Archive for Pallav Acharya

Own A Villa In South of France? Some Pleasant News For Estate Tax!

fictitious swimming pool in the garden, rendered composite 3d image

Property ownership in continental Europe is often fraught with some unique issues upon death. Most countries including Italy, Spain and France impose “forced heir-ship” rules. Accordingly, a portion of the property must pass to the children of the decedent at the time of death; spouse of the decedent can not be made the sole beneficiary of the Estate. As a result spouse cannot sell the property at his or her own will and must obtain consent form the children prior to selling. This causes many issues for the U.S. beneficiaries in terms of Estate tax.

Effective from August, 2015, the EU have decided to change these rules. The new EU rules envisage that the citizens of the U.S. can make a choice in their will that the U.S. law would apply to foreign property in an EU state. This would enable them to bequeath the Read more

You Can Now Pay Your Taxes On IRS Website

TaxConnections Picture - IRS Website With Paperwork - square

The Internal Revenue Service announced the successful start of its new web-based system — IRS Direct Pay — on, which lets taxpayers pay their tax bills or make estimated tax payments directly from checking or savings accounts without any fees or pre-registration.

IR 2014-67 further reports that “To date, more than 150,000 taxpayers have paid more than $340 million in taxes through the new IRS Direct Pay system. With IRS Direct Pay, taxpayers receive instant confirmation that the payment has been submitted, and the system is available 24 hours a day, 7 days a week. Bank account information is not retained in IRS systems after payments are made. Read more

Simplified Home Office Expense Deduction Will Save 1.6M Hours Annually Says IRS!

home office

In tax year 2011, the most recent year for which figures are available, some 3.3 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction) totaling nearly $10 billion.

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

The new option is available starting with the 2013 return taxpayers are filing now. Normally, home-based businesses are required to fill out a 43-line form 8829 often with complex calculations of allocated expenses, depreciation and carryovers of unused Read more

IRS Releases Transfer Pricing Audit Roadmap

audit stamp

Transfer pricing audit is getting a momentum and is being perceived as a big weapon in the hands of the Internal Revenue Service for the adjustments. IRC 482 gives immense powers to the IRS for adjusting income, credits and deductions of a taxpayer where it finds that a revenue is lost due to the related party transactions that were not conducted on arm’s length standard.

The IRS’s Large Business and International division has released a roadmap providing detailed guidance on transfer audits, including audit techniques and tools to assist with transfer pricing exams, as well as an estimated timeline for the exam, insights as to how the exams will be conducted, and tips for upfront planning. Read more

Beanie Baby Billionaire Requests Leniency

Businessman in suit and handcuffs

“Beanie Baby Billionaire Requests Leniency after Tax Evasion Conviction: H. Ty Warner, the billionaire creator of Beanie Baby plush toys and owner of Ty Warner Hotel & Resorts, whose operations include the Four Seasons Hotel in New York, New York, asked a judge to give him probation, rather than prison, for evading more than $5.5 million in taxes on secret Swiss accounts that held as much as $107 million. (He pled guilty on October 2, 2013, and agreed to pay a civil penalty of approximately $53.6 million.) Warner is to be sentenced in Chicago on January 14, 2014, and faces up to five years in prison under nonbinding guidelines. The Beanie Baby creator and hotelier requests probation with community service, rather than a prison sentence. U.S. v. H. Ty Warner, N.D. Ill., No. 13 CR 00731.”

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United Kingdom Announces New Tax

Tax On Monitor Showing Taxation
United Kingdom Announces New Tax On Equity Compensation To Global Employees

The United Kingdom published a draft legislation recently that the tax treatment of all employment related securities be the same for all globally mobile employees. Accordingly a portion of any equity award paid to such employees should be apportioned to United Kingdom income based on the number of United Kingdom days in such financial year.

This legislation can create additional costs to the internationally mobile employee and should be reviewed carefully.

Read more

“Investment In United States Property” – Tax Court Affirms – Inclusion Is Not Qualified Dividend

iStock_US HousekeyXSmallIn Osvaldo Rodriguez et al V. Commissioner, the fifth circuit court recently upheld the decision in a transaction involving inclusion of IRC 956 income with respect to the taxpayers’ Controlled Foreign Corporation (CFC) in Mexico.

Osvaldo and Ana Rodriguez, husband and wife, were citizens of Mexico and permanent residents of the United States. They were the sole shareholders of Editora Paso del Norte, S.A. de C.V. (Editora). Editora had been incorporated in 1976 under Mexican law and in 2001 had established operations in the U.S. as a branch under the name Editora Paso del Norte, S.A. de C.V., Inc. — a controlled foreign corporation (CFC).  On their amended 2003 and original 2004 U.S. federal income tax returns, the taxpayers included in gross income $1,585,527 and $1,478,202, respectively, for amounts of Editora’s earnings invested in U.S. property and taxable directly under IRC 951(a)(1)(B) and IRC 956.

Taxpayers treated the IRC 951 inclusions as qualified dividend income subject to preferential qualified dividend rates. IRS determined that the Code Sec. 951 inclusions were taxable at ordinary income rates.

The fifth circuit upheld the decision and ruled that the amounts included in the Rodriguez’s gross income under IRC 951(a)(1)(B) and IRC 956 with respect to their CFC’s investments in U.S. property were not qualified dividend income under IRC 1(h)(11).

India Tax Planning – Multinationals Should Act Before May 31, 2013

Multinationals with operations in India have only until May 31, 2013 to act before a newly proposed provision in India’s Finance Bill will affect their tax planning.

Private companies operating in India typically resort to a buyback of its shares instead of payment of the dividends to avoid a dividend distribution tax, particularly where the capital gains arising to the shareholders are either not chargeable to tax or are taxable at a lower rate.

The Union Budget 2013 includes a provision that, effective June 1, 2013, an additional tax — at a rate of 20% (plus applicable surcharge and cess levy) — would be imposed on any amount distributed by an Indian company with respect to the buy-back of unlisted shares.

In other words, this tax would be imposed on the distributed income of the Indian company. This income would not be Read more

IRS changes instructions for Forms 5471 and 8621

Form 5471:

  1. IRS now requires a creation of Refrence ID of the foreign corporation and this must be completed for all years ending on or after December 31, 2012.
  2. According to AICPA – “ The most notable change and one that the AICPA has recently addressed in a comment letter to the IRS, is the constructive ownership exception which was previously available to Category 3 and 4 filers only. The exception has now been extended to all Category 5 filers where ownership in the foreign corporation is solely through application of constructive ownership principles and the U.S. person through whom the U.S. shareholder constructively owns an interest in the foreign corporation files Form 5471 reporting all required information. “
  3. Other changes can be found in “What’s new” section of Form 5471.

Form 8621:

  1. In the filer identification section, a line has been added to request the reference ID number of the PFIC or QEF.
  2. New Part I, Summary of Annual Information was added to reflect the new annual filing requirement of section 1298(f) which was added by section 521 of the Hiring Incentives to Restore Employment Act of 2010. However, this new Part I is not required until the underlying regulations are published. For now, they have been marked as Reserved For Future Use. Form 8621 will be revised when Part I becomes effective.
  3. The elections in Part II of the form have been reordered and the filing requirements for new elections F, G, and H have been modified. Please complete Part II carefully with these changes in mind.
  4. See instructions for all changes very carefully.