Tag Archive for Tax Blog

A Pitfall For Americans Using Canadian ULCs

Unless you are very active in Canada-US cross-border tax planning, you probably are not aware of the fact that, a few years ago, the 5th Protocol to the Canada-U.S. Tax Convention (“the Treaty”) created a problem in connection with the ownership of Canadian Unlimited Liability Companies (“ULCs”) by U.S. Residents.

ULCs are a strange feature of corporate law-they are corporations with unlimited liability. At one time, Nova Scotia was the only jurisdiction in Canada that had these entities, and they were modeled after similar entities existing under UK corporate law. However, some years ago Alberta and British Columbia jumped on the ULC bandwagon.

From a Canadian tax perspective, ULCs are taxed in the same way as “normal” Canadian Read More

Written by | Posted in Corporate • International • North America

Attacking Small Businesses that Receive Too Much in Credit Cards – IRS Letter 5043

Attempt to get “Cash” businesses

The IRS has been pushing for many years to capture cash income of small businesses and force him to pay taxes. That is one of the reasons that the IRS is requiring credit card merchant service companies to report a 1099-K for businesses to the IRS. This form lists the amount of credit card payments made to the business by its customers. The IRS then takes this information, comparing it to the gross sales of the business. If the business has too high of a percentage of credit card sales, the IRS issues a letter 5043.

This letter starts out that “your gross receipts may be underreported.” This is the beginning of a long series of letters and correspondence which could eventually lead Read More

Written by | Posted in Audit • IRS • Small Business

Should I Stay or Should I Go? – Part 6

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)

VII. When determining the highest amount in each undisclosed foreign account for each year or the highest asset balance of all undisclosed foreign entities for each year, what exchange rate applies?

The foreign currency exchange rate at the end of the year, regardless of when during the Read More

Written by | Posted in FBAR • OVDP

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 2 – 2.4)

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

2.4 THE RELEVANCE OF PAJA AND THE PRINCIPLE OF LEGALITY

2.4.1 Introduction
With the development of constitutional law and the promulgation of PAJA giving effect to Read More

Written by | Posted in Africa • Audit

FATCA Guidance For UK Trustees

The United Kingdom’s Law Society, Institute of Chartered Accountants, and STEP published guidance that is intended to help United Kingdom trustees and their advisers determine whether FATCA registration is required.

The Law Society states that:

“This guidance is relevant for all UK trusts and trustees, whether or not they have any known US connections. UK financial institutions must meet the requirements of the Treaty and UK legislation in order to avoid the withholding tax. All UK trusts and trustees, whether or not they have any known US connections, need to consider their status under the UK/US agreement. If they are required to register with the IRS under the agreement, Read More

Written by | Posted in FATCA • International

Vodafone Return of Value To Shareholders – Irish Tax Treatment

On 2nd September 2013, Vodafone Group Plc. announced that it was disposing of its 45% interest in Verizon Wireless to Verizon Communications Inc.

At the same time, it also announced its intention to carry out a “Return of Value” to its shareholders, of which there are almost 400,000 in Ireland. Many of these shareholders had acquired Vodafone shares in exchange for their Eircom shares in 2001. The “Return of Value” would be partly in cash and partly in Verizon consideration shares.

On 14th May 2014 the Irish Revenue Authorities issued a comprehensive Tax Brief outlining the tax treatment of the Vodafone Return of Value to its shareholders which provides comprehensive guidance on the calculation of the base cost for Capital Read More

Written by | Posted in Capital Gains • Europe, Middle East

40% of Big Firm Partners Retiring Within Decade

High Net Wealth Partners Retiring

On April 28, 2014 The American Lawyer published its annual (2014) Big Law report in which it found that 16% of partners in the US’ largest 200 law firms by revenue are 60 years old or older, with at least 8% 65 or older.  These 16% of big firm partners will be retiring over the next five years.  Moreover, right behind this retiring group are 28% more partners that have reached at least 50 years of age.

While these thousands of retiring partners leading up to retirement may have been earning between $750,000 and $3 million annually, most also have lifestyles that correspond to spending this level of income.  These retiring partners are now asking Read More

Written by | Posted in Estate Planning Tax • Individual • Retirement

Fraud Technical Advisors: An End-Run Around Tweel?

United States v. Tweel is the most famous example of a motion to suppress in a tax case. In Tweel, the Fifth Circuit Court of Appeals held that it constitutes trickery, fraud, and deceit for the IRS to conduct a criminal investigation under the guise of a civil examination. Because of how fact-sensitive the holding of this case is, a recitation of the facts is necessary.

During a civil examination – the examination from which the indictment arose – Tweel’s representative was concerned that the Criminal Investigation Division (CI) was involved. As a result, he specifically asked the revenue agent whether CI was involved. The Revenue Agent answered, “no,” which was technically the right answer. CI was not involved. Relying upon the Revenue Agent’s “word,” the representative cooperated with Read More

Written by | Posted in Tax Fraud/Evasion/Crimes

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 2 – 2.3.3)

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

2.3 A CONSTITUTIONAL BALANCE OF SARS’ POWERS AND THE ‘ADMINISTRATIVE ACTION’ DEBATE

2.3.3 Conclusion
Read More

Written by | Posted in Africa • Audit

S Corporation – What Are The Benefits?

An S Corporation or S Corp is an eligible domestic corporation that has elected to be treated as an S Corporation for tax purposes. S Corporations avoid double taxation on corporate income because corporate income, losses, deductions and credits are passed through to the shareholders. Shareholders of the S corporation report the income and losses on their personal tax returns. However, S Corps are responsible for tax on certain built-in gains and passive income at the entity level.

Self-Employment tax

Undistributed taxable income of the S corporation that is passed through to its shareholders is not treated as earnings from self- employment (Rev. Rul. 59-221, 1959-1 C.B. 225) and is therefore not subject to self-employment tax. Read More

Written by | Posted in Corporate • Income Tax • Small Business

Canada – A Tax Friendly Destination For Wealthy Immigrants!

Probably more than ever before, Canada is considered to be a highly desirable destination for wealthy immigrants.

Many non-tax reasons can be cited, including Canada’s:

• Healthy diverse economy
• Natural resources that are the envy of the world, including abundant supplies of fresh water, oil and gas, potash, timber and gold
• Banking system that is considered the healthiest in the world
• Stable democratic government
• Highly multi-cultural society that welcomes people of all backgrounds Read More

Written by | Posted in International • North America

Should I Stay or Should I Go? – Part 5

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)

VI. How is the offshore penalty calculated?

The starting point is to sum up the values of all foreign accounts and foreign assets for each year. The corresponding penalty is calculated at 27.5% of the highest year’s aggregate value during the look-back period. If the taxpayer has multiple accounts or assets where the Read More

Written by | Posted in FBAR • OVDP
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