tax law Archives | Page 5 of 30

21Dec 2021 by Anthony Diosdi

When Foreigners Own U.S. Real Property: Planning for the Estate and Gift Tax Associated with U.S. Property Ownership with an Emphasis on Partnerships

Tax Law

By Anthony Diosdi In the individual foreign investor setting, inbound tax planning often requires a balancing of U.S. income tax considerations and U.S. federal gift and estate tax considerations. While U.S. federal income tax rates on the taxable income of an individual foreign investor are the same as those applicable to a U.S. citizen or resident, the federal estate and gift tax as applied to individual foreign investors can and often results in a dramatically higher burden on a taxable U.S. estate or donative transfer of a foreign investor than for a U.S. citizen or domiciliary. As a result, for many individual foreign investors, the most important U.S. tax consideration is the U.S. federal estate and gift taxation. The United States imposes estate and gift taxes on certain transfers of…

17Dec 2021 by Anthony Diosdi

An Overview of Type E Tax-Free Reorganizations

Tax Law

By Anthony Diosdi In the corporate tax context, the term “reorganization” is a statutory term of art. Rather than providing a general definition, the Internal Revenue Code attempts to provide precise definitions for the term “reorganization” in Section 368(a)(1) with an exclusive list of seven specific types of transactions that will be considered “reorganizations.” Subparagraphs (A) through (G) of Section 368(a)(1) each provide a description of a particular reorganization transaction. Unless a transaction fits into one of the seven categories stated in subparagraphs (A) through (G), it is not a corporate reorganization. A tax-free reorganization sometimes involves only a single corporation which is undergoing a readjustment to its capital structure. The most common form of a reorganization that involves recapitalization is a Type E reorganization. Internal Revenue Code Section 368(a)(1)(E)…

17Dec 2021 by Anthony Diosdi

An Overview of Type F Tax-Free Reorganizations

Tax Law

By Anthony Diosdi In the corporate tax context, the term “reorganization” is a statutory term of art. Rather than providing a general definition, the Internal Revenue Code attempts to provide precise definitions for the term “reorganization” in Section 368(a)(1) with an exclusive list of seven specific types of transactions that will be considered “reorganizations.” Subparagraphs (A) through (G) of Section 368(a)(1) each provide a description of a particular reorganization transaction. Unless a transaction fits into one of the seven categories stated in subparagraphs (A) through (G), it is not a corporate reorganization. A Type F reorganization involves “a mere change in identity, or place of organization of one corporation, however effected.” See IRC Section 368(a)(1)(F). The major tax advantage to classification as a Type F reorganization is a preferential set…

17Dec 2021 by Anthony Diosdi

An Overview of Type C Tax-Free Reorganizations and Type C Tax-Free Triangular Reorganizations

Tax Law

By Anthony Diosdi In the corporate tax context, the term “reorganization” is a statutory term of art. Rather than providing a general definition, the Internal Revenue Code attempts to provide precise definitions for the term “reorganization” in Section 368(a)(1) with an exclusive list of seven specific types of transactions that will be considered “reorganizations.” Subparagraphs (A) through (G) of Section 368(a)(1) each provide a description of a particular reorganization transaction. Unless a transaction fits into one of the seven categories stated in subparagraphs (A) through (G), it is not a corporate reorganization. In a Type C reorganization, the purchasing corporation acquires “substantially all of the properties” of another corporation. Thus, a Type C reorganization is often referred to as an “asset acquisition.” If the target corporation transfers less than substantially…

15Dec 2021 by Anthony Diosdi

International CorporateTax-Free Mergers and Acquisitions- is there Anywhere to Hide from Section 367?

Tax Law

By Anthony Diosdi Whenever a U.S. person decides to establish a business outside offshore that will be conducted through a foreign corporation, it will likely be necessary to capitalize the foreign corporation with a transfer of cash and other property in exchange for corporate stock. When appreciated assets, such as equipment or intangible property rights (i.e., patents, trademarks, copyrights, and other intangible property), is transferred to a foreign corporation, the U.S. transferor may be subject to taxable gain. This taxable gain will be realized by the transferor unless one of the tax-free exchange provisions of the Internal Revenue Code applies. The imposition of U.S. tax on a transfer of appreciated property to a foreign corporation is a substantial deterrent to the transfer of property. Accordingly, the taxplanner should seek to…

