Gift Tax Archives | SF Tax Counsel

23Jan 2020 by Pat Geddie

A Possible Solution to Gift Tax Concerns Associated with Cash, Check, or Wire Transfer Gifts from Overseas

By Anthony Diosdi Estate and Gift Tax 101The Tax Cut and Jobs Act of 2017 currently excludes $11.4 million of assets from estate and gift taxes of a U.S. citizen or resident. The way the estate tax is computed on the gross estate of a decedent which includes “the value at the time of his death all property, real or personal, tangible or intangible, wherever situated.” See IRC Section 2031. After the taxable estate has been determined by subtracting deductions from the gross estate, the tax is determined by applying the rates and computation method of of Internal Revenue Code Section 2001 to the base: the taxable estate. The estate tax is payable by the executor of the estate. Estate and gift (gift taxes will be discussed in more detail…

13Jan 2020 by Pat Geddie

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

Gift Tax

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…

20Dec 2019 by Pat Geddie

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 Pat Geddie

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…

18Dec 2019 by Pat Geddie

Attention California Homeowners Age 55+: How Proposition 60/90 Could Benefit You

Gift Tax

By Kerrin N.T. Liu Introduction to California Proposition 60/90 If you are a California homeowner age 55 or older, you need to know about Proposition 60/90. Proposition 60 provides voter-enacted constitutional tax relief to ease the tax burden on California seniors downsizing or relocating their principal homes. Proposition 60 accomplishes this by offsetting the effects of Proposition 13 which limits property tax to 2% growth per year but, upon a change in ownership, requires a reassessment of the property at market value. As one can imagine, the new market value on a replacement home is likely significantly higher than compared to the owner’s sold home, which had the benefit of the Proposition 13 growth limit of 2% on taxable value. Proposition 60 provided property tax relief for seniors by preventing a property…

11Dec 2019 by Pat Geddie

All I Want for Christmas is a Refund of the 965 Tax I Overpaid

Gift Tax

By Anthony Diosdi The Section 965 Transition TaxInternal Revenue Code Section 965 imposes a one-time transition tax on a U.S. shareholder share of deferred foreign income of certain foreign corporations (“accumulated deferred foreign income” or ADFI”). For this purpose, a U.S. shareholder is a U.S. person who directly, indirectly, or constructively owns at least 10 percent of either the total combined voting power or total value of a foreign corporation’s stock. Section 965 accomplishes the transition tax by increasing the subpart F income of each specified foreign corporation in the SFC’s last taxable year that began before January 1, 2018 by the greater of the SFC’s ADFI measured in functional currency as of November 2, 2017 or December 31, 2017. By allowing a reduction to the ADFI inclusion, Section 965…

11Dec 2019 by Pat Geddie

Hovering Deficits- Uncertain Times in Cross Border Mergers with the Enactment of the 2017 Tax Cuts and Jobs Act

Gift Tax

By Anthony Diosdi OverviewIn general, Section 367 governs corporate restructurings under Sections 332, 351, 354, 355, 356, and 361 (Subchapter C nonrecognition transactions) in which the status of a foreign corporation as a “corporation” is necessary for the application of the relevant subchapter C nonrecognition provisions. Other provisions in subchapter C (subchapter C carryover provisions) apply to such transactions in conjunction with the enumerated provisions and detail additional consequences that occur in connection with the transaction. For example, Sections 362 and 381 govern the carryover of basis and earnings and profits from the transferor corporation to the transferee corporation in applicable transactions.The subchapter C carryover provisions generally have been drafted to apply to domestic corporations and U.S. shareholders. As a result, those provisions often do not fully take into account…

09Dec 2019 by Pat Geddie

Owe the IRS? What Can be Done to Prevent IRS Levies or Garnishments

Gift Tax

By Anthony Diosdi If the Internal Revenue Service (“IRS”) has assessed a tax liability against you and it is not paid, the IRS can proceed with enforced collection actions you. Enforced collection actions includes seizure of your wages, your bank accounts, and your property to satisfy the outstanding tax liability. This can be financially devastating. Fortunately, with proper planning, IRS collection actions may be prevented. And, in some cases, an unsatisfied tax liability can be reduced or even eliminated. Before the IRS will begin to proceed with enforced collection actions, you will be issued a series of notices from the IRS. These notices should be taken seriously and never ignored. In some cases, the notices you receive from the IRS may actually offer you an opportunity to resolve your outstanding…

20Sep 2019 by Pat Geddie

The IRS Offers Settlements for Owners of Micro-Captives Insurance Companies

Gift Tax

By Anthony Diosdi Once upon a time, there was a type of insurance company known as a micro-captive insurance company. The use of micro-captive insurance companies were a very effective vehicle for transferring wealth out of an operating business so that wealth was not trapped and exposed to higher taxation by the IRS. By paying premiums to a micro-captive insurance company, wealth was effectively transferred out of the operating business and into the captive. The premiums of the policies were paid with pre-tax dollars by the business. Because micro-captive insurance companies had the benefit of being able to accrue reserves tax-free and other tax advantages available only to insurance companies, micro-captive insurance companies offered huge tax benefits. For example, Internal Revenue Code Section 831(b) permitted micro-captive insurance companies to claim…

30Aug 2019 by Pat Geddie

Be Careful When Receiving a Gift From a Foreign Corporation or Partnership

Gift Tax

By Anthony Diosdi The Small Business Job Protection Act of 1996 created reporting requirements for U.S. persons that receive large gifts after August 20, 1996 from foreign persons (including foreign corporations). Federal law requires gifts or bequests valued at more than $100,000 from a nonresident alien or foreign estate to be disclosed on an IRs Form 3520. Federal law also requires gifts valued at more than $16,076 from foreign corporations or foreign partnerships (adjusted annually for inflation) to be disclosed on an IRS Form 3520. Besides the IRS reporting requirements of a Form 3520, anyone receiving a gift from a foreign corporation or foreign partnership should know that Internal Revenue Code Section 672(f)(4) broadly authorizes regulations to recharacterize gifts or bequests, directly or indirectly, from partnerships or foreign corporations, as…