Tax Law Archives | SF Tax Counsel

17May 2023 by Pat Geddie

Challenges Associated with the Sourcing of Computer Programs for Purposes of the U.S. Cross-Border Tax Sourcing Rules

By Anthony DiosdiThe source rules play a prominent role in the U.S. taxation of foreign persons, since they effectively define the boundaries of U.S. taxation.Source rules apply in a number of different contexts. One important application of the source rules is the determination of U.S. income tax liability for foreign persons. The U.S. taxes the gross amount of a foreign person’s U.S.-source nonbusiness income at a flat rate of 30 percent. The U.S. also taxes foreign persons at graduated rates on the net amounts of income effectively connected with the conduct of a U.S. trade or business. In other words, the U.S. taxes the U.S.-source income of foreign persons and does not tax a foreign person’s foreign-source income. Sourcing of income can also have a significant impact on a U.S.…

12May 2023 by Pat Geddie

Navigating Tax Challenges with a San Francisco Tax Litigation Attorney

Tax Law

Tax issues can be a labyrinth of complexities. Whether it's an IRS audit, a criminal tax investigation, or a tax dispute, these matters require precise legal expertise. If you're in San Francisco, securing the services of a proficient tax litigation attorney is crucial. At Diosdi Ching & Liu, LLP, our team is equipped with the knowledge and experience to guide you through every step of your tax litigation journey. Why Hire a San Francisco Tax Litigation Attorney? San Francisco's tax laws can be intricate and ever-changing. Attempting to tackle these matters alone may lead to detrimental outcomes. This is where the professional assistance of a San Francisco tax litigation attorney becomes indispensable. Our attorneys understand the nuances of local, state, and federal tax laws and can provide the necessary legal…

10May 2023 by Pat Geddie

Introduction to the Taxation of Corporate Divisions

Tax Law

By Anthony DiosdiInternal Revenue Code Section 355 allows a corporation to make a tax-free distribution to its shareholders of stock and securities in one or more controlled subsidiaries. Corporate divisions involve the reverse- breaking the investment reflected in one corporation into investments in multiple corporations. The reasons for a corporate division or separation can be varied. A divisive transaction can be either taxable or tax-free. To illustrate a “taxable division,” imagine a corporation with two individual shareholders that has been operating a hotel business and a restaurant business as separate divisions. The corporation might arrange a corporate division simply by distributing the hotel business assets to one shareholder and the restaurant business assets to the other in a complete liquidation. Such a liquidating distribution would be taxable to the shareholders…

10May 2023 by Pat Geddie

An Overview of the Rules Governing Tax-Free Corporate Reorganizations of Section 355

Tax Law

By Anthony DiosdiCorporate divisions involve the breaking of one corporation into multiple corporations. Such a transaction can be either taxable or tax-free. Corporate divisions tend to come in three basic flavors: spin-off, split-off, and split-up. Each variation involves a slightly different type of distribution of stock or securities. In general, if the transaction successfully runs the gauntlet of Internal Revenue Code Section 355, the tax treatment to the shareholders and the corporation will be the same regardless of whether the transaction is a spin-off, split-off, or split-up. In a spin-off, the distributing corporation distributes stock of a controlled corporation (a subsidiary) to its shareholders. This subsidiary may be either a recently created subsidiary “spun off” through the parent corporation’s transfer of assets in return for stock or an existing subsidiary.…

01May 2023 by Pat Geddie

How to Determine the Tax on a U.S. Partnership Interest of a Foreign Person

Tax Law

By Anthony Diosdi Foreign investors generally have the same goals of minimizing their income tax liabilities from their business investments, as do their U.S. counterparts, although their objective is complicated by the very fact that they are not U.S. persons. That is, foreign investors must be concerned not only with income taxes in the United States, but also income taxes in their home country. Further, the United States has a special income tax regime that is applicable to foreign persons. Specifically, if the foreign investor derives certain types of passive income, it is typically taxed at a flat 30% rate (without allowance for deductions), unless an applicable U.S. tax treaty reduces this statutory rate. In contrast, if the U.S. activities of the foreign investor rises to the level of constituting…

01May 2023 by Pat Geddie

Can a Tax Treaty Tie-Breaker Provision Save Departing Residents from the Expatriation Tax?

