Archive for Treasury Regulations

Alimony? What Is That? And… Do I Have To Report It On My Taxes?

The word Alimony comes from the Latin Word alimonia which means nourishment or sustenance. It also comes from Scots Law which is the legal system of Scotland and their concept of aliment. This was a rule of sustenance to assure the wife’s lodging, food, clothing and other necessities of divorce.

In the 1970s, the United States Supreme court ruled against gender bias in alimony awards. You may remember some high profile divorces, where women such as Britney Spears, Jessica Simpson etc., have paid multimillion dollar settlements in lieu of alimony to their ex-husbands.

Alimony is not child support. Child support is paid by one parent to the custodial parent Read More

Written by | Posted in Income Tax • Individual • Treasury Regulations

Reporting Investments In Certain Foreign Corporations for United States Tax Purposes

As we increasingly become more connected on this planet US Taxpayers are compelled more than ever before to hold investments in multiple countries. As a direct result timely filing IRS Form 5471 is becoming profoundly significant. I’ve been involved with enough international tax matters to appreciate this form and subsequent schedules. This post is a summary of my experiences to date.

Basically if you are a U.S. citizen or resident who is an officer, director, or 10% shareholder in certain foreign corporations this form is required to satisfy the reporting obligations of IRC 6038, and IRC 6046 and related regulations. Generally speaking, all U.S. persons described in Categories of Filers below must complete the schedules, statements, and/or other information. Read More

Written by | Posted in Treasury Regulations

IRS And Treasury Department to Amend Definition of Shareholder of A PFIC

In Notice 2014-28, 2014-18 IRB, IRS has announced that it will amend the regs under Code Sec. 1291 to provide that a U.S. person that owns stock of a passive foreign investment company (PFIC) through a tax-exempt organization or account will not be treated as a shareholder of the PFIC. Code Sec. 1291 imposes a special tax and interest charge on a U.S. person that is a shareholder of a PFIC and receives an excess distribution (defined in Code Sec. 1291(b) from the PFIC or recognizes gain derived from a disposition of the PFIC that is treated as an excess distribution under Code Sec. 1291(a)(2). Code Sec. 1298(a) sets forth attribution rules that treat a U.S. person as the owner of PFIC Read More

Written by | Posted in IRS • Treasury Regulations

Bond Premium Carryforward

In TD. 9653, the IRS issued final regs on the tax treatment of bond premium carryforwards in the final accrual period. The final regs adopt ,without substantiative change, the proposed regs [Reg. 140437-12, January 2013] and withdrew the temporary reg-T.D. 9609.

The temporary reg was issued to answer a holder’s question concerning the treatment of a taxable zero-coupon debt instrument, including a Treasury bill, acquired at a premium but having a negative yield. Under prior regs, a holder who elected to amortize the bond premium, would have a capital loss if the security was retired or sold.

The IRS said this situation arose as a result of market conditions and was not contemplated when the prior regs were issued in 1997. The new regs deal with this issue by adding a Read More

Written by | Posted in IRS • Treasury Regulations

Lifting The Veil On The Black Market Peso Exchange – Part II

THE MECHANICS

The Black Market Peso Exchange (BMPE) consists of two interrelated activities. One occurs in Colombia: the purchase of accumulated drug dollars in America. And the other occurs in the United States: the actual delivery of drug dollars to the money exchanger’s associate in the United States.

1. Purchase of Dollars in Colombia

The BMPE process begins when the cartel financial manager is contacted by his cartel representative in the United States, and advised that a particular trafficking organization in Miami is ready to turn over money owed to the cartel. For purposes of this example, a Read More

Written by | Posted in Federal • IRS • Treasury Regulations

Lifting The Veil On The Black Market Peso Exchange – Part I

The date is July 2, 1991. Piled upon rectangular tables are stacks of United States dollars. The stacks reach three feet high and completely cover the table’s surface. The tables extend from one side of the meeting room to the other, half the distance of a football field. The dollars make a level surface for most of the distance, except for the occasional hill, and a speaker’s podium in the center.

