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OECD Model Treaty Series; Permanent Establishment Exceptions

Not only does the OCED model treaty provide an in-depth explanation of what a PE is, there is also a section that outlines what a PE isn’t Here is the section in its entirety:

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; Read More

Written by | Posted in OECD

Offshore Leasing Company In International Corporate Structure

TaxConnections Tax Blog - China and Southeast Asia Transfer Pricing Issues

An effective operational offshore company often used is the leasing company. Leasing has been utilized in the acquisition of assets and there is a split benefit gained through a leasing company. Tax benefits accrue in the way of substantial depreciation deductions reducing taxable income to one party, while the other party may also be entitled to amortization benefits. This is a cross-border effect of the virtues of depreciation. (1)

The leasing company in the United States context is governed by the Foreign Base Company Income category of Foreign Personal Holding Company Income. (See TaxConnections/TaxBlogoshere/September 20, 2013/Foreign Corporations and Subpart F Income-Part III). Foreign Personal Holding Company Income consisting of rental income Read More

Written by | Posted in Corporate • International

Colorado Marijuana Distributors – Business Expenses And Taxes

As many of you who follow me and/or this tax blog know I have been actively tracking a handful of select medical marijuana dispensaries in Colorado who have been denied the opportunity to deduct ordinary and necessary business expenses by the IRS when arriving at net income subject to income tax. One of the first things I learned is that this industry is messy in several regards and perhaps left to more courageous practitioners of the United States Tax Code. Along the journey I witnessed first hand what appears to be systematic profiling and haphazard application of the Internal Revenue Code (IRC) including threats of US Treasury Circular 230 violations against quality practitioners in search of the truth by overzealous IRS Examiners as they work towards a standard enforcement framework. Being Read More

Written by | Posted in Individual • IRS • Marijuana Taxes

Don’t Look A Gift Horse In The Mouth: All About Gifts And Taxes

It’s the proverbial time of the year when there are a lot of gifts exchanged. Some are store bought, some gift cards & there are those who just get plain ol’ cash.

What constitutes a “gift” in the eyes of the IRS?

• You make a gift if you give property, including money, or the use of or income from property, without expecting anything of equal value in return.
• You also make a gift if you sell something at less than its full value
• There’s a gift made if you give an interest-free loan or reduced interest loan Read More
Written by | Posted in Gift Tax

DOJ / IRS Obtain Court Orders to Seek Offshore Account Data From Five U.S. Banks!

United States District Judge Kimba M. Wood of the Southern District of New York entered an order on November 7, 2013, authorizing the Internal Revenue Service to issue summonses requiring:

Bank of New York Mellon (Mellon) and Citibank NA (Citibank) to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by holding interests in undisclosed accounts at Zurcher Kantonalbank and its affiliates (collectively, ZKB) in Switzerland.

U.S. District Judge Richard M. Berman of the Southern District of New York entered an order Read More

Written by | Posted in FATCA • IRS

Tina Turner – By Adopting Foreign Citizenship Are You Still Subject To The United States Exit Tax?

According to an “activity” report from the U.S. Embassy in Bern, Switzerland, long-time Swiss resident Tina Turner” was in the embassy October 24 to sign her “Statement of Voluntary Relinquishment of U.S. Citizenship under Section 349 (a)(1) of the INA” — the Immigration and Naturalization Act.

She has merely ‘relinquished’ her United States citizenship rather than formally ‘renouncing’ it, by adopting citizenship of her long-time home Switzerland.

She apparently hopes to avoid the USA’s exit tax on all her worldwide property, but she will be disappointed! Read More

Written by | Posted in Europe, Middle East

OECD Model Treaty Post Series: Permanent Establishment, Part III

Continuing the look at the OECD Model Treaty’s definition of permanent establishment, we find the treaty specifically stating the following are PEs in Article 5, Section 2:

2. The term “permanent establishment” includes especially
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop, and
f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. Read More
Written by | Posted in OECD

Income Tax Aspects of Non-business Capital Gains and Losses – Part II

Wash Sales

A wash sale occurs when the same securities are purchased 30 days before or after the sale. If a loss results, all or part of the loss is disallowed. If an equal or greater number of the same securities that were sold are purchased, the entire loss is disallowed. If fewer shares are purchased than were sold, part of the loss is disallowed. The disallowed loss is added to the basis of the securities purchased.

Example 1-total loss disallowed.

Read More

Written by | Posted in Capital Gains • Income Tax

Year-End Planning – Retirement Plans

Retirement plans come in many different flavors with many different rules.  Maybe there are fewer than the flavors of coffee at Starbucks, but there are still quite a few flavors of retirement plans.  The end of the year is a good time to review your retirement plan decisions.

A few plans need to be funded before the end of the year; a few plans just need to be set up before the end of the year.  IRAs and 401(k) plans are the two common retirement plans and their rules are different.  The 401(k) plans need to be funded by the end of each calendar year through the payroll.  IRA contributions can be made through the due date of the return and still be tax deductible – a nice benefit.  You can wait until spring and prepare your return Read More

Written by | Posted in Retirement • Tax Tips

United States And Georgia’s Tax Effect of Same-Sex Marriage

TaxConnections Picture - U.S.Treasury

WASHINGTON — The United States Department of the Treasury and the Internal Revenue Service (IRS) ruled on Aug 29, 2013 that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

Source: IRS.gov

However, each state will not necessary follow these federal guidelines. For example, the Georgia Department of Revenue issued guidance, Informational Bulletin IT-2013-10-25, Read More

Written by | Posted in IRS • North America • Same Sex Couples

Income Tax Aspects of Non-business Capital Gains And Losses – Part I

This article is divided in to three parts. Part I will cover the general aspects of capital gains and losses and how and where they are reported on Form 1040 and supporting schedules. Part II covers special situations involving sales of securities-wash sales, gifts, and inheritances. Part III will cover mutual funds, stock rights, debt securities purchased at a discount and premium, and exchanges.

Part I

It is advantageous to have investment income in the form of long-term (held longer than one year) capital gains (LTCG) because they are taxed at a lower rate than ordinary income. For 2013, the net LTCG will be taxed at various rates depending on the tax bracket: Read More

Written by | Posted in Capital Gains • Income Tax

The OECD Model Tax Treaty – Permanent Establishment – Part II

Today I’m going to continue looking at the OECD model tax treaty’s definition of permanent establishment. Let me start with, Article 5, Section 2, which states:

2. The term “permanent establishment” includes especially:

a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop, and
f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. Read More
Written by | Posted in OECD
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