Tag Archive for IRS Code

Final Regulations On Stock Owned By Domestic Partnerships Under Subpart F Of Internal Revenue Code

Domestic Partnerships Under Subpart F

On January 25, 2022, the Internal Revenue Services issued final regulations relating to the treatment of stock owned by domestic partnerships under certain provisions of subpart F of the Internal Revenue Code (“Subpart F”).[1]  These regulations could substantially impact the tax treatment of partners of such partnerships.

Background on Foreign Corporations and the U.S. International Tax System

U.S. citizens, resident aliens, and domestic corporations generally are subject to federal income tax on worldwide income.[2]

On the other hand, foreign corporations typically are subject to federal income tax only on income 1) that is effectively connected with the conduct of a U.S. trade or business and 2) certain types of U.S. source income.[3]

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Written by | Posted in Domestic Partnerships • IRS Code • Subpart F

New Proposed Regulations 2801 For Covered Gifts/Bequests From Expatriates

U.S. citizens or long term residents who are covered expatriates who gift property during  their lifetime or have bequeathed property upon their death, to a U.S. citizen or U.S.  resident will cause the recipient of the gift to pay gift tax to the extent that the taxable gift exceeds the annual exemption. For 2015, the annual exemption is $14K. For this purpose, resident is one who is domiciled in the United States.
There are also similar rules or application where the recipient is a U.S. trust. Recipients of a “covered gift” or of a “covered bequest” who are charities are exempt from paying the gift tax.

Therefore any U.S. citizen or long-term resident who has expatriated under S877 of the IRS Code AND who is classified as a “covered expatriate” under S877A of the IRS Code will cause the recipient to pay this tax. The tax Read More

Written by | Posted in Canada • Expatriate • Gift Tax

Will Government Help Small Businesses?

President Obama has been pushing for changes to the Internal Revenue Service Code that would limit the tax benefits of pass-through entities. Most small businesses are limited liability companies or S corporations and the profits and losses pass-through to the individual members or shareholders. These are merely preliminary proposals and most likely the House of Representatives will not let these proposals be pushed through Congress.

There is been a lot of recent talk about the lack of small business loans and it has been pointed out that the Small Business Administration is a good source for guaranteed business loans for the smallest of businesses. That is simply not true! Since 2005, the average size of the Small Business Administration loan under its loan guarantee program has gone from approximately $160,000 to approximately $342,000. In 2005, the government backed loans totaled almost 96,000. Last year, only 44,000 loans were guaranteed. Also, the smaller banks, that are many times the best choice for small business, seem to be getting out of the SBA loan guarantee programs in practice. Three large banks, including Wells Fargo, control over 20% of the market for SBA guaranteed loans.

The result is the bigger banks are making a larger percentage of loans in larger dollar amounts, but to less than half the number of businesses that they did in 2005. Read More

Written by | Posted in TaxConnections