Tax Law Archives | Page 40 of 56

16Nov 2020 by Anthony Diosdi

Will Taxes Increase in 2021?

Tax Law

Even with votes still being recounted, it seems likely that the Biden administration will take over the White House in January. Many Americans wonder what this will mean for their taxes in 2021. First, the good news is that tax liability you might face this coming spring is based on your 2020 financial picture and 2020 tax laws, so even if the laws significantly changed, you would not see major changes in your liability until tax season 2022. However, if potential changes in tax laws under the new administration might impact you, it is important to plan ahead to limit your future liability as much as possible. Potential Changes Whether or not new complicated tax legislation will pass through Congress and the White House next year remains to be seen.…

11Nov 2020 by Anthony Diosdi

Demystifying the All New 2020 Tax Year IRS Form 5471 Schedule J

Tax Law

By Anthony Diosdi Schedule J of Form 5471 tracks the earnings and profits (“E&P”) of a controlled foreign corporation (“CFC”). Schedule J has given tax practitioners fits the last two tax seasons. The confusion started when the Internal Revenue Service (“IRS”) and the Department of Treasury announced they will withdraw the proposed regulations for Internal Revenue Code Section 959 and the following new columns were added to Schedule J:1) Post-2017 E&P Not Previously Taxed (post-2017 Section 959(c)(3) balance.2) Hovering Deficit and Deduction for Suspended Taxes.3) PTI from Section 965(a) Inclusion (Section 959(c)(1)(A)).4) PTI from Section 965(b)(4)(A) (Section 959(c)(1)(A)).5) PTI from Section 951A Inclusion (Section 959(c)(1)(A)).6) PTI from Section 965(a) Inclusion (Section 959(c)(2)).7) PTI from Section 965(b)(4)(A) (Section 959(c)(2)), and8) PTI from Section 965(b)(4)(A) (Section 959(c)(2)), and9) PTI from Section 951A…

29Oct 2020 by Anthony Diosdi

Cross-Border Lending of Related Parties Requires Attention be Given to Transfer Pricing and Earnings Stripping Rules

Tax Law

By Anthony Diosdi Cross-border lending is a common business practice with groups of related corporations. However cross-border lending requires attention be given to the transfer pricing and earnings stripping rules. The Internal Revenue Service (“IRS”) has broad powers to recharacterize “any multi-party financing transaction as a transaction directly among any two or more of such parties where the Secretary determines such recharacterization is appropriate to prevent the avoidance of any tax imposed by this title.” See IRC Section 7701(1). We will begin our discussion with a look at how the transfer pricing rules impact cross-border lending.Transfer Pricing Rules for Cross-Border Lending of Related PartiesFor transfer pricing purposes, controlled entities generally must charge each other an arm’s length rate of interest on any intercompany loans or advances. See Treas. Reg. Section…

29Oct 2020 by Anthony Diosdi

Demystifying the 962 Election

Tax Law

By Anthony Diosdi IntroductionU.S. shareholders of a controlled foreign corporation (“CFC”) must include any subpart F income or global low-taxed income (“GILTI”) as ordinary income on their taxable income. The current highest federal tax rate applicable to individual CFC shareholders is 37 percent. Individuals receiving GILTI inclusions may also be subject to an additional Medicare tax of 3.8 percent. To make matters worse, individual CFC shareholders cannot offset their federal income tax liability with foreign tax credits paid by their CFCs. Under these circumstances, it is not too difficult to imagine scenarios where a CFC shareholder pays more in federal, state, and foreign taxes than the actual distributions they receive from the CFC. On the other hand, for federal tax purposes, domestic C corporations that are shareholders of CFCs are…

27Oct 2020 by Anthony Diosdi

Transfer Pricing for Tangible Property

Tax Law

By Anthony Diosdi IntroductionTransfer pricing must be taken into consideration by any business involved in cross-border transactions. Although many have heard of the term “transfer pricing,” few understand how transfer pricing works. This article is designed to provide the reader with a very basic understanding of how transfer pricing works. To understand transfer pricing we must think of the operating units of a multinational corporation. Multinational corporations usually engage in a variety of arrangements of intercompany transactions. For example, a U.S. manufacturer may market its products through foreign marketing subsidiaries. A domestic parent corporation may provide managerial, technical, and administrative services for its subsidiaries, and may license its manufacturing and marketing intangibles to its foreign subsidiaries for commercial exploitation abroad. A “transfer price” must be computed for each of these…

