Tax Law Archives | Page 37 of 56

16Mar 2021 by Anthony Diosdi

How to Determine a U.S. Shareholder’s Pro Rata Share of GILTI if a Foreign Corporation is a CFC for Part of Its Tax Year

Tax Law

By Anthony Diosdi The Internal Revenue Code provides that a United States shareholder (a “U.S. shareholder”) of a controlled foreign corporation (“CFC”) is subject to tax on the foreign corporation’s global intangible low taxed income (“GILTI”). A U.S. shareholder is a U.S. person (A U.S. person is defined as a U.S. citizen, resident alien, corporation, partnership, trust, or estate) who owns, or is considered owning at least 10 percent of the total combined voting power of all classes of shares of stock entitled to vote of such foreign corporation, or 10 percent or more of the total value of shares of all classes of stock of suh foreign corporation. In determining whether a person is a U.S. shareholder and whether the foreign corporation is a CFC, the Internal Revenue Code…

16Mar 2021 by Anthony Diosdi

FORM 3520 / 3520A NOT REQUIRED FOR CERTAIN TAX FAVORED FOREIGN TRUSTS

Tax Law

By: Lynn K. Ching Certain Tax Favored Foreign Trusts Exempt From 3520/3520A Reporting Under (recently issued) IRS Revenue Procedure 2020-17 (“Rev Proc 2020-17”), certain U.S. persons having an interest in qualifying tax-favored foreign trusts established and operated exclusively or almost exclusively to provide pension or retirement, medical, disability, or educational benefits are exempt from Forms 3520 and 3520-A reporting. The IRS and Treasury determined that because certain tax favored trusts are subject to written requirements under foreign local law (such as contribution limits, withdrawal limitations, and informational reporting), it would be appropriate to exempt U.S. individuals from the requirement to provide information about these trusts under IRC Sec. 6048 Only Eligible Individuals May Rely on Rev Proc 2020-17 For purposes of Rev Proc 2020-17, an eligible individual means an individual…

08Mar 2021 by Anthony Diosdi

Self Directed IRAs The Long Reach of IRC 4975 Prohibited Transactions

Tax Law

By Lynn K. Ching An Individual Retirement Account (IRA), whether it be a traditional IRA, a Roth IRA or a Self Directed IRA is a tax-advantaged plan under the Internal Revenue Code (IRC), intended to encourage individuals to save for retirement. Self Directed IRAs are held by a trustee or custodian that permits investment in a broader set of assets than is permitted by traditional IRA custodians. To ensure that the IRA’s tax-preferenced assets are kept separate from the other assets of the IRA owner, the Internal Revenue Code contains a series of “prohibited transaction” rules intended to prevent the IRA owner from using the account to enrich themselves, their family members, or entities in which they retain an interest (“disqualified persons”). In general, IRC 4975 prohibits any direct or…

08Mar 2021 by Anthony Diosdi

Attention All Home Buyers

Tax Law

By Kerrin N.T. Liu Despite the terrible toll COVID-19 has taken in the United States, the real estate market has perhaps surprisingly been booming amid historically low interest rates and an unprecedented exodus from cities into the suburbs. Houses located in the suburbs, especially near and around Northern California’s east and south bay, have been selling well above asking, all leading to a so-called “seller’s market”. Among the many homeowners who may be thinking of selling their home at this time are foreign investors who own recreational property in the United States. But U.S. persons buying homes from the foreign individuals need now, more so than ever, to be apprised of the rules and regulations governing the Foreign Investment in Real Property Tax Act of 1980 (hereinafter “FIRPTA”). What is…

04Mar 2021 by Anthony Diosdi

Does Section 4975 Permit an IRA Account Holder to Establish an IRA Grantor Trust Investment Vehicle and Act as the Trustee of the IRA Grantor Trust?

