Blog

Information about everything from tax bureaucracy to international audits. News and updates. Speeches, conferences and workshop registrations. Packing advice. Phil’s jet-lagged musings on Swiss banks and the “quitting conversation.”

The only non-cash basis step up rule (other than death)

This week’s question came from a CPA friend, asking about a client of hers. It is a disguised expatriation question. See if you can guess the expatriation question before I answer it:

A client [now a U.S. resident] sold his house in China. Since the capital gain is calculated based on the original purchase price, why do some articles say that properties should be appraised before landing to this country? I have been confronted with this question a couple of times. Do you know why?

Form W-8BENs for expatriates

This Week’s Question

This week’s episode is a mashup of several question that have come up.

Once I have successfully expatriated, I want to keep my bank account, IRA, 401(k), brokerage account, etc. open in the United States. What paperwork is required and how will I be taxed?

Short Answer

Form W-8BEN. That is what you give the financial institution. It is pretty easy unless you want to reduce your U.S. income tax from the default 30% to a lower number (like zero).

Why you can’t take a tax deduction for that (FIRPTA edition)

We (the team here at HodgenLaw PC) will be presenting a series of four webcasts for the California Society of Certified Public Accountants. I am preparing the first set of webcasts on a topic I really like – U.S. real estate investments by nonresidents. Shameless sales promotion: you should sign up for the CalCPA webcast.

This week’s Friday Edition is spawned by me being hip-deep in that topic.

TL;DR

Nonresidents who own vacation homes in the United States cannot take tax deductions for any of the costs of ownership.

Non-U.S. Software Company, U.S. Customer, and Withholding Tax

I received an email via Hackernews and figured I would answer it here, because this is a common question. This is likely to be the first of many discussions of this topic. For what it is worth, my username on HN is philiphodgen.

Question

Lightly edited (and ignoring the “how much would it cost to hire you?” question), here is what X.Y. (not his real initials, of course) on HN asked:

I am a $COUNTRY resident running a Hong Kong based software business, and a US based client tells me he needs to withhold 30% foreign taxes on the payments made to my company. I am sure this is not the first time you have seen this, and I wonder what’s the typical procedure in this case. (There are no mentions of taxes in our contract, it is first time both parties have engaged in this type of transaction.)

Gifts, bequests, inheritances and expatriation

This Week’s Question

This week’s question came from reader N., who answered the question in the “Welcome to the Expatriation Only Newsletter” email I sent him with this:

My biggest question regarding expatriation is regarding inheritance. How does taxation change upon renunciation?