tax law Archives | Page 23 of 30

06Jan 2020 by Anthony Diosdi

Demystifying the Form 5471 Part 6. Schedule O

Tax Law

By Anthony Diosdi Schedule O is used to report the organization or reorganization of a foreign corporation and the acquisition or disposition of its stock. This is the sixth 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 O of IRS Form 5471. Who Must Complete Schedule OFive different categories of filers of Form 5471 have been defined by the Income Tax Regulations. They are as follows:Category 1 FilerCategory 1 (previously reserved) is now used by U.S. shareholders of a Specified Foreign Corporation (“SFC”) that is subject to the provisions of Internal Revenue Code Section 965. Category 2 FilerCategory 2 filers are U.S. persons who are officers or directors…

06Jan 2020 by Anthony Diosdi

The District Court Allows a Suit to Proceed Challenging the Regulations to Section 965 of the Internal Revenue Code

Tax Law

By Anthony Diosdi As part of the Tax Cuts and Jobs Act of 2017 (“TCJA”), Congress enacted certain “transition tax” provisions applicable to “controlled foreign corporations” (“CFC”) owned by United States persons. See Pub. L. 115-97, 131 Stat. 2054 (2017). On January 15, 2019, the Internal Revenue Service (“IRS”) and United States Department of Treasury (hereinafter “Defendants”) published final regulations to effectuate these tax provisions.Monte Silver, is the sole shareholder of Monte Silver, Ltd, a CFC incorporated in Israel. Monte Silver (hereinafter “Plaintiffs”) brought an action against the United States in the United States District Court for the District of Columbia. The case is entitled Monte Silver, et al v. Internal Revenue Service, et al. Civil No. 19-cv-247 (APM). The Plaintiffs challenged Defendant’s alleged failure, in connection with promulgating the…

30Dec 2019 by Anthony Diosdi

New York Estate of Mind

Tax Law

By James Huang Ranked among the highest taxing jurisdictions in the country, New York is one of the few states that also has a state-level estate tax. Ranging from 3.06% to a top rate of 16%, New York's estate tax is imposed on decedents domiciled in New York. This tax is also imposed on those who are not New York domiciliaries, but who own real or tangible personal property located in the state. Described below are some of the key features of New York's estate tax and how these features interact with the federal regime. Exclusion Gap Like the federal estate tax, New York's estate tax allows estates a "basic exclusion amount" (BEA) — i.e., an amount up to which a decedent's estate is not subject to estate tax. Historically,…

30Dec 2019 by Anthony Diosdi

Top Four Ways to be Audited by the IRS in 2020

Tax Law

By Anthony Diosdi It’s no secret, the Internal Revenue Service (“IRS”) is auditing fewer tax returns these days, mostly due to federal budget cuts that have affected the IRS’ staff size. Even though IRS has been auditing much fewer tax returns, there are certain things that individual taxpayers can do that will likely certainly result in a costly IRS audit. Below, please find our list of the top four ways to get audited by the IRS in 2020.1. Invested in a Syndicated Conservative Easement Over the years, charitable contributions of conservation easements have allowed taxpayers to obtain a federal tax deduction for the purpose of conserving land for public use, public enjoyment, or to preserve historic building structures. For tax purposes, a conservation easement creates a discounted value for the…

18Dec 2019 by Anthony Diosdi

Attention California Homeowners Age 55+: How Proposition 60/90 Could Benefit You

Gift Tax

By Kerrin N.T. Liu Introduction to California Proposition 60/90 If you are a California homeowner age 55 or older, you need to know about Proposition 60/90. Proposition 60 provides voter-enacted constitutional tax relief to ease the tax burden on California seniors downsizing or relocating their principal homes. Proposition 60 accomplishes this by offsetting the effects of Proposition 13 which limits property tax to 2% growth per year but, upon a change in ownership, requires a reassessment of the property at market value. As one can imagine, the new market value on a replacement home is likely significantly higher than compared to the owner’s sold home, which had the benefit of the Proposition 13 growth limit of 2% on taxable value. Proposition 60 provided property tax relief for seniors by preventing a property…