27Oct 2020 by Anthony Diosdi

Transfer Pricing for Intangible Property

Tax Law

By Anthony Diosdi IntroductionTransfer pricing must be taken into consideration by any business involved in cross-border transactions. Although many have heard of the term “transfer pricing,” few understand how transfer pricing works. This article is designed to provide the reader with a very basic understanding of how transfer pricing works. To understand transfer pricing we must think of the operating units of a multinational corporation. Multinational corporations usually engage in a variety of arrangements of intercompany transactions. For example, a U.S. manufacturer may market its products through foreign marketing subsidiaries. A domestic parent corporation may provide managerial, technical, and administrative services for its subsidiaries, and may license its manufacturing and marketing intangibles to its foreign subsidiaries for commercial exploitation abroad. A “transfer price” must be computed for each of these…

22Oct 2020 by Anthony Diosdi

The Foreign Compliance Intricacies Associated with Using the United States Indonesia Tax Treaty

Tax Law

By Anthony Diosdi IntroductionIf a U.S. business or individual is claiming a benefit through a bilateral international income tax treaty, they must consider both the domestic and foreign compliance requirements of taking a treaty position. On the domestic side, the taxpayer must correctly disclose the treaty position on a U.S. tax return. On the foreign side, the taxpayer may need to satisfy requirements promulgated by the applicable foreign government. Other than filing a foreign tax return, most of the time a domestic taxpayer taking a treaty position does not have any foreign filing obligations. There are some exceptions to this general rule. One such exception is when a domestic taxpayer is using the United States Indonesia tax treaty to obtain relief from foreign taxes. When a domestic taxpayer is utilizing…

22Oct 2020 by Anthony Diosdi

Introduction to International Income Tax Treaties

Tax Law

By Anthony Diosdi IntroductionThe major purpose of an income tax treaty is to reduce or eliminate the impacts of international double taxation by residents of one treaty country from sources within another treaty country. Because tax treaties often reduce U.S. and/or foreign tax consequences associated with a cross-border transaction, anyone involved in international transactions or commerce must consider utilizing an applicable income tax treaty. This article is designed to provide the reader with a broad overview as to how an income tax treaty can be used by U.S. residents and nonresidents to reduce their exposure to global income taxation. Many of the income tax treaties to which the United States is a party are similar to the United States Model Income Tax Convention of November 15, 2006 (“U.S. Model Treaty”).…

21Oct 2020 by Anthony Diosdi

4 Different Branches of Business Law

Tax Law

Owning a business requires great attention to detail on your part, especially when it comes to legal matters. Business agreements, employee rights and the drafting of contracts are usually required, and these tasks can all be made simpler by hiring a business attorney. There are quite a few branches and specialties within business law, and knowing what they are may help you make the best possible choice when hiring a lawyer. 1. Contract Law Creating contracts is usually a vital part of any business, no matter its size. Employer-employee agreements, the sale or trade of goods and partnership agreements may all be necessary as you build your company. An attorney who specializes in contract law can assist you with contract language and ensure that your best interests are being met…

20Oct 2020 by Anthony Diosdi

What is a CFC for Purposes of Filing a Form 5471?

Tax Law

By Anthony Diosdi IntroductionU.S. taxpayers that have an interest in a “controlled foreign corporation” (“CFC”) that are “U.S. shareholders” must file an Internal Revenue Service (“IRS”) Form 5471. Completing a Form 5471 is no easy task and there are serious penalties associated with not accurately filing this form. In addition, the federal tax consequences associated with filing a Form 5471 may be significant. Consequently, anyone with an interest in a foreign business organization must determine if that entity can be classified as a CFC and the U.S. tax consequences of the foreign entity being classified as a CFC.A foreign corporation is a CFC if more than 50 percent of the total combined voting power of all classes of such corporation entitled to vote, or of the total value of the…