Tax Law, Uncategorized

By Anthony Diosdi IntroductionMany Individual Retirement Account (“IRA”) beneficiaries would like more control over the investments of their IRAs. Some IRA beneficiaries want to form investment vehicles to acquire such assets as cryptocurrencies that are rapidly increasing in value. A number of trust companies claim that the United States Tax Court case of Swanson v. Commissioner, 106 T.C. 76 (1996) authorizes the use of an IRA owned grantor trust at the direction of the IRA account holder as a trustee to act as an investment vehicle. This article will discuss whether an IRA grantor trust in which the IRA account holder is a trustee violates the meaning of Section 4975(c)(1)(D) and (E). An Overview of Internal Revenue Code Section 4975The growth of 401(k) plans and other defined contribution plans (as…

04Mar 2021 by Anthony Diosdi

The New Tax Laws Governing Foreign Persons or Entities Sale of U.S. Partnership Interests

Tax Law

By Anthony Diosdi The passage of the Tax Cuts and Jobs Act brought about major changes to the Internal Revenue Code and international tax policy. Among one of many changes the Tax Cuts and Jobs Act made to tax law relates to the handling of the sale of partnership interests by foreign persons. The Tax Cuts and Jobs Act added two new sections to the Internal Revenue Code, Section 864(c)(8) and Section 1446(f). Prior to the enactment of the Tax Cuts and Jobs Act, withholding had not been required for the sale of a partnership interest by a foreign person. That all changed with the Tax Cuts and Jobs Act. Now, a purchaser of a partnership interest that is being sold by a foreign person is generally required to withhold…

04Mar 2021 by Anthony Diosdi

How a Treaty-Tie Breaker Provision May Save Departing Long-Term Green Card Holders from the Expatriation Tax

Tax Law

By Anthony Diosdi A record number of individuals have expatriated from the United States in 2020. 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 also discusses how…

04Mar 2021 by Anthony Diosdi

A First Impression of the Expatriation “Inheritance Tax”

Tax Law

By Anthony Diosdi A record number of individuals have expatriated from the United States in 2020. For federal tax purposes, expatriation means 1) any United States citizen who relinquishes his or her citizenship or 2) any long-term resident of the United States who ceases to be a lawful permanent resident of the United States. The abandonment of citizenship or long-term residence may result in the assessment of the expatriation tax. This tax consists of the “exit tax” and the inheritance tax. This article will focus on the inheritance tax. An Overview of the Exit TaxThe Heroes Earnings Assistance and Relief Tax Act of 2008 (“HEART Act”) added Section 877A to the Internal Revenue Code. This code section imposes an exit tax on individuals who expatriate on or after June 17,…

10Feb 2021 by Anthony Diosdi

Mistakes on Your Taxes Can be Costly

Tax Law

As tax season is upon us in 2021, many people might be debating whether to consult with a tax lawyer regarding their filings. While it can be tempting to try to save money by attempting your taxes on your own, be aware that even a seemingly minor error can be costly in the long run. First, keep in mind that tax laws are always changing. Just because you maximized your deductions last year does not mean the same will work the next year. If you miss a changing law that might benefit you, it is common to pay much more than you should. Next, if you fail to claim all of your income, gains, or international accounts, you might end up paying less than you should. If the IRS conducts…

28Jan 2021 by Anthony Diosdi

An Overview of the Rules Governing the Calculation of Foreign Tax Credits

Tax Law

By Anthony Diosdi The United States taxes U.S. persons on their worldwide income. In order to mitigate the consequence of worldwide taxation, the foreign tax credit rules were developed to prevent U.S. taxpayers from being double taxed. A foreign tax credit is intended to permit U.S. taxpayers to reduce the U.S. federal income tax on its foreign source income by the foreign income taxes paid on that foreign income. The foreign tax credit rules were also enacted to prevent U.S. taxpayers from utilizing foreign tax credits to offset domestic income. Foreign tax credits are not always permitted to offset federal tax liabilities. Foreign tax credits are denied under Internal Revenue Code Section 901(j) for taxes of certain countries with which the United States does not maintain diplomatic relations, and also…