Posts

Showing posts from January, 2019

FBAR examination? Find out how to avoid having the IRS succeed in imposing the larger penalty for willful behavior.

Image
First and foremost, an FBAR battle is being waged in federal courts across the country where taxpayers have been seeking to avoid the imposition of the maximum FBAR willfulness civil penalty. Faced with an adverse result during an IRS civil examination or administrative appeal, taxpayers have turned to litigating the civil penalties in federal court in the hope of a better result. The Department of Justice has succeeded in several cases where courts have upheld the maximum FBAR willfulness penalty and rejected the taxpayer's argument to apply a "reasonable cause" standard and the lesser FBAR nonwillful penalty. This has galvanized the IRS and the revenue agents working the cases. The FBAR willfulness penalty is the greater of $100,000 or 50% of the balance in the unreported foreign account at the time of the violation, and the maximum penalty for a nonwillful violation is $10,000 (31 U.S.C. §5314). See the following cases: Williams, 489 F. App'x 655 (4th Cir. 2012) (di…

GILTI regime guidance answers many questions

Image
Proposed regulations issued in September 2018 provide guidance on the global intangible low-taxed income (GILTI) regime enacted under Sec. 951A by the legislation known as the Tax Cuts and Jobs Act, P.L. 115-97.Sec. 951A requires U.S. shareholders of controlled foreign corporations (CFCs) to include GILTI currently in gross income. A U.S. shareholder's GILTI inclusion is treated similarly to a Subpart F income inclusion under Sec. 951(a)(1)(A), but the inclusion amount is determined in a fundamentally different manner.The regulations address the applicable general rules for calculating the GILTI inclusion amount and associated definitions, the calculation of tested income and loss, the general rules for calculating qualified business asset investment, the definition of tested interest expense and income, the treatment of domestic partnerships and their partners, and the treatment of the GILTI inclusion amount and adjustments to earnings and profits and basis.U.S. shareholders of C…