tax law Archives | Page 20 of 30

11May 2020 by Anthony Diosdi

What to Do if You are Facing a Tax Audit

Tax Law

Unless you are receiving a refund or stimulus payment, no one wants to receive communications from the IRS. In many cases, such unexpected letters include notices of an audit for either your personal or business taxes. Some audits are random and could never be predicted, while others are triggered by discrepancies or suspected inaccuracies on your tax returns. If you receive notice of an audit, the coming weeks can be inconvenient, as you will need to gather a significant amount of information. It can be tempting to ignore the notice and hope the issue disappears, though it will not disappear, and failing to address and handle an audit properly can have serious consequences. You should contact an experienced tax audit attorney in San Francisco as soon as you learn about…

08May 2020 by Anthony Diosdi

Demystifying IRS Form 3520-A

Tax Law

By Anthony Diosdi IntroductionUnited States persons with foreign assets are subject to an ever expanding universe of reporting requirements. A prime example of this can be found in Internal Revenue Code Section 6048(b). This Internal Revenue Code Section provides that a foreign trust owner must file Internal Revenue Service (“IRS”) Form 3520-A. Each U.S. person is treated as an owner of any portion of a foreign trust under the grantor trust rules (Internal Revenue Code Sections 671 through 679) is responsible for ensuring that the foreign trust files Form 3520-A and furnishes the required annual statements to its U.S. owners and U.S. beneficiaries. The penalty for failure to file IRS Form 3520-A will be imposed directly on the U.S. owner of the foreign trust. The penalty is equal to five…

06May 2020 by Anthony Diosdi

Introduction to Corporate Cross-Border Transfers, Reorganizations, and Inversions Part 3. “The Anti-Inversion Rules- It’s Not Just for Large Multinational Corporations Anymore”

Tax Law

By Anthony Diosdi IntroductionUnder current law, a U.S. corporation may reincorporate in a foreign jurisdiction and thereby replace the U.S. parent corporation of a multinational corporate group with a foreign parent corporation. These transactions are commonly referred to as inversion transactions. Inversion transactions may take many different forms, including stock inversions, asset inversions, and various combinations of and variations on the two. Most of the best known transactions to date have been stock inversions. In one example of a stock inversion, a U.S. corporation forms a foreign corporation, which in turn forms a domestic merger subsidiary. The domestic merger subsidiary then merges into the U.S. corporation, with the U.S. corporation surviving, now as a subsidiary of the new foreign corporation. The U.S. corporation’s shareholders receive shares of the foreign corporation…

06May 2020 by Anthony Diosdi

Introduction to Corporate Cross-Border Transfers, Reorganizations, and Inversions Part 4. “U.S. Taxation of Foreign-to-Foreign Acquisitive Reorganizations”

Tax Law

By Anthony Diosdi One would think that the acquisition of one foreign corporation by another foreign corporation would not trigger a U.S. tax consequence. However, in today’s world of cross-border investing, a foreign-to-foreign corporate acquisition or reorganization may trigger U.S. tax consequences. In particular, the liquidation of a foreign corporation into another foreign corporation could result in taxable gain on the distribution of any property used by the distributing foreign corporation in the conduct of a U.S. trade or business at the time of liquidation. See Treas. Reg. Section 1.367(e)-2(c)(2)(i)(A). An exception to this recognition-of-gain rule applies if the distributee foreign corporation continues for a ten-year period to use the property in the conduct of a trade or business (other than U.S. real property interests) and the distributing and distributee…

30Apr 2020 by Anthony Diosdi

Taxation of Foreign Trust Beneficiaries and a Dive into the “Throwback Tax”

Tax Law

By Anthony Diosdi This article discusses the “throwback tax” which imposes harsh federal consequences for U.S. beneficiaries of certain foreign trusts. We will begin this article by discussing the grantor trust provisions of the Internal Revenue Code and the significance of a foreign trust being classified as a nongrantor trust compared to a grantor trust. Next, this article will describe the serious consequences of the throwback tax. We will conclude this article with a discussion on how to potentially mitigate the impacts of the throwback tax. Overview of Federal Taxation of TrustsThe Internal Revenue Code has several regimes for taxing trusts, depending upon whether they are “grantor,” simple or complex trusts. There are also several special rules applicable to foreign trusts. If a trust is a grantor trust, its income…

30Apr 2020 by Lynn Ching

Demystifying IRS Form 3520

Tax Law

By Anthony Diosdi Introduction United States persons with foreign assets are subject to an ever expanding universe of reporting requirements. A prime example of this can be found in Internal Revenue Code Section 667(a). This Internal Revenue Code Section provides that if a United States person beneficiary receives (directly or indirectly) a distribution from a foreign trust, that person is required to make a return with respect to such a trust 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. A foreign gift, bequest, or inheritance that exceeds $100,000 from a nonresident must also be disclosed on a Form 3520. This article will take a deep dive into Form…

23Apr 2020 by Anthony Diosdi

Introduction to Corporate Cross-Border Transfers, Reorganizations, and Inversions Part 2. “Taxation of Mergers and Acquisitions in Which a Foreign Corporation Acquires a U.S. Corporation”

Tax Law

By Anthony Diosdi IntroductionIf a U.S. corporation is liquidated and its assets are distributed to foreign shareholders, U.S. federal income tax will be imposed on the gain realized by the distributing corporation except to the extent that a tax-free-exchange provision provides otherwise. If the stock or assets of a U.S. corporation are acquired by a foreign corporation in exchange for stock of the foreign corporation, gain realized by U.S. shareholders and the U.S. corporation will also be subject to tax, except to the extent that the gain is sheltered by a tax-free-exchange provision provided by the Internal Revenue Code. Under the Internal Revenue Code, taxable gains typically realized in exchange of property in connection with a variety of transactions involving only U.S. corporations will result in a tax-free-exchange. However, when…

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…

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…