International Tax Blog

Video - Downward Attribution Form 5471

Today we uploaded a video discussing downward attribution and filing Form 5471. The video is shown below. Read more →

Form 8993 With Graphic of Formulas

Below is an image of Form 8993 with some sample numbers. The image shows the formulas used to calculate FDII, with color coding to show where the numbers on the form go in the formulas. Click here for a PDF version of the graphic. Read more →

Famous Tax Quotes - Perhaps Congress Just Stubbed Its Toe

Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is where the 11th Circuit was applying the plain meaning rule in interpreting Code §1234A with respect to Code §1231 property: Perhaps * * * Congress just stubbed its toe between the hearing room and the House and Senate floors. Even so, it’s not our place... Read more →

Video - Sec. 1446(f) Withholding on Sales of Partnerships Engaged in US Business

Today we uploaded a video discussing the new rules under Sec. 1446(f), regarding withholding on sales of partnerships engaged in US business. The video is shown below. Read more →

Famous Tax Quotes - Penalties For Hardheaded Persistence

Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is: [W]e will impose a penalty of $1,000 on [the petitioner in Tax Court] for continuing to advance his frivolous arguments. We also warn petitioner that if he does not abandon his misguided and rejected positions-e.g., that he is not subject to tax or required to... Read more →

Famous Tax Quotes - Like white asparagus or a blood orange

Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is: Like white asparagus or a blood orange, this first issue is not ordinary fare but an odd variation, caused by the interplay of ordinary factors with Puerto Rico tax status. Bergersen v. Commr., 109 F.3d 56 (1st Cir. 1997). Read more →

2020 Inflation Adjustments for Individuals in the International Tax Arena

Last week the IRS published Revenue Procedure 2019-44, setting forth inflation adjusted items for 2020. In the international arena, some of the important inflation adjustments include: $171,000 --- Code § 877(a)(2)(A) --- The average annual net income tax that must be imposed for the five taxable years ending before the date of the loss of United States citizenship (or cessation of long-term permanent residency) for an individual to be considered a “covered expatriate” under Code... Read more →

2019 3rd Quarter Published Expatriates - Lowest Since 4th Quarter 2012

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the third quarter of 2019. The number of published expatriates for the quarter was 183 which is the lowest amount of published expatriates in any quarter since the 4th quarter of 2012 where only 45 names were listed. See the chart below for the quarterly expatriates from 2008 to the second quarter of... Read more →

Famous Tax Quotes - The Regulations Barely Rocked The Statutory Boat

Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is: [W]e note that the regulations track the text of §956(d) nearly verbatim. The almost word-for-word match keeps the IRS’s terse explanation in line with the general principle that the more a regulation departs from a statute, the more an agency must explain itself. * *... Read more →

8 New Charts Of Examples Regarding Classification of Cloud Transactions & Computer Programs

On August 24, 2019, the Treasury Department and the IRS issued proposed regulations regarding the classification of cloud transactions for purposes of the international provisions of the Code. The proposed regulations also modify the rules for classifying transactions involving computer programs, including by applying the rules to transfers of digital content. We have created charts of certain examples included in the proposed regulations. View these charts and over a thousand other free charts at andrewmitchel.com... Read more →

2019 2nd Quarter Published Expatriates

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the second quarter of 2019. The number of published expatriates for the quarter was 609. See the chart below for the quarterly expatriates from 2008 to the second quarter of 2019. For a discussion of how the IRS compiles the data, see this post. For our prior coverage of expatriation, see all posts... Read more →

India-U.S. Income Tax Treaty – Article 12, Fees For Included Services

Sometimes U.S. companies perform services in the U.S. for customers located in India and are surprised when the Indian customer withholds Indian taxes from the payment for those services. Most U.S. income tax treaties would not allow foreign taxes to be imposed on services performed in the U.S., where the U.S service-provider has no activity or permanent establishment in the foreign country. However, the India-U.S. Income Tax Treaty (the “Treaty”) is not a typical U.S.... Read more →

Famous Tax Quote - Forming HoldCo To Acquire Target Is Not Unusual

Famous Tax Quotes includes quotations from court opinions with language that is colorful or that concisely states an important tax principle. Continuing our series on Famous Tax Quotes, today's Famous Tax Quote is: The formation of a holding company to acquire another corporation is not an unusual procedure * * *. Cromwell Corp. v. Commr., 43 TC 313 (1964) Read more →

