Archive for January 27, 2014

7 Habitual Mistakes Companies Make – Chapter 5 (12)

TaxConnections Blog Post
More Facts Resolve Tax Risks –
Forgetting to Clean Up Afterward –

THE POSITIVE PREPLANNED result in the media business sale above, did not result in this case. A major consumer supplier decided to sell an unrelated group company for approximately $300m. The transaction was simple enough. When the business had been sold, all that had to happen was that the holding company had to be deregistered within a five-year period; and the deregistration dividend, in anticipation of the deregistration steps being taken, could be declared to the parent group, exempt of dividend tax. As simple as that! Read More

Written by | Posted in Tax Risk Management

Basis and Depreciation: A Review for Tax Professionals – Part III

Once you have determined the type and use of an asset you must determine the basis. As with everything in taxes, there are exceptions to and various methods of calculating basis. Depreciation is just one of many items that depend on an accurate basis calculation for your assets; gain and loss upon disposition, amortization, and casualty information are just a few of the other items determined by basis and the basis can be different in each case for the same piece of property.

The basis of purchased property is usually the cost paid (in either cash, services rendered, or trade) increased by: sales taxes, freighting costs, installation and testing, excise taxes, revenue stamps, recording fees, and real estate taxes if assumed by the buyer. Read More

Written by | Posted in Tax Education

United Arab Emirates – Actively Helping FATCA Express Move On Through

In March 2013 United Arab Emirates Central Bank Governor, Sultan bin Nasser Al Suwaidi, announced that the UAE was considering signing an IGA with the United States in order to facilitate compliance with FATCA. He stressed the need for the UAE regulatory authorities to prepare procedures to facilitate FATCA compliance and set clear instructions for financial institutions under their supervision. Very recently, the UAE Central Bank issued Notices to financial institutions in the Emirates that clearly move the FATCA express steadily along its inevitable path of destruction.

While no IGA has yet been signed, all indications are that this may happen pretty soon. The Model that would be implemented with the UAE would apparently be a so-called “Model 1B IGA” – which is “nonreciprocal”. This means that only the UAE would provide Read More

Written by | Posted in Europe, Middle East • FATCA • IRS

FTB Issues Letters to Over 1 Million California Tax Payers Seeking Tax Returns

More than one million people who did not file a 2012 state income tax return are receiving letters seeking those returns or to verify that they do not have a tax filing requirement, according to the Franchise Tax Board (FTB).

Since the 1950s, FTB has contacted people who have California income, but did not file a tax return. Last year, FTB collected more than $727 million through these efforts.

Each year FTB receives more than 400 million income records from third parties such as banks, employers, state departments, the IRS, and other sources. FTB matches these income records against its records of tax returns filed. While this program mainly identifies wage earners and self-employed individuals who have not filed, it also detects Read More

Written by | Posted in Federal • Individual • IRS • State And Local Tax (SALT)

Basis and Depreciation: A Review for Tax Professionals Part II

Once you have determined the type of property/asset you are dealing with you must determine use. There are four use classifications of property:

1. Personal-use property (not the same as personal type) is owned for personal use and enjoyment or living purposes. Items such as a primary residence, vehicle, clothing, household goods, recreational items, pets, etc, all are considered personal use property.

2. Investment-use property is property owned with a primary objective of increasing in value even though some current income may be generated. This classification includes things like land, collectibles like art or coins, capital stocks, bonds, and buildings not used in active rental. Read More

Written by | Posted in Property Tax

End Of Life Planning: Begin With The End In Mind

I borrowed part of my title today from Stephen R Covey’s best selling book, ” The 7 Habits Of Highly Effective People”. On his list of habits, habit #2 says, “Begin with the End in Mind”. By this he possibly means to discover yourself and set life goals whilst envisioning the ideal characteristics of various roles you play and your relationships in life.

