Category Archives: estate tax planning

Provocative International Tax News

offshore tax planning, offshore tax strategies, controlled foreign corporation,

Tax Planning Small Business Are Taxed at 14%

Government Report Shames Businesses Paying More than 14% in Taxes.    Hard to believe that Senator Bernie Sanders  (who paid tax at 13%) released the report.  It states that a business that plans its taxes are taxed at 14%. Here’s what’s going on.   

International tax planning for the Contract Manufactuere

International tax planning for the Contract Manufacturer

Fantastic tax savings for importers of contracted manufacturer of their products.  This new IRS law gives tax savings to small businesses.  Learn more on this link and send it to your CPA.

Small businesses are now reaping significant tax savings using their own contract manufacturing company.  Importers, exporters, and e-commerce business can use the same loopholes as big business. I wrote my book to teach you these tried and true strategies in an easy two-hour read.

International tax planning

Buy at Amazon for only $9.50.

But, I did more.  I had an audiobook created.  It downloads onto your smartphone so that you can listen while you are commuting.   Get the 2017 edition of  International Taxation in America for the Entrepreneur for $9.50 at Amazon on this link.

saving taxes, how to save taxes, tax planning,

Saving taxes with an IRS approved tax plan is called a private letter ruling.

International Gift Tax Plans with this IRS internal letter on this link. Fantastic legal tax avoidance for the foreign person with family in the U.S. is explained in this letter.

  • Avoiding state income taxes this new IRS  designer  Nevada trust.  IRS tells how to use your Nevada corporation as your trustee to legally stop paying state taxes on your investment income. Here’s what’s happeningon this link.

New- Saving foreign taxes with this letter from the U.S. Department of the Treasury letter to the U.K. tax authorities on tax planning in the U.S. for UK and EU companies.

Tax planning, with the Supreme Court common tax laws

Tax planning with Supreme Court common tax laws

18th Century Supreme Court case destroys IRS tax penalty law. Using this case, the Tax Court gave the IRS a significant defeat.  Here is what happen.   The Supreme Court is the “Law of the Land.”  It rules over the IRS and Congress.   

It works both ways.  The blog on this link explains the most missed Supreme Court Doctrine use by the IRS to blow up this offshore plan.

international tax planning, international, tax, planning,

International tax planning and international tax savings with this Treasury Department report. 

The secret report on tax savings international tax plans that the IRS cannot stop was issued by the U.S. Department of the Treasury (a branch of the White House).

They reported the successful foreign tax plans of international businesses. We have obtained a copy.  It is on this link.   Here you will learn the legitimate foreign tax plans that Congress likes. 

offshore trust, foreign trust, nevada trust, estate planning trust, esbt,    Since the Middle Ages, the wealthy have capitalized on trusts to avoid paying taxes. During the Great Crusades, upon the death of a knight, his entire estate went to the king.    Nine hundred years later, things have not changed much except the ‘King” takes only half.

Trust are the most efficient tax tool. International tax planning should start with a Nevada trust to own the foreign company.  Learn trust tax planning and asset protection in this easy to read blog post.    It has the blueprint for successful trust tax planning.   IRS memo on asset protection and tax planning with an offshore trust.  Get it now on this blog post.

internet tax planning, saving taxes, cloud tax planning

Saving taxes with the cloud-based

Cloud tax planning. Learn how businesses are using the cloud to avoid taxes on this link.  E-commerce companies are avoiding state income taxes and in some cases deferring U.S. taxes.

Be an IRS tax wizard with our new custom Google search, on this link.  This custom Google app to read 400,000 pages deep inside the IRS’s website and the tax court’s website.

New French U.S. Tax Treaty Gives French Citizens Preferred Inheritance Tax Strategy

France is on the United States’ favorite country list.   Recently, France and the U.S. changed their tax treaty.   Under the new treaty,  the U.S. estate tax does not apply if the spouse inherits the property.   And it gets better.

The surviving French spouse can sell the property located in the U.S income tax-free.

This how it works.   When the spouse inherits the property, she or he has a new cost for tax purposes.   The cost is the market value at the time of the death.  For example, French couple acquired a home in Los Angeles in 2009 for U.S.$500,000.

The husband dies in 2017.   The house is now worth $1,500,000.   The wife inherits the home without.  The U.S. death tax does not apply because of the U.S. – French Tax Treaty.

