tax law Archives | Page 16 of 30

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”).…

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…

13Oct 2020 by Anthony Diosdi

The Unintended Collateral Consequences of Entering into the OVDP for Immigrants

Tax Law

By Anthony Diosdi Taxpayers who hide assets abroad to evade income taxes present a serious enforcement challenge for the Internal Revenue Service (“IRS”). In response, over the years the IRS has developed a number of initiatives to encourage offenders to voluntarily disclose the existence of offshore assets and accounts in exchange for reduced penalties and limited protection from criminal prosecution. In exchange the IRS was able to collect revenue it would not have been ordinarily able to collect. Over the years, the most common initiative for disclosing previously undisclosed foreign financial assets and income was the Offshore Voluntary Disclosure Program (“OVDP”). The IRS announced a number of OVDP programs in 2009, 2011, 2012, 2014, and 2018. However, each OVDP required participants to amend previously filed tax returns and report previously…

13Oct 2020 by Anthony Diosdi

Top Five Considerations for Anyone Considering Expatriating from the United States

Tax Law

By Anthony Diosdi With all the talk about large tax increases on wealthy Americans and the recent social unrest in the United States, we have noticed a significant increase in Americans considering expatriating from the United States. If you are considering expatriating from the United States, here are four things to consider:Number Five- Expatriation is Not FreeIndividuals considering expatriating from the United States must understand that it is not free. In order to expatriate from the United States, the individual expatriating will be required to pay $2,350 to the State Department. This payment is due at the time of the expatriation interview.Number Four- You Will be Required to Appear in Person Before a U.S. Embassy to Relinquish Your U.S. Citizenship or Green Card An individual expatriating from the United States…

09Oct 2020 by Anthony Diosdi

A Closer Look at the “Related Transaction” Rules for the Federal Crime Know as Structuring

Tax Law

By Anthony Diosdi According to Section 5331 of the Currency Transaction Reporting Act (also known as the Bank Secrecy Act), any person engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or in two or more related transactions, must file Form 8300 by the 15th day after the case was received. See 31 U.S.C. Section; IRC Section 6050I. The Internal Revenue Service (“IRS”) imposes a penalty of $25,000 or the actual amount of the transaction up to $100,000 for each occurrence. Some attempt to avoid the 8300 filing requirement by structuring (executing financial transactions such as making bank deposits in a specific pattern, calculated to avoid triggering financial institutions to file Form 8300s) or dividing…

30Sep 2020 by Anthony Diosdi

Tax Relief for Farmers Impacted by Drought

Tax Law

There is no doubt that severe and increasing drought has harmed farmers and ranchers across the United States, including in California. Now, such operations that had to sell livestock because of drought might qualify for certain tax relief as announced by the Internal Revenue Service (IRS). Generally speaking, when farmers or ranchers sell livestock for a profit, they must report taxable capital gains on their tax returns if the livestock is not replaced within two years. If the sale was due to drought, the replacement period can be up to four years. Now, however, certain sales will result in an extended replacement period giving parties an additional year before liability for capital gains sets in. This period might be extended by the IRS if serious drought continues. Eligibility for the…

04Sep 2020 by Anthony Diosdi

The Most Costly Mistakes of CFC Shareholders that Catch the Attention of the IRS. Part Seven- Making a 962 Election and Failing to File Forms 1116 and 1118

Tax Law

By Anthony Diosdi Introduction For those who are or will be involved in international business and investment transactions, it is important to have some basic understanding of the relevant tax laws. These series of articles are intended to warn individual shareholders of controlled foreign corporations (“CFCs”) (whether individual or corporate) of mistakes that will likely catch the attention of the Internal Revenue Service (“IRS”) and trigger a potential costly audit. This is the seven of a series of articles designed to educate CFC shareholders of mistakes that can catch the attention of the IRS. Individual shareholders of CFCs that recognize a GILTI inclusion may be taxed at federal rates up to 37 percent, plus another 3.8 percent Medicare Tax. Absent planning, no direct foreign tax credit is available to offset…