We specialize in cross-border business planning and structuring. These articles may shed some light on possible consequences of getting it right (and wrong). If you require help in structuring your business correctly, contact us to learn how we can help.
This is a lengthy discussion of a common fact pattern: When does a U.S. citizen spouse have a Form 5471 filing requirement, merely by being married to a nonresident alien who owns foreign corporation stock? That’s what we’re going to find out today. Efficiency And it hasn’t escaped me that the more ahem efficiency-minded reader…
Form 5471 is hard because, among other reasons, you have to figure out the meaning of the word “own.” There’s your understanding of the word. You certainly know what it means to own something. And then there’s the Federal government’s belief about what it means to “own” something for tax purposes. Uncle Sam’s view of…
Shameless Pimping The first of eleven episodes of The Form 5471 Series will go live next Friday, April 28, 2023, at noon Pacific time. People on the International Tax Lunch Mailing List get information on how to sign up (paid or free, your choice) and will get a PDF copy of the slide deck. Email…
Update, Prophesy, and Exhortation This week’s post is shorter than usual. I deliver here an Update, a Prophesy, and an Exhortation, especially if you have form 5471 problems. Update: Important Tax Court Case The IRS lost an important Tax Court case: Alon Farhy v. Commissioner, 160 T.C. No. 6 (April 3, 2023). (Opinion here as…
In our last thrilling episode of The Form 5471 Files, we considered the curious case of a U.S. manufacturer that sold widgets to its lower-tier foreign subsidiary, which turned around and sold the widgets to an unrelated U.S. customer. The result, we decided, is that Foreign Subsidiary’s profit was foreign base company sales income, which…
When will a CFC’s regular-looking business income from regular-looking, normal business operations be classified as Subpart F income? This week I introduce the concept of “foreign base company sales income” with a simple example, which happens to come from a CPA who asked me about a situation he is dealing with. I distilled the fact…
Introduction We have default assumptions about everything. “Unless proven otherwise, X is true.” For U.S. taxpayers who own stock of controlled foreign corporations, the default assumptions for how CFCs behaved shifted abruptly in late 2017. This was a geomagnetic reversal, the tax equivalent of the magnetic North Pole and magnetic South Pole flipping places. The…
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…
The World’s Worst Tax Strategy “How will they ever find out?” It’s a classic tax-planning strategy that works very well, until the day it doesn’t work. Then it fails spectacularly. Children do this all the time. They say “Dad said I could stay out until midnight!” to Mom and “Mom said I could stay out…
I received an email from Scott, a good friend who, well, does taxes in Mexico. He had a question about an American couple in Mexico who are setting up a S de RL (Sociedad de Responsabilidad Limitada), which is similar to a U.S. LLC. One of the features of this type of entity is that…
Hello from Singapore by way of Jakarta, and welcome to the Friday Edition. It’s all alt-country1 and international tax here, folks. Go fire up Ribbon of Highway by Christy Hays on Ye Olde YouTube (or here on Spotify) then sit back and give this a read. Build Your Holding Structure Before You Sign a Purchase…
Yet Another “As If” And the preparation for next Friday’s Section 962 workshop dragged my attention across a sleepy backwater of the Internal Code: Section 951A(f)(1)(A). Well, not so sleepy, actually. Section 951A is the gnarled source of that gratuitously complex eruption of overly excessive legislative overkill dubbed GILTI by its authors.1 There we find a…
Question From Section 965 Workshop We received a question from our March 23, 2018 workshop discussion about Section 965 about the interplay between the new transition tax rules (IRC §965) and the Net Investment Income Tax (IRC §1411). We do these workshops from time to time and publish them in our Newsletter. The Answer There…
Section 199A Deductions Reader B.B. from Miami Beach asked a such a simple1 question: Are NRAs with pass-through U.S. entities eligible for the [IRC Section 199A] deduction? What follows is my incomplete answer. A complete answer would require me to fully understand Section 199A. And I would rather die in a fire than become intimate…
Poker players are always looking for tells — inadvertent signals by their opponents. The Tax Cuts and Jobs Act has a tell. Our Federal government has told us what they think of us. They think we are incipient felons. If you had any doubt about our how our Federal Overlords view us, new Internal Revenue…