Archive for December 24, 2013

Information Is Our Gift To You

During this holiday season TaxConnections Worldwide Tax Blogs wants to thank our readers who have joined us during 2013. We have enjoyed visitors from more than 155 countries reading Worldwide Tax Blogs with thousands of new viewers each day. This December 2013 www.taxconnections.com will certainly surpass 80,000 monthly visitors on December 2013 Christmas Eve. We may reach 100,000 per month visits by year end. Minimally we will advocate more than 6M times TaxConnections and TaxConnections Sponsors throughout 2014 year in our weekly blogs and website. TaxConnections has a bright future and it includes all of you!

Merry Christmas To You All! Read More
Written by | Posted in TaxConnections

Think You Got Game? Try Being Like Santa

How Imitating Santa Can Help You Save Taxes This Year –

Twas the night before Christmas when all through the house, not a creature was stirring, not even a mouse. As Christmas Eve draws near, my family is busy preparing for guests. Mostly, we’re waiting on cousins, aunts, and uncles; but my little cousins are also waiting for a certain man with glasses and a white beard. You guessed it – St. Nick!

With several cousins under the age of ten, there have been more than just a few discussions in my household about how Santa manages, in one night, to get all of his work done. It does not take endless reruns of a “Miracle on Thirty-Fourth Street” to know that Santa has help. And that help has financial and tax consequences. This sparked a conversation in my Read More

Written by | Posted in Tax Deductions • Tax Humor

Don’t Gamble With Gift Tax Returns

Beginning in 2011, the Internal Revenue Service started cracking down on taxpayers who did not file gift tax returns after making gifts that required reporting. Working with state or county agencies, the IRS started using real estate property records to spot land transfers between family members for no or little consideration, according to an October 2011 Forbes magazine article. Taxpayers who are caught not filing a gift tax return and owe taxes can count on paying the failure-to-file penalty along with interest charges.

a. Who Must File

You do not have to file a gift tax return as long as the amount you give to one person does not exceed $ 14,000 (for the 2013 calendar year). If you are married, you and your spouse Read More

Written by | Posted in Gift Tax

Foreign Trusts and Legal Risks

TaxConnections Blogger Virginia La Torre Jeker writes about offshre trusts
Introduction –

The purpose of this section is to provide a cursory view of foreign trusts and financial planning, the emphasis of which is asset protection from judgments. The basic taxation regime of a foreign trust can be reviewed in a previous writing, Income Taxation of Foreign Trusts and Beneficiaries, TaxConnections, November 25, 2013.

The focus here is the treatment by the United States taxing authority upon a foreign trust pertaining to the tax consequences subsequent to transfer. The points of relevance are the income tax treatment to the Settlor, beneficiary, and trust and the consequential use of the Read More

Written by | Posted in Estate Planning Tax • United States

7 Habitual Mistakes Companies Make – Chapter 4 (9)

TaxConnections Blog Post
Case of Checking Information –

FOR INSTANCE, A tax compliance officer in a large corporation recently decided to review over a period of sixty minutes the tax pack reports submitted to him by the financial manager that had excluded certain deductions which had been deducted for accounting purposes. There were numerous such situations giving rise to “disallowable deductions” of over $2 million. On closer examination by the tax compliance officer he discovered that all the financial managers had made the same mistake.  Expenses they wanted to disallow for tax purposes were all for marketing purposes and were clearly deductible, but they had been marked not deductible, because certain employees who enjoyed these benefits had not been subjected to fringe benefit tax. The two concepts are completely different, and there was no Read More

Written by | Posted in Tax Risk Management

The Gift Tax In A Nutshell

a. How the Federal Gift and Estate Tax Work Together

The federal gift tax is part of what’s called the “unified” federal gift and estate tax. Gift tax applies to lifetime gifts; estate tax applies to assets left at death. The idea is that whether you give assets away while you’re alive, or leave them at your death, they’re taxed the same way, at the same rate. After all, if there were no gift tax, then anyone could completely avoid the estate tax by giving everything away just before death.

Very few Americans need to worry about federal estate tax or the federal gift tax. Why? Because under current law, each of us has a lifetime gift and estate tax exemption of $ 5.25 million, which means that you can leave or give away up to $ 5.25 million without owing any Read More

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United States Partnership Tax: Partner’s Capital Accounts, Part I

Remember from a tax perspective, partners agree to share the economic benefits and burdens of ownership. This means that not only will they share profits, but they will also share losses and – in a worst case scenario — perhaps contribute additional capital in support of the business. For tax purposes, we need to create and maintain some record of this activity.

