Tax Law Archives | Page 5 of 56

13Dec 2023 by Anthony Diosdi

FIRPTA and the Benefits of a Section 897(i) Election

Tax Law

By Anthony Diosdi Foreign investors actively invest in U.S. real estate by speculating on land and developing homes, condominiums, shopping centers, and commercial buildings. Many foreign investors own recreational property in popular U.S. beach and ski destinations. Any foreign investor in U.S. real estate should consider the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) or the effects of Section 897 of the Internal Revenue Code. Section 897 was designed to counteract the use of the various techniques that had been developed to avoid income tax on the disposition of U.S. real property. Section 897 provides that gain or loss realized by nonresident aliens or foreign corporations on the disposition of U.S. real property. Section 897 provides that gain or loss realized by nonresident aliens or foreign corporations…

13Dec 2023 by Anthony Diosdi

Determining Taxable Gains from the Sale of CFC Stocks

Tax Law

By Anthony Diosdi Virtually all controlled foreign corporations (“CFCs”) generate earnings and profits that become previously taxed earnings and profits (“PTEP”). Special rules under Internal Revenue Code Section 959 apply in determining the ordering and taxation of distributions of a PTEP. The rules governing PTEP distributions also apply in determining the basis of CFC corporate stocks. This is because the PTEP regime requires upward and downward basis adjustment in CFC stock for gross income inclusions at the U.S. shareholder level attributable to such CFC. The purpose of the basis adjustments rules of the PTEP regime is to prevent the earnings of a CFC from being taxed at the time of an income inclusion and again when the CFC shareholder sells his or her shares.When a U.S. shareholder has a subpart…

01Dec 2023 by Anthony Diosdi

How to Determine the Withholding Tax on a Foreign Partner’s Partnership Interest

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 percent 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…

22Nov 2023 by Anthony Diosdi

The Tax Consequences of Liquidating C Corporations

Tax Law

By Anthony DiosdiThe closing events of corporate lifetime invoke liquidation of the corporate enterprise. The Internal Revenue Code and regulations fail to provide a precise definition of the term liquidation. However, some guidance is provided by regulations providing that “[a] statute of liquidation exists when the corporation ceases to be a going concern and its activities are merely for the purpose of winding up its affairs, paying its debts, and distributing any remaining balance to its shareholders.” See Treas. Reg. Section 1.332-2(c). Thus, it is useful to think of liquidations as a process through which the corporation winds up its affairs and distributes remaining assets to its shareholders rather than a single event.A corporation may liquidate in one of two ways. After paying off creditors, it may distribute the assets…

22Nov 2023 by Anthony Diosdi

An Overview of the Federal Taxation of S Corporations

Tax Law

By Anthony DiosdiA U.S. corporation can be taxed as either a C or S corporation. C corporations are subject to a double tax regime meaning that there is a tax at the corporate level and a second tax when a dividend is paid to the shareholders. An S corporation is an alternative to the two-tier tax system applicable to C corporations. For federal tax purposes, with an S corporation, there is no corporate taxation. Instead, only the shareholders of an S corporation are subject to tax when there is a distribution from the corporation. Since S corporations are only subject to one layer of tax, S corporate shareholders tend to recognize less tax than C corporate shareholders. This article will discuss the basic rules governing the federal taxation of S…

16Nov 2023 by Anthony Diosdi

Navigating San Francisco’s Tax Landscape: Choosing the Right Tax Attorney

Tax Law

In the dynamic and often complex world of San Francisco's tax laws, having a skilled tax attorney is crucial. At Diosdi Ching & Liu, LLP, our expert team specializes in guiding individuals and businesses through the intricacies of tax law. When seeking a San Francisco tax law attorney, it’s essential to choose a professional who not only understands the law but also prioritizes your unique needs. Why Expertise in San Francisco Tax Law Matters San Francisco's tax regulations can be labyrinthine. Whether it's navigating state taxes, understanding federal tax obligations, or dealing with specific local tax laws, the expertise of a seasoned tax attorney is invaluable. Our attorneys at Diosdi Ching & Liu, LLP possess deep knowledge of these regulations and offer tailored strategies to manage your tax matters effectively. Services…

16Nov 2023 by Anthony Diosdi

A Brief Overview of Taxable Corporate Mergers and Acquisitions

Tax Law

By Anthony DiosdiCorporations sometimes purchase stock in other corporations to hold for investment or purchase assets from other corporations to hold for investment or to use for business operations.In common tax parlance, “corporate acquisition” generally refers to an acquisition of control by one corporation over another. One corporation may acquire control over another through two different transaction types. First, a simple asset acquisition from the target corporation itself offers the purchaser direct control over the selling corporation’s assets. Second, a stock acquisition from the target corporation’s shareholders provides the purchaser with indirect control over the selling corporation’s assets through its ownership of the target corporation’s stock.In a stock purchase, the purchasing corporation (P) acquires a controlling interest in the target corporation’s (T) stock from the target’s shareholder, thus becoming a…

13Nov 2023 by Anthony Diosdi

The Taxation of Affiliated Corporations and Computing Consolidated Taxable Income

Tax Law

By Anthony Diosdi A corporation generally determines its taxable income or loss without reference to the taxable income or loss of its shareholders or other entities, The theory that each corporation is a separate taxpayer is limited, however, in certain situations in which corporations are “affiliated” (i.e., subject to common control or joined through interlocking ownership). In the case of affiliated corporations. Internal Revenue Code restrictions limit the ability to obtain multiple tax benefits and to manipulate intercompany transactions to reduce tax liability. The Internal Revenue Code also recognizes that the identities of affiliated corporations may merge at certain very high levels of common control. For tax purposes, it is permissible to treat the corporation as a single entity in which intercompany transactions are disregarded. This article discusses the taxation…

13Nov 2023 by Anthony Diosdi

An Introduction to the Tax-Free Corporate Reorganization Rules

Tax Law

By Anthony Diosdi The term “reorganization” is used in the Internal Revenue Code to describe a variety of transactions that result in a fundamental change in the ownership or structure of one or more corporations. Transactions that qualify as reorganizations under Section 368 are wholly or partially tax-free to the corporations and their shareholders. This article provides an introduction to the various types of tax-free reorganizations.Types of Corporate ReorganizationsCorporate reorganizations fall into three broad categories:Acquisitive ReorganizationsIn an acquisitive reorganization, the purchasing or acquiring corporation acquires control over or combines with another corporation, usually referred to as the target corporation. In other words, acquisitive reorganizations are transactions where one corporation (the…

25Oct 2023 by Anthony Diosdi

Foreign Cloud Computing Transactions: U.S. Taxation of Service, Intangible, Copyright, and Royalty Income

Tax Law

By Anthony Diosdi New technology and new transactions often raise difficult issues of tax policy and administration in part because existing rules were developed to deal with other situations. The dramatic expansion in electronic commerce facilitated by the use of the Internet and other technology is subjecting existing tax principles to new pressures. One area of concern is the application of source rules to electronic commerce transactions. Suppose, for example, that a corporation delivers software or a digital product to a customer on the Internet. The customer can download the product and use it commercially. Depending upon the nature of the transaction and the property interests involved, the income to the corporation might appropriately be characterized as a rent or royalty for the use of technology, profit from the sale…