corporation (“CFC”) to include in income its global intangible low-taxed income or GILTI. The GILTI tax is meant…

A self-directed retirement plan is a type of structure that allows the holder to transfer tax free funds from a retirement account to acquire real estate. There are a number of rules however that must be followed in order to make such a transaction work.  Let’s first start with a basic retirement account. Retirement accounts (such as IRAs and 401K plans) can be created by contribution subject to annual dollar limits or by rollover from a qualified plan. The owner usually cannot take out distributions prior to age 59 ½ without penalty. Understanding the Prohibited Transaction Rules of the Internal Revenue Code Anyone considering establishing a self-directed retirement plan to invest in real estate must be aware of the prohibited transaction rules discussed in the Tax Code. Internal Revenue Code…

Introduction to Conservation EasementsOver 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 property encumbered by the easement which generates a valuable charitable deduction. To claim a deduction for a conservation easement, the donation of the easement has to be made to a qualified charitable organization. In addition, Treasury Regulation Section 1.170A-14(c)(1) states that the qualified organization must “have a commitment to protect the conversation purpose of the donation, and have the resources to enforce the restrictions.” Furthermore, the contribution must be exclusively for conservation purposes. Conservation purposes under Internal Revenue Code Section 170(h)(4)(A)…

On November 29, 2018, the Internal Revenue Service (“IRS”) announced a new set of rules governing the 2018 Offshore Voluntary Disclosure Program (“OVDP”). The OVDP allows taxpayers with undisclosed foreign accounts to potentially avoid criminal prosecution and/or severe civil penalties. Previously, taxpayers that entered into the OVDP were required to amend tax returns for up to eight years, disclosing any previously undisclosed foreign source income. Participants were also required to satisfy any tax liabilities reflected on the amended returns and were assessed an additional 20 percent accuracy-related penalty. Finally, participants of the OVDP were subject to a 27.5 percent penalty (a Title 26 penalty) on the highest aggregate undeclared foreign financial assets during the last eight years of noncompliance. The 27.5 percent did not just include the value of undisclosed…

Introduction Foreign investors actively invest in United States real estate by speculating on land and developing homes, condominiums, shopping centers, and commercial buildings. Many foreign investors also own recreational property in popular U.S. vacation destinations. This article attempts to summarize the Foreign Investment in Real Property Tax Act of 1980 (hereinafter “FIRPTA”) consequences surrounding a foreign investor’s acquisition of U.S. real property interests. FIRPTA is designed to ensure that a foreign investor is taxed on 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 estate interest are taxed in the same manner as other income effectively connected with the conduct of a U.S. trade or business. See…

Introduction As the world becomes increasingly “global,” so too does the practice of tax law. In California, Florida, and other states, clients of tax advisors are often families from outside the United States that seek to take advantage of investment opportunities and a higher living standard in the United States. While the United States may provide a number of opportunities for non-United States citizens, in order to take advantage of these opportunities, many non-United States citizens become residents of the United States. Once these individuals establish residency in the United States, they may face a host of complicated tax issues. To non-U.S. citizens, these U.S. tax  issues may be foreign in every sense of the word. This is because domestic tax law has notable distinctions from taxing systems around the…

Introduction For years, retailers conducting business through eCommerce were advised that states could not require them to collect and remit sales tax on online sales unless they were ‘doing business’ in a taxing state based on the tax laws of that state. This concept was referred to as a “nexus” based on a seller’s physical presence within a state.  Therefore, a seller who is determined to have a physical presence within a state would be obligated to withhold and remit sales tax to the taxing state. Examples of physical presence included but were not limited to having employees working in a taxing state, placing sales agents in a taxing state, moving business property into a taxing state, or renting property in a taxing state.Many online merchants avoided establishing a physical…