11Dec 2019 by Anthony Diosdi

All I Want for Christmas is a Refund of the 965 Tax I Overpaid

Gift Tax

By Anthony Diosdi The Section 965 Transition TaxInternal Revenue Code Section 965 imposes a one-time transition tax on a U.S. shareholder share of deferred foreign income of certain foreign corporations (“accumulated deferred foreign income” or ADFI”). For this purpose, a U.S. shareholder is a U.S. person who directly, indirectly, or constructively owns at least 10 percent of either the total combined voting power or total value of a foreign corporation’s stock. Section 965 accomplishes the transition tax by increasing the subpart F income of each specified foreign corporation in the SFC’s last taxable year that began before January 1, 2018 by the greater of the SFC’s ADFI measured in functional currency as of November 2, 2017 or December 31, 2017. By allowing a reduction to the ADFI inclusion, Section 965…

11Dec 2019 by Anthony Diosdi

Hovering Deficits- Uncertain Times in Cross Border Mergers with the Enactment of the 2017 Tax Cuts and Jobs Act

Gift Tax

By Anthony Diosdi OverviewIn general, Section 367 governs corporate restructurings under Sections 332, 351, 354, 355, 356, and 361 (Subchapter C nonrecognition transactions) in which the status of a foreign corporation as a “corporation” is necessary for the application of the relevant subchapter C nonrecognition provisions. Other provisions in subchapter C (subchapter C carryover provisions) apply to such transactions in conjunction with the enumerated provisions and detail additional consequences that occur in connection with the transaction. For example, Sections 362 and 381 govern the carryover of basis and earnings and profits from the transferor corporation to the transferee corporation in applicable transactions.The subchapter C carryover provisions generally have been drafted to apply to domestic corporations and U.S. shareholders. As a result, those provisions often do not fully take into account…

09Dec 2019 by Anthony Diosdi

FIRPTA and Partnership Interest Withholding Rules Under the Tax Cuts and Jobs Act

Tax Law

By Anthony Diosdi The passing of the 2017 Tax Cuts and Jobs Act brought many changes to the Internal Revenue Code. One change relates to the handling of the sale of partnership interests by foreign persons. In particular, Sections 864(c)(8) and 1446(f) withholding rules were added to the Internal Revenue Code.Explanation of Withholding Tax and Substantive TaxThe withholding tax under Internal Revenue Code Section 1446(f) requires a 10 percent withholding on the sales price of a partnership interest by foreign persons unless certain exceptions are met. One such exception is if the seller furnishes an affidavit to the buyer stating, among other things, the seller is not a foreign person. The 10 person withholding, similar to the 15 percent Foreign Investment in Real Property Tax Act (“FIRPTA”) withholding on sales…

09Dec 2019 by Anthony Diosdi

Owe the IRS? What Can be Done to Prevent IRS Levies or Garnishments

Gift Tax

By Anthony Diosdi If the Internal Revenue Service (“IRS”) has assessed a tax liability against you and it is not paid, the IRS can proceed with enforced collection actions you. Enforced collection actions includes seizure of your wages, your bank accounts, and your property to satisfy the outstanding tax liability. This can be financially devastating. Fortunately, with proper planning, IRS collection actions may be prevented. And, in some cases, an unsatisfied tax liability can be reduced or even eliminated. Before the IRS will begin to proceed with enforced collection actions, you will be issued a series of notices from the IRS. These notices should be taken seriously and never ignored. In some cases, the notices you receive from the IRS may actually offer you an opportunity to resolve your outstanding…

21Nov 2019 by Anthony Diosdi

Tax-Free Spinoffs in the International Tax Context and the Danger of Subpart F Income Inclusion

Tax Law

By Anthony Diosdi There are many good business reasons that a corporate group may decide to enter a corporate division transaction to separate one or more trades or businesses from another distinct trade or business. Such transactions are commonly referred to as corporate “spin-offs,” “split-ups,” or “spit-offs.” To illustrate the elements of these transactions, assume that Alex and Bertha each own 50 percent of the stock of Diverse Corporation (“D”), which for many years has operated a winery and chicken ranch as separate divisions. The shareholders wish to divide the business into two separate corporations on a tax-free basis. The division method they choose should be influenced by nontax goals. Below, please see Illustration 1., Illustration 2., and Illustration 3., which demonstrate examples of corporate “spin-offs,” “split-ups,” and “spit offs.”…