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Tag Archive for Freeman Law

The Tax Court in Brief

The Tax Court in Brief

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

Plentywood Drug, Inc. | April 26, 2021 | Holmes| Dkt. No. 17753-16

Short Summary:  The Tax Court was asked to decide whether rent paid by the Taxpayer was reasonable.  The Taxpayer was owned by four related individuals (the “Shareholders”).  The Shareholders owned the building where the the Taxpayer was operating.  The Taxpayer paid rent of $83,584, $192,000, and $192,000 for 2011, 2012 and 2013, respectively.

The IRS disallowed certain rent deductions by the Taxpayer to the Shareholders because the IRS stated that the rent paid by the Taxpayer was greater than what the fair market rent would have been paid at an arm’s length transaction.  The IRS recharacterized the excess rent as dividends, therefore, the Taxpayer would not be able to deduct the dividends.

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Tax Treaties: United States And Romania

Tax Treaties: United States And Romania

Quick Summary.  Romania taxes resident companies on their worldwide income.  Non-resident companies are taxed on Romanian-source income.  Micro-companies–defined based upon total prior-year revenue of no more than 1 million euros–are subject to a special, micro-company tax regime.

Romania is a semi-presidential republic.   It is governed by a prime minister and president.  Romania is divided into 41 counties and the municipality of Bucharest. The Romanian Constitution provides for the right to ownership of private property.

Residents are taxed on worldwide income with certain exceptions, including salaries from abroad for work performed outside of Romania.  Non-residents are subject to tax on Romanian-sourced income.  Romania generally employs a flat personal income tax at a rate of 10%.

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Tax Treaties: United States And Hungary

Tax Treaties: United States And Hungary

Quick Summary.  Hungary is a parliamentary republic.  It is comprises of 19 counties.

In 2019, Hungary introduced a group taxation regime.  With certain restrictions, the regime promotes cross offsetting of operating losses.  As of 2020, Hungary implemented EU’s Anti-Tax Avoidance Directive (ATAD II), providing for hybrid anti-abuse rules.  In addition, Hungary imposed an exit tax and anti-avoidance rules.

Other recent development for individuals subject to Hungarian taxation include removal of cash benefits as fringe benefits and developments with respect to the economic employer rules.

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Tax Treaties: United States And Austria

Tax Treaties: United States And Austria

Quick Summary.  Austria is a member country of the European Union (EU).  Its economy is primarily driven by the services industry, which accounts for approximately 75% of its labor force. Austria is comprised of nine states and its capital, Vienna, and is bordered by Italy, Switzerland, Germany, Czechia, Slovakia, Hungary, and Slovenia.

Under the Tax Amendment Act 2020, Austria implemented the Digital Tax Act (‘Digitalsteuergesetz’).  In addition, pursuant to the Reform Act 2020 (‘Steuerreformgesetz 2020’), Austria implemented changes to its Value-added tax (VAT), an exit tax, controlled foreign company (CFC) provisions, and affiliate-deduction rules.

The European Union (EU) Tax Dispute Resolution Act (‘EU-Besteuerungsstreitbeilegungsgesetz’ or EU-BStbG) became effective in September of 2019.

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Tax Treaties: United States And Norway

Tax Treaties: United States And Norway

Quick Summary.  Norway is a constitutional monarchy with a parliamentary, democratic form of government consisting of three branches: a legislature, the Storting; an executive, the Council of State; and a judiciary.

In 2016, the Government of Norway (GON) initiated tax reforms, gradually reducing the individual income and corporate tax rates.

Norwegian companies are subject to tax on worldwide income.  Non-residence companies are subject to tax on certain Norwegian-source income or when engaged in business managed in, or conducted in, Norway.

Resident individuals are subject to tax on their worldwide income.  Non-resident taxpayers are taxed on specified categories of Norwegian-source income.  Norway introduced a PAYE system in 2019 that applies to certain non-resident workers.  The PAYE system applies a 25% flat tax rate.

Norway bases individual tax resident status on a days-of-presence test, which is satisfied where an individual is present more than 183 days during a 12-month period or, alternatively, 270 day during a 36-month period.

Norway is a member of the North Atlantic Treaty Organization (NATO).  While not a member of the European Union, Norway is a member of the European Economic Area (EEA).

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Tax Treaties: United States And Finland

Tax Treaties: United States And Finland

Quick Summary.  Located in Europe’s Nordic region, Finland shares a border with Sweden, Russia and Norway. Officially the Republic of Finland, Finland is a parliamentary republic.

Finland obtained independence in 1917.  Finland consists of five regions and approximately 310 municipalities, with a capital at Helsinki.

The Constitution of Finland provides for a representative democracy through its parliamentary republic, which established a unicameral Parliament of Finland (Eduskunta).  The President serves as the head of state.

Finland’s legal system is a civil law system with an independent judiciary.

Finland implemented hybrid mismatch rules and mandatory reporting pursuant to the EU Directive on cross-border tax arrangements.

