International Tax Blog

Capitalization Trivia

Prepositions, conjunctions, and articles in the titles of IRS forms and publications are typically not capitalized; but this is not always the case. Sometimes these items are capitalized. I decided to analyze the IRS’ use of capitalization in the titles of forms and publications. The IRS has a webpage where you can view all of their forms and publications. The following is a summary of the types of items included: Publications 1,066 Forms 1,042 Instructions... Read more →

IRS Delinquent International Information Return Submission Procedures Have Been Updated

Yesterday the IRS updated its web page containing the delinquent international information return submission procedures. Under the prior procedures, taxpayers were required to have a reasonable cause statement and taxpayers were required to certify that foreign entities were not engaged in tax evasion. Under the new procedures, taxpayers file through “normal filing procedures”, and taxpayers “may” attach a reasonable cause statement. The updated website says: [P]enalties may be assessed without considering the attached reasonable cause... Read more →

A Tax Attorney Uses Python

Two years ago today I started studying the Python programming language. I had heard how Python is supposed to be an easy language to learn, and I thought it might be useful. Here is a sampling of the ways that I have used Python: Checking for errors on my website Scraping IRS and other web pages Automating tasks Searching my client files Searching my database of tax authorities Summarizing information to study/review Checking for Website... Read more →

Rental of Real Estate to Yourself

A taxpayer cannot rent property to him or herself. This is similar to the concept that a taxpayer cannot pay themselves a salary. For example, if a taxpayer has a sole proprietorship and he or she reports the income and expenses of that business on Schedule C of Form 1040, the taxpayer is not able to deduct salary expense on the Schedule C for “wages” paid to him or herself. This makes sense because a... Read more →

Careful / Close / Extra / Heightened / Rigid / Special / Strict Scrutiny For Related Party Transactions

Courts typically scrutinize transactions between related parties. They will often use different descriptions for the type of scrutiny that they are applying. For example, some courts will say that they are applying “careful” scrutiny, while others will indicate “close” or “extra” scrutiny. Other descriptions include: “heightened,” “rigid,” “special,” or “strict” scrutiny. These terms seem to be used interchangeably. Below are excerpts from some tax cases using these terms. Beretta v. Commr., T.C. Memo 1997-570: Courts... Read more →

The “Sailing Permit”

Code §6851(d)(1) provides: No alien shall depart from the United States unless he first procures from the Secretary [of the Treasury] a certificate that he has complied with all the obligations imposed upon him by the income tax laws.1 Thus, with certain exceptions, resident aliens and nonresident aliens who physically leave the U.S. are required to obtain certificates from the IRS that they have complied with all U.S. income tax obligations. This certificate often is... Read more →

Tax Return Preparation Automation

I thought the two minutes of video on YouTube at: This Week in Tech (TWiT) were interesting,and that others might find it interesting. Read more →

Encouraging Foreign Investment - A Distorted U.S. Tax Policy

Let’s say a U.S. entrepreneur has an idea for a new product that is expected to generate annual pre-tax profit of $1 million. The product will be sold to distributors around the world, with a majority of the products being sold in the U.S. The entrepreneur is trying to decide where she should manufacture the product. If she sets up a U.S. manufacturing plant, she can set it up as a U.S. “S” corporation. With... Read more →

2015 - 2016 IRS Priority Guidance Plan - International Issues

On July 31, 2015, the IRS released its 2015 - 2016 Priority Guidance Plan. The list contains 277 projects that are priorities for allocation of IRS resources through June of 2016. 39 of the 277 priorities are in the international area. We have identified several "new" priorities that were not on the 2014 - 2015 list. The new priorities of particular interest include: Guidance under §§877A(g)(4) and 7701(a)(50)(A) regarding relinquishing United States citizenship. Regulations and... Read more →

JCT Excellent Summary of U.S. Cross-Border Tax Rules

Yesterday, March 17, 2015, the Joint Committee on Taxation published a report titled “Present Law and Selected Policy Issues in the U.S. Taxation of Cross-Border Income” (the “JCT Report”). If you are just beginning to learn about U.S. taxation of international transactions, the first 34 pages of the JCT Report provide an excellent overview. The report can be found here, and we have added it to the resource section in right column of this blog. Read more →

Tax Textbook Built Into Lamp

Traveling on vacation in Savannah, Georgia this past week, my hotel room had a “Basic Federal Income Taxation” textbook built into a lamp (see picture below). Read more →

International PLRs & CCA’s of the 51st week of 2012

Last week the IRS published the following Private Letter Rulings and Chief Counsel Advice relating to international taxation. PLR 201251003: Shares of a domestic corporation were transferred to foreign corporation in order to deconsolidate the domestic corporation. Code §1502. PLR 201251005: A real estate investment trust’s (REIT’s) deemed inclusions as Subpart F Income under Code §951 and passive foreign investment company (“PFIC”) inclusions under Code §1293 are considered qualifying income under Code §856(c)(2). In addition,... Read more →

Doctrine of Constructive Receipt

In international tax planning, one of the issues that frequently comes up is whether certain income that is not technically received by a taxpayer is nonetheless taxable to them because they “turned their back” on receiving the income. The rule that makes such income currently taxable to the taxpayer is known as the “constructive receipt doctrine.” The constructive receipt doctrine is defined in Treas. Reg. §1.451-2(a) as the following: General rule. Income although not actually... Read more →

