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Showing posts from April, 2020

Frequently asked questions about carrybacks of NOLs for taxpayers who have had Section 965 inclusions

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The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) amended section 172(b)(1) to provide for a carryback of any net operating loss (NOL) arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, to each of the five taxable years preceding the taxable year in which the loss arises (carryback period). Taxpayers may elect under section 172(b)(3) to waive the carryback period for NOLs arising in those years. In lieu of that election, taxpayers may make an election under section 172(b)(1)(D)(v)(I) for NOLs arising in those years to exclude tax years in which they have section 965(a) inclusions (section 965 years) from the carryback period. Recently issued Revenue Procedure 2020-24 (PDF) sets forth procedures for taxpayers to make these two elections. The IRS also recently issued temporary procedures for faxing certain Forms 1139 and 1045 to the IRS. This document provides the additional information that the IRS announced it would issue in the a…

Subpart F Income from CFC subsidiaries

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I have previously discussed subpart F -
http://www.mooresrowland.tax/2018/02/us-exposed-owner-of-international.html
http://www.mooresrowland.tax/2020/02/the-tax-cuts-and-jobs-acts-impact-on.html

Consider first a fact pattern where a U.S. parent owns CFC1, which sells the stock of CFC2.

1. CFC2 was originally formed by CFC1, which invested $150 in the stock of CFC2.
2. CFC2 has incurred operating losses of $100 and has $50 of remaining basis in its assets.
3. CFC1 sells CFC2 to an unrelated buyer for $500, and the question is whether or not the seller wants to cause the transaction to be treated as a deemed asset sale for U.S. tax purposes by means of a §338(g) election or a ‘‘check-and-sell’’ transaction.
4. On a stock sale without any elections, CFC1 would recognize a $350 gain, all of which would generally be taxable to US Parent as passive basket, subpart F income under §954(c).  5. To the extent CFC1 incurred taxes on the sale, those taxes could be claimed as a foreign tax credit un…

Grantor Trust

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Generally speaking, an arrangement will be treated as a “trust” (as opposed to some other type of entity) under the Internal Revenue Code (IRC), if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility. If this is the purpose, then the parties are not associates in a joint enterprise for the conduct of business for profit, which might be taxable as a partnership, or corporation, for example. An entity created to “operate a business” rather than to “protect or conserve assets” is not recognized as a trust for US tax purposes. Instead, entities conducting business activities are more properly classified as business entities.

Once it is established that there is a Trust, the next step is to determine -
1. Is it a domestic vs Foreign trust 2. Grantor vs non grantor trust 3. domestic grantor vs domestic non grantor trust 4. foreign…

Treasury, IRS announce cross-border tax guidance related to travel disruptions arising from the COVID-19 emergency

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IR-2020-77, April 21, 2020


WASHINGTON — The Treasury Department and the Internal Revenue Service today issued guidance that provides relief to individuals and businesses affected by travel disruptions arising from the COVID-19 emergency.


The guidance includes the following:

1. Revenue Procedure 2020-20 (PDF), which provides that, under certain circumstances, up to 60 consecutive calendar days of U.S. presence that are presumed to arise from travel disruptions caused by the COVID-19 emergency will not be counted for purposes of determining U.S. tax residency and for purposes of determining whether an individual qualifies for tax treaty benefits for income from personal services performed in the United States;


2. Revenue Procedure 2020-27 (PDF), which provides that qualification for exclusions from gross income under I.R.C. section 911 will not be impacted as a result of days spent away from a foreign country due to the COVID-19 emergency based on certain departure dates; and


3. An FAQ

Postpandemic Reality - "Pumping the Brakes"

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Now let's try to be realistic. This virus will not disappear.  Look out for on again, off again lockdowns.

With global coronavirus cases growing daily, in March 2020, Harvard infectious disease experts published an article in the Harvard Gazette.  Modeling showed that — absent the development of a vaccine or other intervention — a staggered pattern of social distancing would save more lives than a one-and-done strategy and avoid overwhelming hospitals while allowing immunity to build in the population.

The work, conducted by researchers at the Harvard T.H. Chan School of Public Health and led by Yonatan Grad, the Melvin J. and Geraldine L. Glimcher Assistant Professor of Immunology and Infectious Diseases, and Marc Lipsitch, professor of epidemiology, also shows that if strict social distancing such as that imposed in China — which cuts transmission by 60 percent — is relaxed, it results in epidemic peaks in the fall and winter similar in size and with similar impacts on the heal…

Evolution in the Economic Citizenship and Economic Residency Space

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Take Aways:

1. A cycle of lock-downs and re-openings may become the new norm

2. Countries allow their citizens to return but sometimes long term residents have been denied re-entry

3. Therefore a Plan B for residency and / or citizenship is now a must for international entrepreneurs

4.  Typically the narrative around second citizenship / residency may have revolved around tax planning

5. The narrative will evolve to include health care systems, disaster preparedness, social stability, IT infrastructure (especially fast WiFi).

6. Those who can afford it, will continue to curate a portfolio of citizenship / residencies  as they seek to avoid unrest, protect families and preserve wealth?

7. International travel will be forever changed.   Expect to surrender more personal data and perhaps some type of "Immunity" or "health" passport

8. Should we be unable to access our onshore / #offshore assets due to travel restrictions, we need to ensure that we have power of attorney, log…

Post Pandemic increase in Remote Working and Learning.

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Take Aways:
1. Greater remote working and remote learning is one of the more obvious consequences of the pandemic
2. Like most of the other trends, it was on the upswing pre-pandemic but will accelerate post pandemic. Upwork’s “Future Workforce Report” predicts that 73% of all teams will have remote workers by 2028 and 75% of current teleworkers say they plan to work remotely for the rest of their career
3. Technology tools like Zoom and Team plus stronger data security means that remote working / learning is here to stay
4. Remote learning is no longer an inferior option to in person classes.  It has been legitimized
5. Rising remote work may disproportionately benefit higher income earners.  Rising remote learning may disproportionately benefit lower income earners
6.  In terms of real estate, it would of course vary by geography but generally speaking, it has been fundamentally impaired -
6.1 Retail space may continue to decline as shopping moves online
6.2 Industrial space will c…

Post Mortem Estate Planning – Executors’ Elections

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Estate’s Control Sheet
               Date other state(s) fiduciary income taxreturn(s) due:                Alternate valuationdate:

                        Email:


















All section references are to the Internal Revenue Code (“IRC”) unless otherwise indicated. “DNI” refers to distributable net income; “IRS” to the Internal Revenue Service; “QTIP” to qualified terminableinterestproperty;“ERTA”totheEconomicRecoveryTaxActof1981,Pub.L.No.97-34, 95 Stat. 172; “TRA 1997” to the Taxpayer Relief Act of 1997, Pub. L. No. 105-34, 111 Stat. 788, “EGTRRA”totheEconomicGrowthandTaxReliefReconciliationActof2001,Pub.L.No.107-16, “JGTRRA” to the Jobs and Growth Tax Relief Reconciliation Act of 2003, Pub. L. No. 108-27, the “2010TaxReliefAct”tothe