International Tax Blog

88% of Expatriates Have a Net Worth of Less than $2 Million

On September 28, 2020, the Treasury Inspector General for Tax Administration (“TIGTA”) issued a report on the IRS’s Enforcement regarding expatriates. In the report, TIGTA provided a graph showing the number of the names of expatriates published in the Federal Register from 2008 to 2018. If you add up the numbers for these 11 years, the total is 30,507. Interestingly, TIGTA then indicates that the IRS has an expatriate database which includes 41,058 records from... Read more →

FBAR Reporting For Indirectly Owned Foreign Bank Accounts

For years I have been unsure how to report a foreign bank account on an individual’s FBAR (FinCEN Form 114) when the account is owned by a foreign entity and the individual owns more than 50% of the foreign entity. For example, if a US citizen individual owns 100% of a controlled foreign corporation (“CFC”), and the CFC has a foreign bank account, the US citizen individual is treated as having a financial interest in... 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 →

New IRS Practice Unit: Foreign Earned Income

Yesterday the IRS published a new practice unit titled “Foreign Earned Income for Purposes of IRC 911.” This practice unit discusses "foreign earned income" for purposes of Code §911, and rounds out the 10th practice unit on the foreign earned income exclusion ("FEIE"). The IRS now has the following practice units on the foreign earned income exclusion: Foreign Earned Income (2020) Physical Presence Test (2017) Bona Fide Residence Test (2015) Calculating the FEIE - Employee... Read more →

2020 Second Quarter Published Expatriates – Second Highest Quarterly Number Ever

Last week 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 2020. The number of published expatriates for the quarter was 2,406, which is the second highest quarterly number ever, with the first quarter of this year being the highest quarter ever. Therefore, 2020 is currently on track to have the highest number of published expatriates ever. See the... Read more →

U.S. Partnerships Owning CFCs

It has been over a year since the final GILTI regulations were published. The GILTI rules for domestic partnerships in the final regulations were dramatically different than in the proposed regulations. In general, a domestic partnership that owns a CFC does not have a GILTI inclusion amount. However, a partner in the domestic partnership may have a GILTI inclusion amount if the partner is a U.S. shareholder of the CFC (typically meaning that the partner... Read more →

Famous Tax Quotes - No Rational Person . . .

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: [N]o rational person would incur indebtedness of $41.5 million to acquire stock that he already owned free and clear. [4th Circuit, quoting the Tax Court] Estate of Kechijian v. Commr., 125 AFTR 2d 2020-2579 Read more →

Famous Tax Quotes - Backdating of Documents

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: 2. Backdating and “Effective As of” Dating of Documents Petitioners have admitted that one of the critical documents in the record was backdated. Although petitioners explain the backdating as a matter of convenience, the fact that any backdating occurred suggests a willingness to manipulate the... Read more →

New IRS Practice Units: Reasonable Cause and Good Faith & FTC Limitation

The IRS recently published two new practice units related to international tax: Reasonable Cause and Good Faith and FTC Limitation. The first practice unit discusses the reasonable cause exception for penalty relief. The second practice unit discusses the foreign tax credit limitation for individuals. Foreign tax credits are generally limited to the U.S. tax on foreign income. We have added these practice units to our Practice Units By Topic page. Read more →

Average Price of U.S. Real Estate Sold -- By Country

Yesterday the IRS Statistics of Income Division released 2017 data for Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests. When a foreign person disposes of U.S. real property, the buyer is required to file Form 8288-A. The IRS release breaks out the following data by country: The number of forms filed, The total sales, and The Federal income tax withheld. The average sale price per property for each... Read more →

Famous Tax Quotes - Born in Generosity; Debauched in Avarice

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: Since * * * Duberstein, * * * the law has been clear that the predominant factor in determining whether a payment is a gift is the intent of the payor. It is utterly incredible that Burford, a man who had attended New York University’s... Read more →

5 New Tax Charts Published

Today we published 5 new situational tax charts to AndrewMitchel.com (charts listed in topical order and charts listed in alpha-numeric order). We have over 1200 charts for FREE on our website. The recently published charts include: Rev. Rul. 2008-39 (Upper-Tier Partnership Sec. 212 Expenses Must be Separately Stated) Reg. 1.267(a)-3(b)(4), Example 1 (Interest Expense of Accrual Taxpayer Not Deductible Until Paid) Prop. Reg. 1.864-6(c)(3)(i), Example 1 (NRA With a US Tax Home Selling Foreign-Produced Inventory... Read more →

