Tax Law Archives | Page 46 of 56

17Apr 2020 by Anthony Diosdi

The Government Begins to Hunt Down Individuals Who Received Commissions and Referral Fees from RaPower-3

Tax Law

By Anthony Diosdi Over the past few years, a company known as RaPower-3 has marketed ownership in solar lenses to investors throughout the United States. Investors were promised ownership in solar lenses located throughout the Southwestern United States. Investors were told that they could “zero out” their federal income tax liability by buying enough solar lenses and claiming both a depreciation deduction and solar energy tax credit for the lenses. The purported solar energy technology and solar lenses, however, did not work and could not generate energy. Notwithstanding the fact that the solar lenses and technology never worked, RAPower-3 continued to sell solar lenses to customers emphasizing that they would qualify for depreciation deductions and/or the solar energy tax credit. Between 45,205 and 49,415 solar lenses were sold to customers.…

17Apr 2020 by Anthony Diosdi

Can a 965 Repatriation or Transition Tax Assessment be Compromised Through an Offer in Compromise?

Tax Law

By Anthony Diosdi With the recent downturn in the economy, one of the most frequent questions my office receives is whether or not the Internal Revenue Service (“IRS”) will consider compromising a 965 repatriation or transition tax assessment. On March 23, 2020, the IRS Director of Collection Policy issued a memorandum entitled “Interim Guidance on Offers in Compromise Involving Internal Revenue Code (IRC) Section 965 (Repatriation Tax or Transition Tax).” This memorandum not only verified that the IRS may consider compromising a 965 tax liability through an Offer in Compromise, it also provided valuable guidance regarding taxpayers who elected to defer payment of the 965 tax liability through either a Section 965(h) or 965(i) election.An Overview of the Section 965 Repatriation or Transition TaxInternal Revenue Code Section 965 imposes a…

17Apr 2020 by Anthony Diosdi

Introduction to Corporate Cross-Border Transfers, Reorganizations, and Inversions Part 1. The “Toll Charge”

Tax Law

By Anthony Diosdi IntroductionIn response to changing business conditions, U.S. corporations routinely organize new subsidiaries and divide, merge, and liquidate existing subsidiaries. These routine corporate adjustments generally are tax-free transactions, based on the principle that the transactions involve a change in the form of the corporation’s investment, not the parent corporation’s investment or the parent corporation’s ultimate control of the investment. For example, in non-international context, if a domestic corporation transfers appreciated property to a newly organized subsidiary in exchange for all of the shares of that subsidiary, the gain realized on that exchange is not recognized immediately, but is instead the tax consequence is postponed by having the subsidiary take a carryover basis in the property received. See IRC Sections 351(a) and 362. In cases of cross-border acquisitions and…

10Apr 2020 by Anthony Diosdi

Demystifying the Form 5471 Part 10. Schedule I

Tax Law

By Anthony Diosdi Schedule I is designed to disclose a U.S. shareholder’s pro rata share of income subpart F income from a controlled foreign corporation (“CFC”). This is the tenth of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule I of IRS Form 5471. This article will go line by line through Schedule I of Form 5471.Who Must Complete Schedule IForm 5471 and appropriate accompanying schedules must be completed and filed by the following categories of persons:Category 1 FilerU.S. persons who are officers, directors or ten percent or greater shareholders in a CFC. Category 1 includes U.S. shareholders of a Section 965 “specified foreign corporation” at any tax year…

06Apr 2020 by Anthony Diosdi

The Nuts and Bolts of the CARES Act Economic Disaster and Payroll Protection Loan Programs

Tax Law

By Anthony Diosdi Recently, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act provides for special loan programs for businesses impacted by the coronavirus (COVID-19) pandemic. There are two types of relief a business can apply to receive. They are both discussed in detail below.Economic Injury Disaster LoansThe Small Business Administration (“SBA”) provides low-interest Economic Injury Disaster Loans (EIDLs) that have been available to small businesses following a disaster declaration. EIDLs are authorized by Section 7(a) of the Small Business Act.EIDLs are typically granted after a natural disaster. Each EIDL provides up to a $2 million loan. These loans may be used to pay fixed debts, pay fixed debts, payroll accounts payable, and other bills. The current interest rate on…

