tax law Archives | Page 12 of 30

06Apr 2021 by Anthony Diosdi

A Line-by-Line Review of the IRS Form 5471 Schedule M

Tax Law

By Anthony Diosdi Schedule M is designed to measure Controlled Foreign Corporation (“CFC”) 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 article is designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471, Schedule M. Who Must Complete Schedule MForm 5471 and its 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 owned that stock on the last day in that year. A SFC includes 1) a…

02Apr 2021 by Anthony Diosdi

What is a Fungible Token (NFT) and How is a NFT Taxed?

Tax Law

By Anthony Diosdi The popularity of Non Fungible Tokens (“NFTs) has spiked in the past couple of months. NFTs were just featured on an episode of Saturday Night Live. Recently, the New York Times published an article entitled “Why Did Someone Pay $560,000 for a Picture of My Column?” The article discusses how a reporter wrote a column about NFTs, turned the column itself into a NFT, and put it up for auction. The winning bid for the column was about $560,000. So what is an NFT? To understand what an NFT is, you must understand the basics about digital currencies. Digital current is money. There are a number of different digital currencies. They include bitcoin, ethereum, and dogecoin. Digital currencies are also called cryptocurrency. This is because cryptocurrency can…

02Apr 2021 by Anthony Diosdi

Can a “Leveraged Lease or License” Avoid the New Anti-Conduit Regulations Revisited with a Touch of Hungarian Spice

Tax Law

By Anthony Diosdi Recently, the Internal Revenue Service (“IRS”) and the Department of Treasury (“Treasury”) issued a number of regulations and proposed regulations (the Proposed Regulations) that will restrict foreign persons’ ability to minimize U.S. tax through “conduit” financing arrangements. See REG-106013-19; 85 F.R. 19858-19873. The new final regulations and Proposed Regulations potentially impact a number of types of structures used by foreign persons for financing into the United States, and therefore these structures should be reevaluated. The discussion below first presents a brief overview of the 30 percent withholding tax as well as the “anti-conduit” rules, then describes if a properly structured “leveraged lease” is entitled to an exemption U.S. withholding tax. The 30 Percent Withholding TaxNon-U.S. taxpayers are subject to U.S. federal income taxation on a limited basis.…

01Apr 2021 by Anthony Diosdi

Major Estate and Gift Tax Increase Proposed in the Senate

Gift Tax

By Anthony Diosdi On March 25, 2021, Senator Bernie Sanders of Vermont and Senator Sheldon Whitehouse of Rhode Island introduced a bill entitled “For the 99.5% Act.” If the bill is enacted, it dramatically changes the current estate and gift tax system. Below, are the most significant provisions of the 99.5% Act:1. There would be a reduction of the estate tax exemption amount to $3.5 million per person and $7 million for a married couple. The exemption would be indexed for inflation. Currently, the estate tax exemption per person is $11.7 million and $23.4 million per married couple. 2. There would be a reduction of the gift tax exemption to $1 million per person. Under current law, an individual is permitted a gift tax exemption of $11.7 million. 3. Currently,…

01Apr 2021 by Anthony Diosdi

The Conduit Regulations and Multinational Financing Transactions Between Cross-Border Subsidiaries

Tax Law

By Anthony Diosdi It has been more than 25 years since Congress enacted Section 7701(1) of the Internal Revenue Code and the Department of Treasury (“Treasury”). These provisions authorize the Internal Revenue Service (“IRS”) to recharacterize any multiple-party financing transaction as a transaction directly between two or more parties if it is determined that reclassification is necessary to prevent the avoidance of U.S. tax. Last year, on April 8, 2020, Treasury issued new proposed regulations which would make changes to the current conduit regulations. Anyone involved in the planning of multinational corporate finance transactions, must understand the conduit regulations. This article is designed to provide an introduction to the conduit finance rules which govern the transfer of funds among subsidiaries in different countries. The 30 Percent Withholding TaxHistorically, foreign taxpayers…

26Mar 2021 by Anthony Diosdi

The Roller-Coaster Ride is Over: IRS Loses Battle to Render PPP Business Deductions Non-Deductible

