Net Worth Test Q&A

This post is a collection of questions and answers from Debra Rudd’s January 15, 2021 International Tax Lunch webinar on the Net Worth Test.

The below questions were asked by viewers of the webinar, and answered by Debra during the webinar. Some questions have been slightly edited for clarity.

This post is not legal advice. Do not make big life decisions without consulting an expert.

Q1:
Regarding the tax liability test, when testing a married filing jointly couple, both expatriating, do you divide their joint liability by two? Or does it need to be more precisely allocated to the source of income?... continue reading

A simple explanation of tested interest expense for IRC §951A

Here is a simple explanation of “tested interest expense” — one of the variables you will compute when calculating how much global intangible low-taxed income will be included in a U.S. shareholder’s gross income because of IRC §951A(a).

The example will show you how to prepare both forms, and what the numbers mean, including how to deal with the interest deduction and its later add-back into the calculations.

Completed sample Form 5471, Schedule I-1 and Form 8992 can be found within my August 2020 International Tax Lunch slides.

IRC §951A(a) makes a U.S. shareholder include (most of) a CFC’s net income in the shareholder’s U.S.... continue reading

Why a Section 962 Statement is Necessary

On July 10, 2020 I will  present a live Section 962 webcast that goes into excruciatingly painful detail about preparing a Section 962 tax return.

This is the first draft of my notes for the part of the presentation that talks about where the rubber meets the road:  the Section 962 Statement.

I probably won’t publish the notes as part of the webcast, but I will be sharing drafts on the blog. Later, there will be a complete recorded webcast/course materials package available.

Sign up to get the early-bird pricing here.

Part 5 describes how you prepare the Section 962 Statement.... continue reading

Filing and tax payment deadlines for 2019 tax filings

The IRS can postpone deadlines when there is a Federally-declared disaster. IRC §7508A. We have one of those Federally-declared disasters right now, what with the coronavirus excitement and all of that.

The IRS, in a series of Notices, has given everyone until July 15, 2020 to do anything required to be done between April 1, 2020 and July 15, 2020.

Notices

These are the Notices that the IRS has issued so far to adjust filing deadlines and tax payment deadlines:

• Notice 2020-17. Superseded by Notice 2020-18.
• Notice 2020-18. Supersedes and expands Notice 2020-17.
• Notice 2020-20. Leaves in place and amplifies Notice 2020-18.

What goes on your balance sheet when you expatriate?

When you expatriate, you are required to declare all of your assets and liabilities and compute your net worth. If your net worth is above $2 million, you are a “covered expatriate” and hilarity ensues.

What goes on your balance sheet?

Let’s talk about what goes on your Form 8854 balance sheet.  What, specifically, is an asset you own?

This is how you figure it out:

1. Assume you are a U.S. citizen or a resident of the United States (as “resident” is defined for estate/gift tax purposes).
2. There is an asset that you are wondering about. Should you include it on your balance sheet or not?