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

05Aug 2023 by Anthony Diosdi

What is Superannuation and How it Could be Taxed Under the United States- Australia Income Tax Treaty

Tax Treaty

There are currently more than 100,000 Australian-born people living in the United States. Many of these individuals have an Australian Superannuation account. A superannuation is an Australian pension program created by a company to benefit its employees. Funds deposited in a superannuation account will grow through appreciation and contributions until retirement or withdrawal. As with many foreign pension plans, the U.S. federal taxation of superannuation accounts is a gray area. The most common type of superannuation is the Self-Managed Superannuation Funds. This article will focus on Self-Managed Superannuation Funds. This is because Self-Managed Superannuation Funds are the most common type of superannuation. Many tax professionals consider a superannuation fund to be a foreign grantor trust for U.S. tax purposes. If a superannuation fund can be classified as a grantor trust,…

20Jul 2023 by Anthony Diosdi

Does the Farhy Decision Apply to 3520 Penalty Assessments?

Tax Law

By Anthony DiosdiRecently the United States Tax Court held in Alon Farhy v. Commissioner of Internal Revenue, that the Internal Revenue Service or (“IRS”) lacked the authority to assess certain penalties against taxpayers under Internal Revenue Code Section 6038(b). In Farhy the petitioner was required to file Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, but he did not. The penalty for failure to file, or for delinquent, incomplete, or materially incorrect filing is a reduction of foreign tax credits by 10% and a penalty of $10,000. An additional $10,000 continuation penalty may be assessed for each 30-day period that noncompliance continues up to $50,000 per return. See IRC Section 6038(b) and (c). The IRS assessed penalties against the petitioner under Section 6038(b) of the…

12Jul 2023 by Anthony Diosdi

Secure Your Financial Future with Diosdi Ching & Liu, LLP: Your Reliable San Francisco Tax Law Attorneys

Tax Law

Tax law is an intricate maze. It's easy to get lost in its complexities and even easier to make a mistake. Don't navigate this challenging landscape alone. Diosdi Ching & Liu, LLP, a trusted law firm in San Francisco, California, is ready to assist you as your dependable San Francisco tax law attorneys. At Diosdi Ching & Liu, LLP, we understand the intricacies of tax law. We believe that effective tax planning and dispute resolution is vital for your financial well-being. Our experienced attorneys are committed to providing you with comprehensive tax law services, helping you minimize your liabilities and maintain compliance. Our attorneys are adept at handling a range of tax issues. From tax planning and audit representation, to resolving tax controversies and tax litigation, we have the knowledge and skills to guide…

28Jun 2023 by Anthony Diosdi

The U.S. Taxation of Foreign Computer Programs and Cloud Computing Transactions

Tax Law

By Anthony Diosdi The United States taxes U.S. persons on all of their income, from whatever source derived. Therefore, the source of income generally has no effect on the computation of a U.S. person’s taxable income. Sourcing can, however, have a significant impact on the computation of a U.S. person’s ability to claim a foreign tax credit. The source rules play a more prominent role in the taxation of a foreign person or foreign business, since they effectively define the boundaries of U.S. taxation. The U.S. taxes the gross amount of a foreign person’s or foreign business’s U.S.-source passive type income at a flat rate of 30 percent. The U.S. also taxes foreign persons and foreign businesses at graduated rates on the net amount of income effectively connected with the…

21Jun 2023 by Anthony Diosdi

To Withhold, or Not to Withhold, That is the Question For Foreign Workers

Tax Law

By Anthony Diosdi U.S. companies regularly hire foreign contractors to perform various tasks. U.S. companies often do not consider the potential U.S. withholding tax consequences of retaining a foreign contractor. Many forms of U.S.-source income received by foreign persons is subject to a flat tax of 30 percent on the gross amount of income received. Internal Revenue Code Sections 871(a) (for nonresident aliens) and 881(a) (for foreign corporations) impose the 30-percent tax on “interest * * * dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income.” This enumeration is sometimes referred to as “FDAP income.” The collection of such taxes is affected primarily through the imposition of an obligation on the person or entity making the payment to…