Uncategorized

By: Lynn K. Ching Many small businesses received a loan in 2020 under the (CARES Act) SBA Paycheck Protection Program (“PPP”). Under the CARES Act, the PPP loan proceeds are eligible for forgiveness, if used to pay (1) payroll costs, (2) certain employee benefits relating to healthcare, (3) interest on mortgage obligations, (4) rent, (5) utilities, and (6) interest on any other existing debt obligations, during the ‘covered period’. The CARES Act also excludes forgiven PPP loan proceeds from taxable income. However, the CARES Act did not specifically address whether business expenses paid with a (forgivable) PPP loan may be deducted on a taxpayer’s federal tax return. Federal Not missing a beat, in May 2020, the IRS issued Notice 2020-32, which stated that no deduction is allowed if its payment…

26Mar 2021 by Anthony Diosdi

Reducing U.S. Taxes While Living Abroad

Tax Law

By: Lynn K. Ching If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may be able to reduce your income in one or several ways, including but not limited to, the Foreign Earned Income Exclusion; and the Foreign Housing Exclusion or Foreign Housing Deduction. Foreign Earned Income Exclusion (“FEIE”) If you qualify for the FEIE (see below), you may exclude your foreign earnings from US income up to an amount that is adjusted annually for inflation ($107,600 for 2020, and $108,700 for 2021). In addition, you may also qualify to exclude or deduct certain foreign housing amounts. Foreign Housing Exclusion or Foreign Housing Deduction (not both) Employees: You may be able to…

23Mar 2021 by Anthony Diosdi

Can a “Leveraged Lease” Avoid the New Anti-Conduit Provisions of the Code?

Tax Law

By Anthony Diosdi Recently, the Internal Revenue Service (“IRS”) and the Department of Treasury (“Treasury”) issued a number of regulations and proposed regulations (the Proposed Regulations) that will restrict foreign persons’ ability to minimize U.S. tax through “conduit” financing arrangements. See REG-106013-19; 85 F.R. 19858-19873. The new final regulations and Proposed Regulations potentially impact a number of types of structures used by foreign persons for financing into the United States, and therefore these structures should be reevaluated. The discussion below first presents a brief overview of the 30 percent withholding tax as well as the “anti-conduit” rules, then describes if a properly structured “leveraged lease” is entitled to an exemption U.S. withholding tax. The 30 Percent Withholding TaxNon-U.S. taxpayers are subject to U.S. federal income taxation on a limited basis.…

22Mar 2021 by Anthony Diosdi

How You May Qualify for the $10,200 Unemployment Tax Break

Tax Law

By Kerrin N.T. Liu Generally, unemployment benefits are treated as income for tax purposes. However, a federal tax waiver of $10,200 for unemployment benefits received in 2020 was recently announced as part of President Joe Biden’s $1.9 trillion Covid relief bill. This tax break applies to the current filing season which runs until the postponed individual tax return deadline of May 17, 2021 (formerly April 15, 2021). For married couples, each spouse can exclude up to $10,200 of their benefits, reducing couples’ joint taxable income by up to $20,400 maximum. Any amounts exceeding $10,200 for each individual are still taxable. Only US taxpayers who earned less than an adjusted gross income of $150,000 in 2020 are eligible for the $10,200 unemployment tax break. The $150,000 restriction applies regardless of filing…

19Mar 2021 by Anthony Diosdi

A Closer Look at International Tax Arbitrage and the Dual Consolidated Loss Rules

Tax Law

By Anthony Diosdi International or cross-border tax arbitrage is the name, frequently given to arrangements designed to produce tax savings through exploitation of differences between the U.S. and foreign tax rules on such matters as determining the source of income and deductions, classification of entities and determining the residence of entities for tax purposes. In the context of direct investment abroad there are many opportunities for such arbitrage. Some of the more significant of these lie in the use of hybrid entities (and particularly hybrid branches), which is facilitated by the check-the-box regulations. A simple illustration of how cross-border arbitration has taken place in the past can be illustrated as follows: suppose a U.S. corporation owns a smaller than ten percent interest in the voting equity of a foreign joint…