He may only partly be referring to the end of life itself but in the context of planning for end of life, we have to consider this statistic, that more than half of all Americans dying do not have a will or estate planning at all. As we look closer there are even more who haven’t made any efforts to ease the burden left to their survivors. The burden in connection with burial, memorial, personal accounts and many other significant decisions which may cause divisions in family. Is that the legacy one would like to leave behind? Read More

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

Non-Statutory Asset Protection Trusts – Part I

Introduction

In the United States, there has been a malpractice crisis for the medical profession for a number of years. It has at its roots the American Trial Lawyers who advocate a position that the medical profession is not adequately regulated for physicians whose practice causes harm to their clients. Its associations vigorously contend that victims of malpractice by physicians are inadequately compensated from injury and demand that no limits can be imposed as to the amounts mandated by the jury. The insurance underwriters of medical professionals assert that large verdicts have caused them to raise premiums where they depart from economic reality. Read More

Written by | Posted in Estate Planning Tax

United States Corporations With Foreign Shareholders? Form 5472 – Part II

Part I of the topic exploring Form 5472, was posted last week and covered the situation when Form 5472 must be filed by a US corporation that is at least 25% owned by a foreign shareholder. Today’s post covers the other type of case requiring the filing of this form – when a foreign corporation that is engaged in a US trade or business (USTB) has a “reportable transaction” with either a US or a foreign related party.

Generally, the purpose of the form is to disclose the nature and amount of foreign and domestic transactions that occur with related-parties, since these types of transactions can give rise to abuse (for example, in transfer-pricing or in attempts to siphon off taxable earnings and profits in disguised non-taxable forms). Read More

Written by | Posted in Corporate • United States

Real Revenue Sources For Tax Reform

To lower the corporate tax rate and perhaps also the individual income tax rate, in a revenue neutral rate means that revenue must be found to pay for the drop in taxes that would occur with a lowered tax rate. Tax preferences – special deductions, exclusions and tax credits would need to be eliminated or cut back. Some of the suggestions though, involve timing items. For example, making depreciable lives longer and methods slower just pushes more of the depreciation deduction to later years. It does not permanently raise revenue. It will show up though as a revenue raiser in a table that only shows the revenue effect for a limited number of years.

Where can permanent tax increases be generated to offset the desired permanent tax decrease generated from permanent lower rates? Read More

Written by | Posted in Corporate

IRS Released “Get Transcript” Application for Real Time Downloading of Information on Your Tax Account

My friend Bill Nemeth from Georgia informed me this morning of the IRS’ new application roll out that allows any individual taxpayer to view, print or download their own transcripts on-line in Real-Time using a computer or Smartphone. You simply go to www.IRS.gov and enter GET TRANSCRIPT in the site search bar, or go here http://www.irs.gov/Individuals/Get-Transcript#!

This is a giant leap forward for those of us working with the IRS. Once in their system a user creates a user profile by identifying himself (SSN and DOB) and answering a number of security questions (standard public database questions like what what year did you purchase your home, how much did you pay for your home, etc). Read More

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Captive Cases Series – The IRS’ War on Captives; Humana, Part I

Just to provide some context before moving forward, we’ve been looking at the captive cases in chronological order. We finished with the economic family doctrine. In the conclusion of my analysis to those cases I noted that, most importantly, the IRS was very prepared for captive litigation while the taxpayers weren’t. As a result, the IRS gained a strategic foothold in captive jurisprudence. With Humana, we see the first really good taxpayer push back against the IRS’ efforts. To that end,we’ll be spending some time delving into the decision’s details. The following is an excerpt from my book, U.S. Captive Insurance Law.

Humana was a groundbreaking case because it was the first major victory for a taxpayer in the captive insurance area. Humana was (and is) a publicly traded health care Read More

Written by | Posted in Tax Risk Management

7 Habitual Mistakes Companies Make – Chapter 5 (11)

TaxConnections Blog Post
More Facts Resolve Tax Risks –
The Media Company Business Sale

AFTER YEARS OF mergers and acquisition involving a number of media-related companies, a dominant holding company emerged. The final step involved is the sale of the main business, with a cash injection into the holding company’s business. The plan was then to distribute the capital profit of the family of companies up to the ultimate holding company, where the funds were required to fund a new series of acquisitions. This meant that dividends had to be declared to the ultimate holding company. Provided that the indirect subsidiary company selling the media business and the various intermediate subsidiary companies fell within a group of company’s structure, where the Read More

Written by | Posted in Tax Risk Management
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