Graphic on Inbound & Outbound

Below is a diagram showing the broad categories of U.S. international taxation segregated into "inbound" topics, "outbound" topics, and overlapping topics. As indicated in the diagram, "inbound" generally means foreign persons (e.g., foreign corporations, nonresident aliens, etc.) with U.S. income, and "outbound" generally means U.S. persons (e.g., domestic corporations, U.S. citizens and residents, etc.) with foreign income. Click on image to enlarge. For related blog post see inbound-outbound. Read more →

International PLRs of the 38th, 39th & 40th weeks of 2012

Several weeks ago the IRS published the following Private Letter Rulings and Chief Counsel Advice relating to international taxation. PLR 201238005 - Late Canadian registered retirement savings plan ("RRSP") deferral election. Form 8891. Rev. Proc. 2002-23. PLR 201239003 - Code §368(a) reorganizations involving foreign subsidiaries. PLR 201239005 - Late Canadian registered retirement savings plan ("RRSP") deferral election. Form 8891. Rev. Proc. 2002-23. PLR 201240017 - Code §355 spin-offs involving foreign corporations with foreign parent company.... Read more →

Gratuitous Links to Local Visiting Nurses Association

This post has nothing to do with international taxes. It is a blatant attempt to help promote the online presence of our local visiting nurses association. I volunteer as the Treasurer of our local not for profit visiting nurses organization (Visiting Nurses of the Lower Valley (“VNLV”)). VNLV has been a pillar of our community since 1920. VNLV provides in-home skilled nursing, physical and occupational therapy, as well as general home health care. VNLV recently... Read more →

International PLRs of the 28th week of 2012

Several weeks ago the IRS published the following Private Letter Rulings and Chief Counsel Advice relating to international taxation for the 28th week of 2012. There were no international related Private Letter Rulings for the 27th week of 2012. PLR 201228013 - Taxpayer is a resident alien and will become a nonresident alien, and then again a resident alien. Taxpayer’s unused net operating losses that were generated while he was taxed as a U.S. resident,... Read more →

International PLRs of the 23rd week of 2012

Last week the IRS published the following Private Letter Rulings relating to international taxation. PLR 201223001: Taxpayer was permitted to change to the tax book value method of asset valuation for interest expense allocation. Temp. Treas. Reg. §§1.861-8T(c)(2) and 1.861-9T(g)(1)(ii). PLR 201223006: Grandfather rule for “existing 80/20 company” continues to apply. Expansion of the taxpayer’s mineral business did not constitute “an addition of a substantial line of business” within the meaning of Code §871(l)(1)(A)(iii). PLR... Read more →

International PLRs of the 22nd week of 2012

The IRS published the following Private Letter Rulings relating to international taxation for the 22nd week of 2012 PLR 201222002: Taxpayer was permitted to change to the tax book value method of asset valuation for interest expense allocation. Temp. Treas. Reg. §§1.861-8T(c)(2) and 1.861-9T(g)(1)(ii). PLR 201222019: Late Canadian registered retirement savings plan ("RRSP") deferral election. Form 8891. Rev. Proc. 2002-23. PLR 201222021: Late Canadian registered retirement savings plan ("RRSP") deferral election. Form 8891. Rev. Proc.... Read more →

International PLRs of the 12th week of 2012

Last week the IRS published the following Chief Counsel Advice relating to international taxation. CCA 201212008: Taxation of Green Card Holders at the Italian Embassy under the 1878 U.S.-Italy consular convention, the 1984 U.S.-Italy income tax treaty, and section 893. CCA 201212020: Personal liability of the executor of an estate (fiduciary is liable only if it had notice of the claim of the United States before making the distribution). The only asset in the estate... Read more →

Attorney-Client Privilege Flowchart

Today our sister website, Tax-Charts.com, published a free flowchart of the attorney-client privilege. The flowchart is shown below and is also available here. Read more →

Income Accruing in Foreign Retirement Plans

U.S. citizens that live and work outside the U.S. often participate in foreign retirement plans. Similarly, non-U.S. citizens that move to the U.S. and become U.S. tax residents, after working outside the U.S., have often participated in foreign retirement plans. A question that sometimes arises is whether the income accruing annually in the foreign retirement plans must be included on the individual's U.S. tax return. The rule for this situation was concisely stated in Rev.... Read more →

The “Repatriation IRA” [To Stimulate the Economy]

Large U.S. based multinationals have been lobbying for a repatriation holiday where offshore profits are brought back to the U.S. and only taxed at a rate of 5.25%, similar to the 2004-2005 repatriation holiday. Many argue that the repatriation of the offshore profits will stimulate the U.S. economy. I propose a comparable benefit for individuals --- let’s call it the “Repatriation IRA.” Under the Repatriation IRA, individuals can contribute up to 75% of their taxable... Read more →

Offshore Structure to Hold Iraqi Dinars?

I have received a number of inquiries recently regarding the taxation of gains associated with the disposition of Iraqi dinars. Some of the inquiries have related to the formation of an offshore structure (such as an offshore trust, foundation, corporation, etc.) to hold the Iraqi dinars. If you are a U.S. citizen or a U.S. resident, the short answer to the question of whether you should set up such a structure is “no.” The long... Read more →

Doctrine of Cloth[e]ing

The follow are excerpts from various tax cases discussing a taxpayer’s attempts to “clothe” a transaction to disguise its true form. Lynch v. Commr, 31 T.C. 990 (1959): A commonly encountered problem, however, is that a taxpayer, seeking to avoid taxation, will clothe a transaction and make it appear to be something which in reality it is not. Federal Oil Company v. Commr, 25 TCM 996 (1966): It is true that the Court is not... Read more →