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Showing posts from February, 2019

GILTI Rules Particularly Onerous for Non-C Corporation CFC Shareholders

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Background - http://www.mooresrowland.tax/2018/02/us-exposed-owner-of-international.html http://www.mooresrowland.tax/2019/01/gilti-regime-guidance-answers-many.html


Summary
The recently enacted tax reform legislation significantly expanded the application of Subpart F, including by adding a new inclusion rule for non-routine CFC income, termed “global intangible low-taxed income” (GILTI). The GILTI rules apply higher tax rates to GILTI attributed to individuals and trusts who own CFC stock (either directly or through LLCs or S corporations) than to C corporation shareholders. This article describes the difference and suggests steps individuals and trusts may take to defer or reduce the effect of the GILTI rules on individuals and trusts.


In DepthEffective for the first tax year of a controlled foreign corporation (CFC) beginning after December 31, 2017, any US person who is a US shareholder of a CFC and directly or indirectly owns stock in the CFC on the last day of the CFC’s tax year (…

Facing the Impact of the Gov't Shutdown

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Let's talk about 2018 returns due in 2019
First of all, apologies to our clients for the delays in finalizing US returns but this is due to factors beyond our control.
USA Today recently featured a full article on the impact of the shutdown on the IRS.  In short, certain forms that have changed, are not yet completed.  - "The IRS was also under stress to roll out new tax law changes that required replacing three tax returns forms – the 1040, 1040A and 1040EZ – with one new form 1040, along with creating six new schedules for certain credits and deductions. The IRS had to publish new instructions, notices and FAQs to help the public navigate the new tax code. Because of this work, the IRS did not provide the electronic filing requirements to tax software companies like TurboTax and H&R Block until September, much later than in previous years. “As we document in these pages, the IRS is wrestling with its workload," the report states. "With the best of intentions –…

If I Study and / or Teach in the US – would I pay taxes on my World Wide Income?

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President Reagan signed H.R. 4170 into law on July 18, 1984.  Thus, effective for tax years beginning after 1984, objective definitions of the terms residents aliens (“RAs”) and nonresidents aliens (“NRAs”) for Federal income tax purposes are incorporated into the Code.   

It is very important to note however, that the new definitions do not affect the determination of residence for Federal estate and gift tax purposes (discussed later).  In addition, the Joint Explanatory Statement of the Committee of Conference (the “Joint Statement”) also makes it clear that it is not intended that the definitions of RA and NRA affect the determination of whether an estate or trust is a U.S. or foreign estate or trust, “except insofar as that determination itself turns on the residence or non-residence of particular alien individuals.”




RESIDENCE TESTS
Code Section 7701(b) sets forth the following two (2) tests pursuant to which an alien individual will be considered a RA with respect to any calendar yea…

Avoiding U.S. Controlled Foreign Corporation (CFC) status using Nominees? You're at risk with the IRS.

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So often I speak with clients who were advised to use nominees to conceal their status as the UBO - ultimate beneficial owner.

I cannot say this often enough.  It's dangerous and it's dangerous.  Banking is problematic, what if the nominee passes or becomes incapacitated, and most importantly - the IRS sees right through it.  You will get caught and we avoid these arrangements like a plague.

This is what the IRS relies on -
Garlock v. Commissioner, 489 F - .2d 197 (2d Cir. 1973) andTreas. Reg. 1.951- 1(g)(2)
Have a look at this deck from an IRS presentation. It's from the LB&I International Practice Service Transaction Unit -

https://drive.google.com/open?id=1fPgxBBVjClOzYlKeEnhnRm_mF3JhJ8GO

Someone recommended using nominees for tax purposes?  Run.....