In front of the speaker’s podium on the ground, are bags stacked one upon another reaching higher than the tops of the tables. These bags bear the markings of the Federal Reserve and although nothing green can be observed, they leave no doubt that they are filled with United States currency. Read More

Written by | Posted in Federal • IRS • Treasury Regulations

Expatriate Year End Tax Planning

Year-end tax planning could be especially productive this year because timely action could nail down a host of tax breaks that won’t be around next year unless Congress acts to extend them, which, at the present time, looks doubtful. These include, for individuals: the option to deduct state and local sales and use taxes instead of state and local income taxes; the above-the-line deduction for qualified higher education expenses; and tax-free distributions by those age 70-1/2 or older from IRAs for charitable purposes.

Some areas to draw your attention are listed below:

NEW HIGH INCOME SURCHARGES

High-income-earners have other factors to keep in mind when mapping out year-end plans. Read More

Written by | Posted in Affordable Healthcare Act • Expatriate • FBAR • Federal • Individual • International • OVDP • Treasury Regulations

The Department of Treasury Issues Final Regulations Governing Net Investment Income Tax

TaxConnections Blog Post
Introduction

On Tuesday, November 26th The Department of Treasury released final treasury regulations governing the Net Investment Income Tax (hereinafter “NIIT”) that was included in the Affordable Care Act. The 3.80% tax took effect on January 1, 2013 and applies to individuals, estates and trusts that have certain investment income above certain threshold amounts.

More specifically, individuals will owe the 3.80% tax if they have Net Investment Income and also have “Modified Adjusted Gross Income” above the following thresholds: Read More

Written by | Posted in Affordable Healthcare Act • Treasury Regulations

Proposed Regulations Provide Favorable Guidance on Research and Experimentation Expenditures

TaxConnections Picture - U.S.TreasuryThe United States Department of the Treasury and the Internal Revenue Service (IRS) have issued proposed regulations that address several long-standing discrepancies between how taxpayers and the IRS interpret the tax code related to the Section 174 deduction for research and experimentation (R&E) expenditures. The new regulations clarify that the eligibility of R&E expenditures for the tax deduction is not impacted by the subsequent sale of the resulting tangible property, such as a prototype, created through the R&E process.

“Today’s proposed rules provide the tax certainty necessary to reward businesses that invest in innovation,” said Assistant Secretary for Tax Policy Mark J. Mazur. “Research and development are critical to addressing the challenges we face as a nation, and we will continue to pursue opportunities to clarify the tax code in a way that promotes economic growth and job creation.”

These regulations, which are proposed to apply to tax years ending on or after the date final regulations are published, also include a new “shrinking-back” provision and definition of the term “pilot model.” Specifically, the “shrinking- back” provision, which is similar to the research credit rule under Regulation Section 1.41-4(b)(2), addresses expense treatment in which the Section 174 requirements are met with respect to only a component of the larger product but not with respect to the product as a whole. Additionally, the proposed definition of “pilot model” as any representation or model of a product that is produced to evaluate and resolve uncertainty concerning the product includes a fully functional representation or model, which thereby provides for a full-scale prototype to be eligible for the R&E deduction. Read More

Written by | Posted in Federal • IRS • Tax Policy • Treasury Regulations • United States

A Practical Guide to the Scope and Application of the Final Treasury Regulations Governing the Proper Tax Treatment for Repair & Maintenance Expenditures

U.S.Treasury To Insure Money Market Mutual FundsIntroduction

The Department of Treasury finally issued their much awaited final treasury regulations governing the proper tax treatment for repair and maintenance expenditures on Friday, September 13th. The final treasury regulations replace the temporary regulations previously issued in December of 2011. As with temporary treasury regulations, the final treasury regulations have the force and effect of law on both taxpayers and the government and any deviation from these treasury regulations will require the filing of Form 8275-R entitled “Regulation Disclosure Statement” for taking a position contrary to a treasury regulation in either temporary or final form. These final treasury regulations are meant to provide further clarity and reduce controversy over the determination of whether an expenditure may be currently deducted as a repair under I.R.C. § 162(a) or must be capitalized under I.R.C. § 263(a). While generally effective for tax years beginning on or after January 1, 2014, taxpayers have the option of applying the final treasury regulations to tax years beginning on or after January 1, 2012

A Practical Guide to the Scope and Application of the Final Treasury Regulations

The subsequent synopsis will serve as a practical guide to the scope and application of the final treasury Read More

Written by | Posted in Treasury Regulations • United States
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