14Jun 2023 by Anthony Diosdi

Diosdi Ching & Liu, LLP: Experienced San Francisco Tax Law Attorneys

Tax Law

Dealing with tax-related issues can be complex and demanding. At Diosdi Ching & Liu, LLP, we understand this challenge and aim to make the process less daunting for our clients. As seasoned San Francisco tax law attorneys, we offer comprehensive support in a wide range of tax-related matters. Our team is well-versed with the intricate labyrinth of tax laws. We've handled numerous cases, employing innovative strategies to help our clients navigate complex tax situations. Be it a tax dispute, an audit, or an international tax issue, our San Francisco tax law attorneys are equipped to handle it all. What sets us apart at Diosdi Ching & Liu, LLP, is our client-centric approach. We believe that every tax problem is unique, and thus, deserves a unique solution. Our attorneys listen to…

14Jun 2023 by Anthony Diosdi

Can a Foreign Tech Company be Subject to U.S. Tax on Internet-Related Income by Utilizing U.S. Servers?

Tax Law

By Anthony Diosdi The U.S. source rules in general derive from an attempt to identify the geographic locus of the economic activity or financial arrangements that generate income. The source rules play a prominent role in the taxation of foreign persons, since they effectively define the boundaries of U.S. taxation. The source rules for gross income are organized by categories of income, such as interest, dividends, personal services income, rentals, royalties, and gains from the disposition of property. The rapid evolution of electronic commerce and the internet has generated many difficult conceptual issues such as how to source a foreign person’s business activities undertaken on the internet that affect the U.S. economy. The U.S. source rules provide that the source of rental and royalty income is determined by the place…

14Jun 2023 by Anthony Diosdi

A Closer Look at the Benefits of Cross-Border Finance Transactions that are Characterized as Portfolio Debt

Tax Law

By Anthony Diosdi The United States is the world’s top destination for foreign direct investment. Foreign investors generally have the same goals of minimizing their income tax liabilities from their U.S. real estate and business investments as do their U.S. counterparts, although their objective is complicated by a special income tax regime that is applicable to foreign persons. Specifically, if the non-U.S. person receives passive U.S. source income, the income is taxed at a flat 30 percent rate, unless a tax treaty reduces this rate. On the other hand, if the U.S. activities of the foreign investor rises to the level of a “trade or business,” then the foreign person will be taxed at the same graduated tax rates applicable to U.S. persons.Portfolio Debt PlanningForeign investors often utilize portfolio debt…

08Jun 2023 by Anthony Diosdi

A Deep Dive into the FIRPTA Rules

Tax Law

By Anthony Diosdi U.S. real estate has become a popular investment with foreigners. However, few foreign investors fail to consider the U.S. tax implications of holding U.S. real property. There are significant income, gift and estate tax consequences that may result when U.S. real property is sold or transferred. This article discusses the withholding requirements of the Foreign Investment in Real Property Tax Act of 1980 (or “FIRPTA”) and how the FIRPTA withholdings may be reduced or eliminated. Under FIRPTA, gains or losses realized by foreign corporations or nonresident alien individuals from any sale, exchange, or other dispositions of a U.S. real property interest are taxed in the same manner as income effectively connected with the conduct of a U.S. trade or business. This means that gains from dispositions of…

08Jun 2023 by Anthony Diosdi

Do the Anti-Conduit Regulations Delegate Authority to the IRS to Override Tax Treaties?

Tax Law

By Anthony Diosdi Congress in 1993 added Section 7701(l) to the Internal REvenue Code. Section 7701(l) authorizes the Department of Treasury and the Internal Revenue Service (“IRS”) to promulgate regulations which allow for the “recharacterization” of multi-party financing transactions as a transaction directly among two or more of the parties to it if such characterization “is appropriate to prevent avoidance of any tax ***.” The IRS has implemented this authority by issuing “anti-conduit” regulations. The result of the anti-conduit regulations is that intermediate entities (“conduits”) are disregarded in the determination of U.S. taxes on international financing arrangements, which may include loans, leases, and licenses. The key factors that will result in the recharacterization of a conduit entity are:1) The participation of the intermediate entity or entities which reduces the tax…