Free Flowchart - Section 894(c): Hybrid & Reverse Hybrid Entities

Today we published an updated version of our Section 894(c): Hybrid & Reverse Hybrid Entities flowchart on our sister site Tax-Charts.com. This free chart guides you through the classification of an entity as a hybrid entity, a reverse hybrid entity, or not a hybrid entity. Tax-Charts.com now has 16 free flowcharts (and 27 flowcharts for sale). Read more →

New IRS Practice Unit: Flow-Through Entities Effects on FTC

Yesterday the IRS published a new practice unit titled “Flow-Through Entities Effects on FTC.” This practice unit discusses how flow-through entities affect an individual’s foreign tax credit. We have added this practice unit to our Practice Units By Topic page. Read more →

Two New (& One Updated) IRS Practice Units

Yesterday the IRS published some new practice units and updated an existing practice unit. The new units included: FEIE - Disallowance of FTCs for Foreign Taxes on Excluded Income (2020) PTI (now PTEP) Exchange Gain or Loss (2020) The updated practice unit was: Official versus Free Market Exchange Rate (2020) We have added these practice units to our Practice Units By Topic page. (The IRS also yesterday published a practice unit on 481(a) Adjustments for... Read more →

2020 First Quarter Published Expatriates –Highest Quarterly Number Ever

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 2020. The number of published expatriates for the quarter was 2,909, which is the highest quarterly number ever. The only previous quarter to come close to this amount was the fourth quarter of 2016, for which there were 2,365 published expatriates. The two quarters preceding the current quarter (the... Read more →

Three New IRS Practice Units

Yesterday the IRS published three new practice units: Substantiation Requirements for Claiming FTCs Foreign Currency Translation for FTCs Installment Method for Installment Sales We have added these practice units to our Practice Units By Topic page. Read more →

New IRS Practice Unit On The Statute Of Limitations

Yesterday the IRS published a new practice unit titled “Overview of Statute of Limitations on the Assessment of Tax.” This practice unit discusses the time limits under which the IRS can no longer assess additional tax, with a focus on international. We have added this practice unit to our Practice Units By Topic page. Read more →

New IRS Practice Unit for “Adjustments for Overwithholding on Form 1042”

Yesterday the IRS published a new practice unit titled “Adjustments for Overwithholding on Form 1042.” This practice unit discusses adjustments for overwithholding of tax done on payments of U.S. source income to foreign persons on Forms 1042 tax returns and Forms 1042-S information returns. As discussed in the practice unit, how corrections to overwithholding are made depends on the timing of when the overwithholding is discovered. Three time periods are discussed: Before last deposits for... Read more →

Rev. Proc. 2020-17 - Exemption From Filing Forms 3520 and 3520-A for Applicable Tax-Favored Foreign Trusts

Yesterday the IRS published Rev. Proc. 2020-17. This revenue procedure provides an exemption from filing Forms 3520 and 3520-A for an “eligible individual’s” transactions with, or ownership of, an “applicable tax-favored foreign trust” (“ATFFT”). An eligible individual generally means an individual who is a U.S. citizen or resident and who is compliant with all requirements for filing U.S. federal income tax returns and has reported as income (to the extent required) any contributions to, earnings... Read more →

Section 911 Housing Cost Amounts Updated for 2020

Last week the IRS published Notice 2020-13 which provides adjustments to the limitation on housing expenses for specific locations in 2020. 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 2020 is $107,600. The Housing Cost Amount is generally defined as an amount equal to the excess of (A) the “Housing Expenses” of an... Read more →

11 New Tax Charts

We recently added 11 new charts to andrewmitchel.com (listed in topical order and listed in alpha-numeric order). We now have more than 1,200 charts available. The recently added charts include: Reg. 1.960-2(b)(5), Example (Deemed Paid Foreign Income Taxes: Subpart F Income Inclusion) Reg. 1.960-2(c)(7)(i), Example 1 (Deemed Paid Foreign Income Taxes: GILTI Inclusion) Reg. 1.960-2(c)(7)(ii), Example 2 (Deemed Paid Foreign Income Taxes: GILTI Inclusion, CFC Owned Thru P'ship) Reg. 1.960-3(e)(1), Example 1 (Foreign Income Taxes... Read more →

2019 Published Expatriates - Lowest Level in Six Years

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 2019. The number of published expatriates for the fourth quarter was 261, bringing the total number of published expatriates in 2019 to 2,072. The number of expatriates for 2019 was the lowest it has been for the past 6 years. The peak of expatriations was in 2016, with 5,411... Read more →

New IRS Practice Unit – FDAP Statistical Sampling in the Audit of a U.S. Withholding Agent

The IRS has published a new practice unit that deals with FDAP statistical sampling in audits of U.S. withholding agents. This practice unit would typically apply to the audit of a U.S. financial institution. To see all IRS Practice Units, click here. Read more →

Video - Downward Attribution Form 5471

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