Famous Tax Quotes - A taxpayer’s own documents

Famous Tax Quotes includes quotations from court opinions with language that is colorful or that concisely states an important tax principle. Continuing our series on Famous Tax Quotes, today's Famous Tax Quote is: [A]lthough a taxpayer’s own documents are not conclusive, they normally override any conflicting subjective considerations advanced by that taxpayer. Redwing Carriers, Inc. and Rockana Carriers, Inc., v. Laurie W. Tomlinson, former Director of Internal Revenue for the District of Florida, 399 F.2d... Read more →

U.S. Government Continues to Pursue Taxpayers Committing Tax Fraud

As we have reported in past years the U.S. government actively pursues taxpayers that are committing tax fraud and other tax crimes. The Justice Department publicizes its successes in its press releases. The press releases continue to demonstrate an impressive list of tax-related convictions, guilty pleas, injunctions, summonses, and other actions against taxpayers (and tax preparers). Many of the tax fraud schemes include offshore activities. See, for instance: Court Authorizes Service of John Doe Summonses... Read more →

2019 1st Quarter Published Expatriates - 1,019 Names

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the first quarter of 2019. The number of published expatriates for the quarter was 1,019. See the chart below for the quarterly expatriates from 2008 to the first quarter of 2019. The numbers seem to have leveled off at roughly 1,000 expatriations per quarter. For a discussion of how the IRS compiles the... Read more →

Section 911 Housing Cost Amounts Updated for 2019

Last week the IRS published Notice 2019-24 which provides adjustments to the limitation on housing expenses for specific locations in 2019. Code §911(a) allows a qualified individual to elect to exclude from gross income an “Exclusion Amount” related to foreign earned income and a “Housing Cost Amount.” The Exclusion Amount for 2019 is $105,900. The Housing Cost Amount is generally defined as an amount equal to the excess of (A) the “Housing Expenses” of an... Read more →

Code §911 Foreign Earned Income Exclusion - Adverse Conditions for 2018

Last week the IRS published Revenue Procedure 2019-15, which announced that Democratic Republic of the Congo, Cuba, Iraq, and Nicaragua are the countries for 2018 where it was determined that war, civil unrest, or similar adverse conditions precluded the normal conduct of business for purposes of Code § 911. The effective date for Democratic Republic of the Congo was December 14, 2018, the effective date for Cuba was January 4, 2018, the effective date for... Read more →

New IRS Practice Units published in March

Last week the IRS released 3 new practice units titled: Competent Authority Revenue Procedure 2015-40 Guidance: Foreign-Initiated Adjustment(s) (03-21-2019) Introduction to Traditional Automatic Exchange of Information (03-15-2019) Competent Authority Process Under a MAP Article of a U.S. Income Tax Treaty (03-08-2019) We updated our IRS Practice Units By Topic page to add these new practice units. Read more →

2018 4th Quarter Published Expatriates - A total of 685

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the fourth quarter of 2018. The number of published expatriates for the fourth quarter was 685, bringing the total number of published expatriates in 2018 to 3,981. The number of expatriates for 2018 is a 22% decrease from 2017. For our prior coverage of expatriation, see all posts tagged Expatriation. Read more →

GILTI Deduction Allowed With 962 Election (Proposed Regulations)

The IRS has issued proposed regulations on the GILTI deduction under Code §250. The proposed regulations indicate that a GILTI deduction will be available for an individual who makes a Code §962 election to be taxed at corporate rates. The preamble to the proposed regulations provides in part: Congress enacted section 962 to ensure that individuals’ tax burdens with respect to undistributed foreign earnings of their CFCs “will be no heavier than they would have... Read more →

Eaton Corp. v. Commr., 152 T.C. No. 2 (2019)

Earlier this week the Tax Court concluded that the earnings and profits (E&P) of certain upper-tier CFCs was increased by the amount of Subpart F Income inclusions and Code §956 inclusions (Code §951(a) inclusions) that flowed up from lower-tier CFCs through a U.S. partnership. Below is a chart of the entity structure in the Eaton case. Read more →

New IRS Practice Unit: Creation of a Permanent Establishment (PE) through the Activities of a Dependent Agent in the United States

Yesterday the IRS released a new practice unit titled: Creation of a Permanent Establishment (PE) through the Activities of a Dependent Agent in the United States. We updated our IRS Practice Units By Topic page to add this new practice unit. 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 →

Form 5472 Failure to File Penalty Increased to $25,000

Back in 2015 we had blogged about “The Escalation of Offshore Penalties Over the Last 20 Years.” This post explained: “Over the past twenty years, the U.S. has significantly increased the penalties associated with failing to report certain foreign-related transactions, and it has created new filing requirements that have their own associated penalties.” However, the 2015 post had focused on “outbound” information reporting (U.S. persons with foreign activities), such as the FBAR and Forms 3520,... Read more →