tax law Archives | Page 26 of 30

30Aug 2019 by Anthony Diosdi

Be Careful When Receiving a Gift From a Foreign Corporation or Partnership

Gift Tax

By Anthony Diosdi The Small Business Job Protection Act of 1996 created reporting requirements for U.S. persons that receive large gifts after August 20, 1996 from foreign persons (including foreign corporations). Federal law requires gifts or bequests valued at more than $100,000 from a nonresident alien or foreign estate to be disclosed on an IRs Form 3520. Federal law also requires gifts valued at more than $16,076 from foreign corporations or foreign partnerships (adjusted annually for inflation) to be disclosed on an IRS Form 3520. Besides the IRS reporting requirements of a Form 3520, anyone receiving a gift from a foreign corporation or foreign partnership should know that Internal Revenue Code Section 672(f)(4) broadly authorizes regulations to recharacterize gifts or bequests, directly or indirectly, from partnerships or foreign corporations, as…

30Aug 2019 by Anthony Diosdi

When Can a Foreign Tax Credit be Claimed?

Tax Law

By Anthony Diosdi U.S. taxpayers are generally subject to U.S. tax on their worldwide income, but may be provided a tax credit for foreign income taxes paid or accrued. The main purpose of the foreign tax credit is to mitigate the double taxation of foreign source income that might occur if such income is taxed by both the United States and a foreign country. A U.S. taxpayer may receive a “direct” foreign tax credit Who is the Taxpayer Entitled to the Credit?Under Internal Revenue Code Section 901(b)(1), U.S. citizens and U.S. corporations are entitled to a foreign tax credit for “the amount of any income, war profits, and excess profits taxes paid or accrued during the tax year to any foreign country or any possession of the United States. The…

28Aug 2019 by Anthony Diosdi

No, No, No, No….Prohibited Transactions and Disqualified Persons in Self-Directed IRAs Part II- The Taxation of Self-Directed IRAs

IRA

By Anthony Diosdi The appeal of investing retirement funds outside of the typical investments has driven a surge in the use of self-directed Individual Retirement Account (“IRA”) investment structures. Investments within self-directed IRAs frequently include real estate, closely held business entities, private loans, and can include any other investment that is not specifically prohibited by federal law. In my last blog, I discussed the legal implications of investing in a self-directed IRA. This blog I will discuss potential tax obligations and filing requirements associated with self-directed IRAs.Most individuals who fund a self-directed IRAs do not realize that funding such a structure may trigger tax obligations and filing requirements. Anyone considering funding a self-directed IRA must understand the term unrelated business taxable income (“UBTI”). If the self-directed IRA earns UBTI, the…

22Aug 2019 by Anthony Diosdi

No, No, No, No….Prohibited Transactions and Disqualified Persons in Self-Directed IRAs

Tax Law

By Anthony Diosdi Since 1974, the IRS has permitted individuals to totally “self-direct” investments made within their Individual Retirement Plans (“IRAs”). Self-directed IRAs are also authorized by federal law and are held by a trustee or custodian that permits investments in a broader range of assets than is permitted by traditional IRAs. See Levine v. Entrust Grp., Inc., 2012 WL 6087399 (N.D. Dec. 6, 2012). Self-directed IRAs allow individuals and small companies to invest in asset classes that are often deemed illiquid. These include but are not limited to tax lien certificates, real estate, livestock, and private companies. Hence, self-directed IRAs allow individuals who prefer to leverage their personal expertise in their investment to do so. Although a self-directed IRA allows individuals to invest in numerous illiquid assets, investments in…

22Aug 2019 by Anthony Diosdi

Can Todd and Julie Chrisley of “Chrisley Knows Best” Blame their Legal Troubles on a Whistleblower Statute?