03Apr 2020 by Anthony Diosdi

Demystifying the Form 5471 Part 9. Schedule G

Tax Law

By Anthony Diosdi Schedule G is designed to disclose a broad range of transactions of a controlled foreign corporation (“CFC”). This is the ninth of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule G of IRS Form 5471. This article will go line by line through Schedule G of Form 5471.Who Must Complete Schedule GForm 5471 and appropriate accompanying schedules must be completed and filed by the following categories of persons:Category 1 FilerU.S. persons who are officers, directors or ten percent or greater shareholders in a CFC. Category 1 includes U.S. shareholders of a Section 965 “specified foreign corporation” at any tax year of the foreign corporation, and who…

27Mar 2020 by Anthony Diosdi

Demystifying the Form 5471 Part 8. Schedule M

Tax Law

By Anthony Diosdi Schedule M is designed to measure intercompany payments. Schedule M requires the majority U.S. owner to provide information on transactions between the CFC and its shareholders or other related persons. This is the eighth of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule M of IRS Form 5471. This article will go column by column and line by line through the attachment to Form 5471.Who Must Complete Schedule MForm 5471 and appropriate accompanying schedules must be completed and filed by the following categories of persons:Category 1 FilerU.S. persons who are officers, directors or ten percent or greater shareholders in a CFC. Category 1 includes U.S. shareholders…

27Mar 2020 by Anthony Diosdi

Do Shareholders of Dormant Foreign Corporations Still Need to File a Form 5471?

Tax Law

By Anthony Diosdi U.S. persons with certain interests in controlled foreign corporations (“CFCs”) must disclose their interests on Form 5471. Sometimes, CFCs temporarily stop conducting business and as a result, the CFC’s U.S. shareholders assume that it is not necessary to file an IRS Form 5471. This is an incorrect assumption and can result in serious penalty assessments by the IRS. Even if a CFC is dormant, the U.S. shareholders must still file a Form 5471. The good news is shareholders of a dormant CFC can qualify for minimal Form 5471 reporting requirements. Revenue Procedure 92-70 discusses the circumstances when a CFC shareholder qualifies for minimal Form 5471 reporting requirements.Per Revenue Procedure 92-70, there are eight conditions that must be met in order for a foreign corporation to be considered…

20Mar 2020 by Anthony Diosdi

Beware of the New CFC Rules Triggering a Surprise 965 Inclusion

Tax Law

By Anthony Diosdi The Controlled Foreign Corporation (“CFC”) rules are embedded in the Internal Revenue Code. The CFC rules are designed to limit artificial deferral of foreign income using foreign entities. The CFC provides that certain classes of taxpayers must include in their U.S. taxable income amounts earned by foreign entities they or related entities/persons control. The 2017 Tax Cuts and Jobs Act made significant changes to these rules. The Definition of a CFC Before the Enactment of the 2017 Tax Cuts and Jobs ActPrior to the 2017 Tax Cuts and Jobs Act, Internal Revenue Code Section 951 provides that a United States shareholder of a CFC must include in its income its pro rata share of its “Subpart F income” regardless of whether that income has been distributed to…

20Mar 2020 by Anthony Diosdi

Relief from Filing Forms 3520 and Form 3520-A for Some

Tax Law

By Anthony Diosdi The Internal Revenue Code provides that if any United States Person (i.e. U.S. citizen or U.S. resident) beneficiary receives (directly or indirectly) a distribution from a foreign trust during any taxable year, such person is required to make a return with respect to such a trust for such year using Internal Revenue Service (“IRS”) Form 3520, and show thereon the name of the trust, the amount of the aggregate distribution received, and any other data the IRS may require. The IRS may assess an annual penalty equal to 35 percent of the gross value of the trust. See IRC Section 6048(c).The Internal Revenue Code also provides that each U.S. Person treated as an owner of any portion of a foreign trust under Internal Revenue Code Section 671…