Attribution of PFICs Through a Family Trust

Today’s topic is based on some war stories we have seen. Here is the general situation we have had to deal with:

I am a US citizen living abroad and married to a foreign national. She and I both owned some PFICs. We transferred them to a family trust whose trustee is a private company we own 50-50. Our children and we are beneficiaries of the family trust. Do I have to report the PFICs held in the family trust as my own?

Today’s post will discuss some of the uncertainties and possible results for PFIC attribution through a trust.

What are PFICs?

Independent Contractors Who Become U.S. Residents

This newsletter is inspired by a geek with a hat. Swizec is someone whose blog I follow from afar. I also watch for him on Hacker News, where he pops up from time to time. Interesting guy, does interesting things.

So when he wrote a blog post about his international tax catastrophe, I read it with interest.

In brief, Swizec came to California from Slovenia, spent too much time here, and became a resident for tax purposes for multiple years. He ended up with a massive tax bill for Federal and State income tax.

As a bonus multiplier, he ended up owing tax in Slovenia, too.... continue reading

Are my Exchange Traded Notes PFICs?

Debts instruments that sound somewhat like shares

This is a question that came by way of email:

I own some exchange traded notes. Are those PFICs?

In this post, I will discuss the factors that you can examine to check whether buying a particular debt instrument carries any risk related to passive foreign investment companies. Then, we can check if exchange traded notes are debt or shares.

What are exchange traded notes?

Exchange traded notes (ETN) is a type of debt instrument. They have a fixed maturity date. They pay interest, but the rate of interest depends on an index or market benchmark.... continue reading

Snatch Form 2555 Victory from the Jaws of Procrastination Defeat?

Snatching Victory from the Jaws of Defeat

You messed up, and time has gone by. You wanted to claim the foreign earned income exclusion on a tax return, but the filing deadline for that tax return was more than a year ago.

You are very late. Maybe you filed a tax return and missed making the claim for the foreign earned income exclusion. Maybe you did not even file a tax return at all.

Let’s talk about how you can claim the foreign earned income exclusion. To do this we will talk about the rules, and a recent Tax Court case that demonstrates the rules in action.... continue reading

Redfield v. Commissioner (U.S. Tax Court Memorandum Opinion, 26 April 2017)

This Tax Court Memorandum opinion is currently only available on (extremely overpriced and God-awful UI) Lexis via Tax Notes Today. (How do you take something terrible and make it worse? Lexis Advance is your answer).

I do not see the opinion anywhere on the Tax Court’s website. In order to make it available to everyone, I am posting it here.

The opinion demonstrates the procedural aspects for filing a late Form 2555.

DAMON AARON REDFIELD,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
RespondentUNITED STATES TAX COURTFiled April 26, 2017

Damon Aaron Redfield, pro se.

Jeffrey E. Gold and Stephen C.... continue reading