Tax Law

By Anthony Diosdi A federal grand jury has indicted reality television stars Todd and Julie Chrisley on multiple counts of federal crimes including tax evasion. The Chrisleys’ accountant, Peter Tarantino, was also indicted for a number of tax crimes. The Chrisley’s are stars of a successful reality show known as “Chrisley Knows Best”. Todd Chrisley recently declared his innocence on an Instagram post. In his post, Todd Chrisley blamed his legal troubles on a former employee. Todd Chrisley’s Instagram post stated as follows: “Needless to say, we fired the guy and took him to court- and that’s when the real trouble started. To get revenge, he took a bunch of his phony documents to the U.S. Attorney’s office and told them we had committed all kinds of financial crimes, like…

15Aug 2019 by Anthony Diosdi

Conducting Business Abroad? The Check-the-Box Regulations and Cross Border Tax Arbitrage May Offer Significant Tax Savings Opportunities

Tax Law

By Anthony Diosdi It has always been important, but often difficult to determine the proper characterization of entities, foreign or domestic, for U.S. income, estate, and gift tax purposes. Under older law, the U.S. federal tax classification of an entity depended on the number of corporate characteristics (limited liability, continuity of life, centralized management) it possessed. The 1997 check-the-box regulations (Regs. Sections 301.7701-1, 2, and 3) have brought substantial certainty and flexibility to this endeavor. A relatively comprehensive list of foreign entities will be treated as per se corporations, and, unless an election to the contrary is timely filed, any other foreign organization is to be treated as a partnership if it has two members (at least one of whom has limited liability) or disregarded as an entity separate from…

05Aug 2019 by Anthony Diosdi

Failed to Disclose a Virtual Currency on Your Tax Return? You May be Receiving Either an “IRS Letter 6173,” “IRS Letter 6174,” or “IRS Letter 6174-A” in the Very Near Future

Tax Law

By Anthony Diosdi On July 26, 2019, the Internal Revenue Service (“IRS”) issued IR-2019-132, a press release. IR-2019-132 announced that the IRS will be sending letters to persons that participated in virtual currency transactions. For individuals receiving this letter, there are three variations: Letter 6173, Letter 6174, or Letter 6174-A. IRS Letter 6173 IRS Letter 6173 states in relevant part: “We have information that you have or had one or more accounts containing virtual currency and may not have met your U.S. tax filing and reporting requirements for transactions involving virtual currency, which include cryptocurrency and non-crypto virtual currencies.”This correspondence indicates that the IRS may know that there is unreported income received through virtual currency transactions. Anyone who receives an IRS Letter 6173 must reply to this notice either by…

05Aug 2019 by Anthony Diosdi

There May By 50 Ways To Leave Your Lover But Only 1 Way To Make a Transfer To a “Ding,” NING,” “WING,” Or “SDING”

Gift Tax

By Anthony Diosdi Introduction The passing of the Tax Cuts and Jobs Act resulted in a significant tax increase for many in high income tax states. It also elevated the need of many residents of high tax states to utilize planning opportunities to reduce their overall tax liabilities. An incomplete gift non-grantor trust (hereinafter “ING”) formed in a state such as Nevada, Delaware, Wyoming, or South Dakota- that is, a “NING,” “DING,” “WING,” or “SDING,” may offer a planning opportunity to reduce state income tax liabilities. As a general rule, states impose income tax based on residency. For example, a Maryland resident is subject to Maryland income tax and a California resident is subject to California income tax. The same can be said of an ING. An ING is subject…

22Jul 2019 by Anthony Diosdi

What is an Offer in Compromise?

Tax Law

Some people may ignore their taxes because they know they cannot afford their tax liability. However, failing to file can result in serious penalties or even criminal charges. Always remember there are options for those you cannot pay their full past-due tax bill in full all at once. One option is to seek an offer in compromise (OIC). There is no guarantee that your OIC will be granted, however, and it always helps to have the assistance of an experienced tax lawyer in San Francisco so you can obtain the help you need. An offer in compromise is a proposed plan that you can make to the Internal Revenue Service (IRS) when you cannot pay your full tax bill. When accepted, an OIC allows you to pay a lump sum…

28Jun 2019 by Anthony Diosdi

PFICs and the Statute of Limitations- Finally Some Good News

Tax Law

By Anthony Diosdi Many U.S. investors in foreign mutual funds aware of the painful Passive Foreign Investment Company (“PFIC”) rules. Under the PFIC rules, U.S. investors who do not make a Qualified Electing Fund (“QEF”) election are taxed under a special excess distribution regime. Under this regime, the U.S. investor is allowed to defer taxation of the PFIC’s undistributed income until the PFIC makes an excess distribution. An excess distribution includes the following:1) A gain realized on the sale of PFIC stock, and2) Any actual distribution made by the PFIC, but only to the extent the total actual distributions received by the U.S. investor for the year exceeds 125 percent of the average actual distribution received by the investor in the preceding three taxable years (or, if shorter, the investor’s…