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February 11, 2009 - Phil Hodgen

How will the IRS ever find out?

A cautionary morality play for the wiser ones of you in the audience.

I get many people coming into the office asking for help. They have (or want to have) money in offshore accounts, foreign trusts, corporations, what have you.

Some of them say “Well, how will the IRS ever find out?” (Meaning “Can I lie and get away with it?”). We don’t do business. Lying is a great tax shelter, and you don’t need to pay me to make it work. It works extremely well until it doesn’t work anymore.

Attached to this post is a PDF of a recent Bankruptcy Court case against one Gary Krause.... continue reading

Foreign Business Activities in the USA US Real Estate Investments Voluntary Disclosure
January 21, 2009 - Phil Hodgen

Writing off carrying costs — for nonresidents

This is something that comes up again and again. Nonresident owns raw land (just dirt, nothing on it). There are some costs incurred each year — property taxes for sure, maybe mortgage interest, maybe a couple of other things. But property tax mostly.

How can these costs get converted into a tax deduction? Answer: not possible.

In order to get a tax deduction under U.S. law, there has to be a specific provision that allows the deduction.

Nonresidents are taxed in one of two ways —

  • On passive income received from U.S. sources, at 30% of gross income received. No deductions allowed.
... continue reading
Foreign Business Activities in the USA US Real Estate Investments
January 6, 2009 - Phil Hodgen

Notice 2008-63 on private trust companies

To the people who attended my course today in San Jose on Foreign Trusts — find Notice 2008-63 as a PDF or Notice 2008-63 as HTML on the IRS website. This is all about private trust companies, in response to Lee Kaplan’s question.... continue reading

Foreign Business Activities in the USA US Real Estate Investments
December 16, 2008 - Phil Hodgen

Start-up California corporations exemption from tax

It isn’t international tax (directly) but I’m solving this California corporate tax problem publicly so you don’t have to lose a few brain cells.

If you form a corporation in California on December 17 or later you don’t have to file a California tax return for the rest of the year. This is if you have a calendar year for the fiscal year of the corporation.

The important thing is the date. It is the Continental Divide of California corporate tax: incorporate on December 17 or later and you do not file Form 100. Incorporate on December 16 or earlier and you have to file Form 100.... continue reading

Foreign Business Activities in the USA Tax and Trusts
December 12, 2008 - Phil Hodgen

Foreign corporations for estate tax protection – works, for now

I got an inquiry today from my FIRPTA.com website that I figured would be worth answering here, because it is a topic of general application. The question is whether using a foreign corporation works to protect against U.S. estate tax.

Foreign corporations to hold U.S. real estate

Nonresident investors frequently hold U.S. real estate using foreign corporation structures. (A “foreign corporation” for our purposes is a corporation formed in a country other than the United States.) There are two common variations of this theme:

  • Nonresident owns all the shares of stock of a foreign corporation. The foreign corporation owns the U.S.
... continue reading
Foreign Business Activities in the USA Nonresidents with US Activities