06Dec 2021 by Anthony Diosdi

An Introduction to Type A Forward and Reverse Triangular Tax-Free Mergers

Tax Law

The three basic types of reorganization (Type A, Type B, and Type C) offer rather limited flexibility if the acquiring corporation desires to operate a target corporation as a wholly owned subsidiary. Assume, for example, that Parent Corporation (“P”) wishes to acquire Target Corporation (“T”) and keep T’s business in a separate corporate shell for non tax reasons. Although this objective could be satisfied by a Type B reorganization, the difficult “solely for voting stock” requirement may be an obstacle if P wants to utilize non voting stock as consideration or if a significant number of T shareholders are unwilling to accept any class of P stock. An A reorganization may also not be feasible in all cases. Suppose that P does not wish to incur the risk of T’s…

03Dec 2021 by Anthony Diosdi

The Tax-Free Withdrawal of U.S. Based Retirement Funds by Non-U.S. Citizens through Income Tax Treaties

Tax Law

In an increasingly global economy, workers are experiencing unprecedented mobility. As such, foreigners living in America, even for a limited time, often participate in a pension or retirement plan in the United States; participation might even be mandatory. In most cases, pretax money is contributed into retirement accounts where it accumulates tax-free until retirement. U.S. retirement such as 403(b) plans, 401(k) plans, and Individual Retirement Accounts (“IRAs”) are commonly encountered by foreigners who are employed in the United States. Whether contributions, earnings, and distributions are includible in a foreign worker’s U.S. taxable income depends on how the worker is classified for U.S. tax purposes and whether a tax treaty exempts an event that is otherwise taxable. This article will discuss how tax treaties can potentially be utilized by non-U.S. citizens…

19Nov 2021 by Anthony Diosdi

Will a Voluntary Disclosure of Unreported Income to the IRS Really Protect You From Criminal Prosecution?

Tax Law

By Anthony Diosdi Many tax attorneys tout the benefits of making a voluntary disclosure to the Internal Revenue Service (“IRS”) if you failed to disclose income on previously filed tax returns. Sadly, many professionals neglect to mention the risks of making a voluntary disclosure of unreported income to the IRS. This article will discuss the voluntary disclosure process in detail. A voluntary disclosure is the only administrative remedy that can potentially be utilized to prevent a criminal prosecution for crimes such as tax evasion or the filing of false tax returns. Unfortunately, as will be discussed below in detail, a voluntary disclosure is far from a “sure thing.” Anyone considering making a voluntary disclose to the IRS should know that it had a formal “voluntary disclosure” policy under which a…

19Nov 2021 by Anthony Diosdi

The U.S. Addresses Its Role as a Tax Haven by Promulgating Regulations Targeting Single-Member LLCs Held by Foreign Persons

Tax Law

By Anthony Diosdi The U.S. banking and financial system, and other U.S. investments such as real estate have been prime targets for those seeking to evade the tax systems of foreigners seeking to evade the tax systems of their home countries. For years, the U.S. government has looked to foreign countries to assist it in combating tax evasion. In response, many countries have criticized U.S. laws that allow domestic entities to obscure the identity of beneficial owners and allow non-U.S. persons to conceal assets in this country. As a result of pressure from abroad, the U.S. government has implemented new disclosure requirements and conducted investigations targeting the use of U.S. entities used to evade foreign taxes.In order to combat the use of U.S. entities to evade foreign taxes, on January…

19Nov 2021 by Anthony Diosdi

International Treaty Law that Permits Non-Residents to Withdraw Funds from their IRAs or 401(k) Funds and Avoid Any and All U.S. Tax Consequences

Tax Law

By Anthony Diosdi In an increasingly global economy, workers are experiencing unprecedented mobility. As such, foreigners living in America, even for a limited time, often participate in a pension or retirement plan in the United States; participation might even be mandatory. In most cases, pretax money is contributed into retirement accounts where it accumulates tax-free until retirement. U.S. retirement such as 403(b) plans, 401(k) plans, and Individual Retirement Accounts (“IRAs”) are commonly encountered by foreigners who are employed in the United States. Whether contributions, earnings, and distributions are includible in a foreign worker’s U.S. taxable income depends on how the worker is classified for U.S. tax purposes and whether a tax treaty exempts an event that is otherwise taxable. U.S. Retirement Plans in GeneralThe most common U.S. retirement plans, for…