Enter the partner’s capital account. This is the most important element of partnership taxation; it is an ongoing record documenting the partner’s economic participation in the partnership. The actual workings of this account are one of the most complex in US taxation and therefore beyond the scope of a few blog posts. However, some initial observations can be made. Read More

Written by | Posted in Partnership

Sales of Business Assets

Business assets are not capital assets but the sale my result in long-term capital gain if the asset has been held for more than one year. Under Code Section 1231, the net gain from sale of all Section 1231 assets is long-term capital gain, but there are two are two exceptions for depreciable property. (1) For personal property, under Section 1245, gain is ordinary income to the extent of any depreciation allowed or allowable (depreciation recapture). Allowable means that if the taxpayer could have taken depreciation on the asset but did not do so, then this amount must reduce the basis of the asset and is considered as ordinary income when the property is sold for a gain. (2) Under Section 1250, real property depreciated under an accelerated method is also treated as ordinary income. The amount of recapture depends on when the asset was placed in service and what depreciation method Read More

Written by | Posted in Property Tax • Sales/Use Tax • Tax Provision/Tax Reporting

FATCA Registration in Full Swing; More Countries Signing FATCA IGAs

Foreign Financial Institutions are not getting the best of Christmas presents this year. Instead of getting sugar plums in their stockings, they are getting FATCA and GIIN!

By brief background, under the Foreign Account Tax Compliance Act, (FATCA), foreign financial institutions (FFIs) and non-financial foreign entities (NFFEs) must agree to verification and due diligence procedures – meaning they must be on the look-out for customers, owners or beneficiaries evidencing any “US indicia”. They must identify and report directly to the United States Internal Revenue Service (IRS) or their own government via an intergovernmental agreement (IGA), information on US account holders/owners. They must look through their customers and counterparties’ ownership to find “substantial United States owners” (generally, more than 10 percent ownership). Read More

Written by | Posted in FATCA • IRS

Last Call for Tax Deductions

There is about a week left for 2013 which means this is the last call for most tax deductions. Sure, there a few things you can still do in April when you are filing your return but the vast majority of tax deductions must be taken care of before the end of the year. It’s the holiday season so tax deductions are not likely to be on top of your to-do list, but maybe they should be.

Charitable contributions need to be made before year-end. That includes donations of appreciated stock which need to be transferred into the charity’s account before January. Sometimes the paperwork for transferring securities can take a day or two, so don’t wait until 4:00PM on New Year’s Eve to start the process. Read More

Written by | Posted in Gift Tax • Individual • Tax Provision/Tax Reporting

New User Fees for Processing Installment Agreements and Offers in Compromise

Effective January 1, 2014, processing fees for standard installment agreements and doubt as to collectability offers will increase. Fees for direct debit installment agreements are unchanged. Low income fees and fee waivers are also unchanged.

The notice of proposed rule making proposed to increase the fee under § 300.1 for entering into an installment agreement from $105 to $120 and to increase the fee under § 300.2 for restructuring or reinstating an installment agreement from $45 to $50.

Under the notice of proposed rule making, the fee for a direct debit installment agreement remained $52, and low-income taxpayers, as defined in § 300.1(b)(2), would continue to pay $43 for any new installment agreement, including a direct debit installment agreement. The Read More

Written by | Posted in Tax Provision/Tax Reporting

7 Habitual Mistakes Companies Make – Chapter 4 (8)

TaxConnections Blog Post
Ticked Boxes? –

IT IS THEREFORE clear that it cannot simply be accepted that ticking the correct boxes and submitting the required supporting schedules is sufficient. A taxpayer is required to provide the IRS with all the material facts which would influence their decision on how the transaction should be treated for tax purposes. The crucial time to provide this information is before the original assessment is issued. The best opportunity is therefore in the tax return.

Cooperation between Senior Management and the Tax Manager –

TRANSPARENT TAX COMPLIANCE means that the IRS will find it very difficult to issue an additional assessment after the expiry of the statutory final and conclusive period to close an Read More

Written by | Posted in Tax Risk Management
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