Tax Law

By Anthony Diosdi During the past few years, a record number of individuals have expatriated from the United States. Much of this expatriation is from citizens of other countries who were issued green cards. People from around the world are attracted to the United States because of lucrative employment or business opportunities. However, a significant number of these individuals decide to either return to their home countries or seek opportunities elsewhere. The U.S. tax system (which taxes U.S. residents on their worldwide income) makes holding on to a green card too expensive to keep and many decide to relinquish it. To the surprise of many, the relinquishment of a green card can trigger a very expensive expatriation tax. This article will explain the mechanics of the expatriation tax. This article…

20Apr 2023 by Pat Geddie

Demystifying the 2023 IRS Form 5471 Schedule J

Tax Law

By Anthony Diosdi Form 5471 is used by certain U.S. persons who are officers, directors, or shareholders in respect of certain foreign entities that are classified as corporations for U.S. tax purposes. The Form 5471 and schedules are used to satisfy the reporting requirements of Internal Revenue Code Section 6038 and 6046 along with the applicable regulations. Substantively, it backstops various international sections of the Internal Revenue Code including Sections 901/904 (Code Section 901 and 904 provide rules governing foreign tax credits), Section 951(a) (Section 951a provide rules governing Subpart F income and Section 956. Section 956 is an anomaly and operates differently than the rest of subpart F. Generally, a U.S. shareholder of a foreign corporation must include in income his or her pro rata share of the foreign…

17Apr 2023 by Pat Geddie

California Tax Attorneys: Navigate the Complex Tax Landscape with Diosdi Ching & Liu

Tax Law

Navigating the complex tax landscape in California can be a daunting task for individuals and businesses alike. With ever-changing tax laws and regulations, staying on top of your tax obligations can be overwhelming. This is where experienced California tax attorneys like Diosdi Ching & Liu step in to provide guidance and assistance. In this blog post, we will discuss the services offered by Diosdi Ching & Liu and how they can help you with your tax concerns. Diosdi Ching & Liu: The Premier California Tax Attorneys Team Diosdi Ching & Liu is a leading law firm that focuses on providing top-notch tax law services in California. With a team of skilled and knowledgeable attorneys, they have helped numerous clients successfully address their tax-related issues. As California tax attorneys, their primary…

12Apr 2023 by Pat Geddie

How is Crypto Staking Taxed Post Jarrett?

Tax Law

By Anthony Diosdi In 2021, a Tennessee couple filed suit in federal district court in Tennessee seeking the refund of the federal income tax they paid on certain newly issued Tazos cryptocurrency units they acquired in 2019. See Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn. 2021)(May 26, 2021). The cryptocurrency units at issue were the rewards the couple had received for their “staking” activities on Tezos blockchain network. Rather than contest the matter, the Internal Revenue Service (“IRS”) refunded the tax paid by the couple. As a result, the court dismissed the case, depriving the cryptocurrency market of needed clarification in this area. This article discusses the current state of the taxation of crypto staking and how investors can calculate their basis in the block rewards from staking. An…

12Apr 2023 by Pat Geddie

The 2023 Tax Guide for Cryptocurrency and NFTs

Tax Law

By Anthony Diosdi Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency, that functions as a unit of account, a store of value, and a medium of exchange. Cryptocurrency allows parties to transact directly without an intermediary using blockchain technology, a shared distributed ledger that verifies, records, and settles transactions on a secure, encrypted network. Although some major retailers accept cryptocurrencies like Bitcoin and Ethereum, cryptocurrency is not money. Money means coin and paper money that Congress declares is legal tender. Because cryptocurrencies are sometimes other than money, what they are varies depending on the perspective from which they are viewed. For example, the Securities…