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Tax Treaties: United States And Sweden

Tax Treaties: United States And Sweden

Quick Summary.  Sweden taxes resident legal entities on their worldwide income, while non-resident entities are subject to tax derived from a Swedish source.  Sweden taxes non-residents based, in part upon whether they work for an employer with a permanent establishment in Sweden and based upon days of physical presence in Sweden.  Sweden implemented a pay-as-you-earn (PAYE) system in 2019 for individuals.

Sweden implemented new limitation rules and hybrid mismatch rules as of 2019 and 2020, respectively.  The hybrid mismatch rules, implemented in light of the EU ATAD directive and the BEPS project, provide that certain expenses that are related to hybrids due to a Permanent Establishment are not deductible.

The Swedish Tax Agency has historically emphasized enforcement of the arm’s-length rule and carried interest treatment with respect to owners of private equity companies.

Treaty

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Taxes and Bankruptcy: Taxes In Bankruptcy Case

Greg Mitchell - Taxes And Bankruptcy

In re Minor; 127 AFTR 2d 2021-XXXX (DC CA); Case No. 2:20-cv-03626 (DC, C.D. CA)

This case involves taxes in a bankruptcy case that were priority taxes under the Bankruptcy Code.

The Debtor in this case filed for Chapter 7 bankruptcy in May, 2013 and received a discharge in May, 2015.  In March, 2018, the IRS filed an amended proof of claim in the bankruptcy case for almost $26 million for unpaid federal income taxes owed by Minor for tax years 2007, 2008, 2009, and 2011 (the “IRS Claim”).  The IRS Claim consisted of a secured claim of $24,857,210.48, a priority claim of $997,869.07, and an unsecured claim of $61,398.90.

The California Franchise Tax Board (“FTB”) also filed its own proof of claim, the details of which were not relevant for purposes of this case.  What was relevant was that the bankruptcy trustee did not have enough funds to pay both the IRS and the FTB claims in full.  Therefore, the bankruptcy trustee (“Trustee”), the IRS, and the FTB entered into a stipulation regarding the division of available funds (the “Stipulation”).

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Tax Treaties: United States And Portugal

Tax Treaties: United States And Portugal

Quick Summary.  Portugal is located on the Iberian Peninsula in southwestern Europe, bordering the Atlantic ocean and Spain.  Portugal is a democratic republic.  Its Constitution provides for a president, a unicameral Assembly of the Republic, and judicial system headed by the Constitutional Tribunal.

Portugal provides for three tier of government below the national level, including parishes (freesias), municipalities (concertos), and districts. Portugal is comprised of 18 districts and two autonomous regions with a capital at Lison.

Portugals tax laws primarily derives from the Portuguese Constitution, EU Regulations and Directives, codes regarding the taxes , the General Tax Law and other tax legislation.

Portugal is a member of the North Atlantic Treaty Organization (NATO) and the European Union (EU).

Treaty

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Tax Treaties: United States And Slovenia

Tax Treaties: United States And Slovenia

Quick Summary. Nestled in Central Europe along the Adriatic Sea and strategically located between the Balkans and Western Europe, the Republic of Slovenia is a mountainous country with deep cultural roots.

Part of the Austro-Hungarian Empire until the end of World War I, the Slovene lands subsequently comprised Yugoslavia in 1929. The Slovenes established independence in 1991 and began a post-communist transition.

Slovenia is a member of both NATO and the EU, as well as the OECD and World Trade Organization.

Slovenia has three levels of regulatory authority: supra-national, national, and sub-national (municipalities).

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Tax Treaties: United States And Denmark

Tax Treaties: United States And Denmark

Quick Summary.  The Kingdom of Denmark is a Nordic country located in Northern Europe.  A Scandinavian country with an archipelago of 443 islands, Denmark consists of five main regions with its capital at Copenhagen.

Denmark is a constitutional monarchy with a parliamentary democracy.  Denmark’s parliament is a unicameral body known as the Folketing, which is vested with legislative power.

Denmark has a civil law system that has been influenced by Germanic law and that is largely based upon customary law.  Denmark’s constitution provides for independence of the judicial power from the government and Parliament.

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Tax Treaties: United States And Ukraine

Tax Treaties: United States And Ukraine

Quick Summary.  Ukraine imposes an income tax on worldwide profits earned by Ukrainian entities.  Non-resident entities are subject to Ukrainian income tax on Ukrainian-sourced income.  Resident individuals are subject to tax upon their worldwide income.  Non-resident individuals are subject to tax on their Ukrainian-sourced income.

The Ukrainian Parliament (the Verkhovna Rada of Ukraine) has enacted tax legislation providing for a number of significant changes in 2020, including transfer pricing; tax depreciation; withholding taxes; permanent establishments and 0ther taxes.  In addition, beginning in 2021, legislation implements changes with respect to controlled foreign companies and thin capitalization rules.

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