Tag Archive for Tax Blog

How To Treat Gifts And Bequests From Foreign (Non-US) Persons

If you are a US citizen or resident and you receive gifts or bequests (generally, an inheritance or gift of property by a Will) of money or other property from a foreign (non-US) person or entity, you may need to report these gifts on Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. Form 3520 is an information return, not a tax return. Many people receiving gifts or bequests get very confused. They mistakenly believe that they have to pay tax when they receive a gift or bequest. This is not the case – bona fide gifts or bequests are not subject to income tax in the hands of the recipient. This remains the case regardless of whether the person giving the gift is a US person or a foreign person. It remains the case regardless of the amount of the gift or bequest. Read More

Written by | Posted in Expatriate • Gift Tax • Individual • International

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 3 – 3.3.2)

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis Of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution Of The Republic of South Africa

CHAPTER 3 – LIMITATIONS TO INVOKING SECTIONS 74A AND 74B OF THE INCOME TAX ACT

3.3.2 Jurisdictional facts Read More

Written by | Posted in Africa • Audit

A Legislative Update From Capitol Hill

On Thursday, June 12th the House passed the subsequent bills designed to provide substantial tax benefits to businesses:

• H.R. 4457, passed by a vote of 272 to 144, entitled the “America’s Small Business Tax Relief Act of 2014,” would permanently extend I.R.C. § 179 expensing of up to $500,000 after the bonus depreciation limit expired last year; and
• H.R. 4453, passed by a vote of 263 to 155, entitled the “S Corporation Permanent Tax Relief Act of 2014,” makes permanent the shortening of the built-in gains tax-holding period for S corporations from 10 years to 5 years to give S corporations quicker access to capital. It further contains a basis adjustment fix for charitable contributions made by S corporations. Read More

Written by | Posted in Corporate • Small Business

Should I Stay or Should I Go? – Part 18

Answers to the Most Frequently Asked Questions Regarding OVDP

As a tax attorney specializing in the Offshore Voluntary Disclosure Program (OVDP), nary a day goes by that I don’t get a call from a person inquiring about the OVDP. The questions asked are relatively the same. After a while, I began to make a list of the most frequently asked questions. Below are my answers to them: (continued)

XXII. If I opt out, will my case be referred for audit?

Yes, your case will be referred to the field for a complete examination of all issues. In that examination, the normal statute of limitations rules apply. If no exception to the normal three-year statute applies, the IRS will only be able to assess tax, penalties, and interest Read More

Written by | Posted in FBAR • OVDP

The Basics of Offshore Tax Planning For Canadian Corporations – Part 2

Carrying On Business in Canada

The mere fact that Forco is not resident in Canada will not, in and of itself, ensure that Forco’s income is not subject to Canadian tax.

Care must also be taken that none of Forco’s income is derived from carrying on business in Canada. To the extent that it is, Forco may be subject to Canadian tax [1], and, in fact, these taxes may well be higher than if the income had been earned by Canco [2].

To determine whether Forco is carrying on business in Canada, one must consider the nature of Forco’s income earning activities. Read More

Written by | Posted in Corporate • Expatriate • International

Foreign Corporations: That Have A Stake In US Corporations, Do Business In The US

There were proposed and final regulations issued for Form 5472 on June 6th, 2014. The long arm of the United States Government is not only reaching out to U.S. corporations doing business in other countries, it is also expecting compliance by foreign corporations that do business in the U.S or have a stake in US Corporations.

Form 5472 is an information return used by a 25% foreign-owned U.S. corporation or a foreign corporation engaged in a U.S. trade or business to provide information when reportable transactions occur during the tax year of a reporting corporation with a foreign or domestic related party under sections 6038A and 6038C.

What Is a Reporting Corporation? A reporting corporation is either: Read More

Written by | Posted in Corporate • IRS

Should I Stay or Should I Go? – Part 17

Answers to the Most Frequently Asked Questions Regarding OVDP

As a tax attorney specializing in the Offshore Voluntary Disclosure Program (OVDP), nary a day goes by that I don’t get a call from a person inquiring about the OVDP. The questions asked are relatively the same. After a while, I began to make a list of the most frequently asked questions. Below are my answers to them: (continued)

XXI. What if, after making a voluntary disclosure, I disagree with the application of the offshore penalty? What can I do?

Remember that the penalty framework for offshore voluntary disclosure and the agreement to limit tax exposure to eight years are package terms. Mediation with Read More

Written by | Posted in FBAR • OVDP

Repairs vs. Capitalization – Part 5

Putting It All Together

TD 9636 has well over 100 case studies and examples included throughout the text. While the IRS won’t ‘draw a line in the sand’, they do give some pretty concrete samples of differing scenarios. Reg. Section 1.263(a) also has numerous examples for you to use when deciding how to best serve your client.

To summarize everything and put it all together, the following are the items that apply to all of the safe harbors we have discussed:

1. The company must have a written policy, in place before the beginning of the tax year in question, setting the non-tax related reasons for the use of the safe harbor. Read More

Written by | Posted in IRS • Tax Policy

Summer Hearings On Comprehensive Tax Reform

On June 5, 2014, Senators Wyden and Hatch of the Senate Finance Committee announced three hearings for the summer on comprehensive tax reform. The topics:

June – Education incentives

July – (1) Identity theft and taxpayer privacy protection (2) Modernizing corporate taxation

They also mention:

• Simplification
• Promoting economic prosperity
• Innovative ways to fix the depleted Highway Trust Fund Read More

Written by | Posted in Corporate • Federal

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 3 – 3.3.1)

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis Of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution Of The Republic of South Africa

CHAPTER 3 – LIMITATIONS TO INVOKING SECTIONS 74A AND 74B OF THE INCOME TAX ACT

3.3.1 Authority Read More

Written by | Posted in Africa • Audit

The Basics of Offshore Tax Planning For Canadian Corporations – Part 1

Introduction

In my blog that was posted on June 3, 2014, Canadian Corporations Can Repatriate Profits of Offshore Subsidiaries Tax-Free, I explained that Canadian-based corporations, unlike their U.S. counterparts, can usually repatriate the earnings of offshore subsidiaries, free of Canadian tax. This is usually true even if those earnings have borne little or no tax at all in the offshore jurisdictions.

In response to that posting, I received many emails from Canadian corporations and their professional advisers asking for more information about what is required and entailed to successfully set-up an offshore corporate structure. Read More

Written by | Posted in Corporate • Expatriate • International

FBAR And FATCA — Two Abbreviations That Can Wrap You Around The IRS Axle

FBAR and FATCA are two important abbreviations for those who have overseas financial interests. Failure to file the FBAR report, in view of the IRS’s continuing application of FATCA, can get you into what old military veterans used to call FUBAR.

Let’s back up a bit and go over those abbreviations:

FBAR is a Foreign Bank and Financial Accounts Report. It’s a report form required by the Bank Secrecy Act. Here’s how the IRS describes it:

“If you have a financial interest in or signature authority over a foreign financial account, … exceeding certain thresholds … you [are required to] report the account yearly to the Internal Revenue Service…” Read More

Written by | Posted in FATCA • FBAR • IRS • OVDP • Tax Fraud/Evasion/Crimes
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