The advent of the OECD Common Reporting Standard (CRS) has illuminated the issue of tax residency and the desire of people to become tax residents of more tax favorable jurisdictions. It has become critically important for people to understand what is meant by tax residency. It is important that people understand how tax residency is determined and the questions that must be asked in determining tax residence. Tax residency is NOT necessarily determined by physical presence.
Tag Archive for Internal Revenue Code
Justin Fundalinski of Jim Saulnier & Associates, who I met while volunteering time for the betterment of the Financial Planning Association, asked me a procedural question about a fascinating situation he encountered regarding depreciation and disposition of residential rental real estate, causing pause. Tax questions that cause me to pause are the spice of life.
In April 2016, we posted US Pressured For Beneficial Ownership Rules where we discussed a speech by Treasury deputy assistant secretary Jennifer Fowler to a financial crime conference earlier in April noting that the Treasury is in the process of introducing a new rule forcing financial institutions to perform customer due diligence checks on new clients.
The Treasury Inspector General for Tax Administration (TIGTA) issued a report concluding that the IRS’s lax enforcement of backup withholding requirements is potentially causing billions of dollars in lost revenue (TIGTA Rep’t No. 2016-40-078).
In this presidential election, the Republican candidate Donald Trump steadfastly refuses to release his tax returns. This has caused political blogs to have a lively discussion regarding whether President Obama could request Donald Trump’s tax returns from the Internal Revenue Service (IRS)?
The United States has many tax treaties with many nations. As a general principle the “savings clause” prevents Americans abroad from having the benefit of treaty provisions. That said, there are situations where a U.S. citizen abroad can benefit from the specific provisions of a specific treaty.
This post is a continuation to my recent post: “The Internal Revenue Code does not explicitly define “citizen”, “citizenship” or require “citizenship-based taxation“.
It is widely understood that the United States Internal Revenue Code requires that “U.S. citizens” are subject to U.S. taxation wherever they may live in the world. Although this is true, the Internal Revenue Code:
- Does NOT explicitly say that U.S. citizens are subject to U.S. taxation on their world income wherever they reside; and
- Does NOT explicitly define the term “citizen” or “U.S. citizen”. (This contrasts with the the terms: “U.S. Person”, “Permanent Resident”, “Substantial presence”, etc. that ARE explicitly defined in the Internal Revenue Code.) This means that the starting point for the definition of “U.S. citizen” is in the 14th Amendment of the Constitution and the United States Immigration and Nationality Act.
Some thoughts on each of these points…
A frequent question that arises is whether legal expenses are deductible. The answer to that question can be both yes and no and can be complicated depending upon the nature of the legal expense.
The Internal Revenue Code (IRC), which is the body of tax laws written by the United States (U.S.) Congress and approved by the president in office at the time the law is created, tells us that except as otherwise expressly provided, such as itemized deductions, no deduction shall be allowed for personal, living, or family expenses. The IRC also says that, in the case of an individual, deductions are allowed for all of the ordinary and necessary expenses paid or incurred during the taxable year:
• For the production or collection of taxable income; Read more
The Service Issues New Administrative Authority Governing TPR De Minimis Safe Harbor Limits for Small Businesses
On November 24th of 2015, the Internal Revenue Service (hereinafter the “Service”) streamlined the compliance for the Tangible Property Regulations (hereinafter “TPR”) for small businesses by increasing the safe harbor threshold for deducting certain capital items from $ 500 to $ 2,500 under IRS Notice 2015-82. The scope affects businesses that do not maintain an Applicable Financial Statement (hereinafter “AFS”) such as an audited financial statement. It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.
The new $2,500 threshold applies to any such item that is substantiated by an invoice. As a result, small businesses will be able to immediately deduct expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions. The new $2,500 threshold takes effect starting with tax year 2016. Read more
On 1/14/15, Nina Olson, the National Taxpayer Advocate released her required annual report to Congress about problems with the tax system. As noted on the NTA website, the key parts of this 700+ page report are:
• Most Serious Problems• Legislative Recommendations• Most Litigated Issues• Volume 2: TAS Research and Related Studies
Some key points noted include:
• Tax law complexity (here + Executive Summary)
• The need to put taxpayer bill of rights into the Internal Revenue Code (here)
• Problems due to inadequate funding of the IRS (here + Executive Summary) Read more