Next, U.S income tax law increases the tax cost of inherited property to the market value as of the day of death.    When the spouse sells the property for $1,500,000 she will have no gain or loss.

This new tax law is found in a “protocol” to the original French-U.S. income tax treaty and not to the estate tax treaty.  Here is a link to the protocol.

If you need help with your U.S. – French tax planning, then please email me [email protected]

By the way, U.S. tax laws allow a unique type of trust that will avoid inheritance tax for the children of French citizens.   Wth trust is called a “marital deduction trust”.  This trust created at the time of the death of the first spouse.   For French tax law, this trust is a U.S. person which provides interesting tax savings.   By the way, the French have duplicated the U.S. foreign trust reporting (the U.S. trust is a French foreign trust).   As you know, I am a big fan of reporting.

As you know, I am a big fan of reporting.   In this case, the tax treaty provides powerful protection.  Best state for a French U.S. trust is Nevada.

 

 

IRS Wipes Out “Penny Wise and Dollar Foolish” Self-prepared Form 3520 Reporting Foreign Gifts and Inheritance

form 3520, how to prepare from 3520, foreign gift, foreign inheritance, U.K. inheritance,

“Penny wise and dollar foolish” was one of my mother’s favorite saying. Doing the IRS Form 3520 yourself is foolish.

Another day and an another email from a poor soul preparing Form 3520.  This form is multipurpose.  One purpose is to track assets transferred to U.S. taxpayers.   The goal of the Form 3520 is to place a bullseye on you.

Most people hate reading instructions.  So, they just follow the form and ignore the instructions and the complex requirement found only in IRS regulations.    And there are even more deadly problems that make you an IRS target.

I will discuss those problems below;  however, first, please hire a certified public accountant or an international tax attorney to prepare the Form.  Next, retrieve all of the information from the deceased’s estate.  An IRS audit occurs a few years after you file the Form and by then the information may be misplaced.

  1.   The IRS is hunting for hidden offshore taxable income with the Form 3520.

    Besides looking for gift taxes and estate taxes, the IRS is looking for the tax evader.   The IRS examines the recipient looking for disguise income.   Tax evaders often claim the money they receive is a gift from a “friend” or distant relative or a foreign corporation.

  2. The IRS is hunting for gift taxes and generation skipping taxes for gifts by non-resident (domiciled) aliens from a U.S. bank account.

    The alien does not have the $5.5 million dollar gift and estate tax exemption.   In fact, they have almost no exemption, at all.   Gifts of money can be taxable. Gifts of money to a grandchild can be taxable twice (the gift tax and the generation skipping tax).   If you report a gift made by a transfer from a U.S. bank account, expect an examination and expect to owed taxes.

  3. The IRS is hunting for estate taxes for assets owned by a foreign corporation by the non-resident alien.

    Once again, so many emails and phone calls from U.S. taxpayers inheriting a foreign corporation  (this week it seem to be Panama companies).   Assets owned by a foreign entity are owned by the shareholder (learn more on this link).

    You (and the foreign estate) do have tax planning options but you need an international tax professional to select the correct strategy.

    The non-resident alien’s U.S. estate tax exemption is less than $60,000 (unless an estate tax treaty applies).   If the foreign corporation owns shares of U.S. companies (including those on the stock market) or U.S. real estate, then taxes are due.

    You personally owed the estate taxes or gift taxes since you received the property.  This is known as “transferee liability”.  Besides owning the taxes, you will owe a tax penalty and also interest.   You should expect about fifty percent of the amount you received to be paid to the IRS.    Of course, you will need a professional to represent you.

    The typical fee for a Form 3520 preparation is about $5,000 unless your relative owned a foreign foundation.   If so, then you have the complex issue for a non-grantor foreign trust (learn more on this link).

 

Foreign Inheritance and Gift Tax Planning and Strategies

The IRS headline Aliens with any U.S. Assets Must File Estate Tax Returnsis shocking to their adult children.

And, it gets worse for those decedents owning foundations, foreign trusts, foreign companies, Stiftung, and Anstalts.   The heirs could owe the IRS both estate taxes and income taxes on their inheritance.

The label of the entity (such as trust) does not decide the entities IRS tax classification.     An entity labeled a “trust” can be classified for tax law a corporation.  Similarly, a foreign corporation can be categorized by the IRS as a trust.

Suzan’s father is a French citizen.  When he passed away, he was residing in Spain.  To avoid French and Spain taxes, he formed a Panama foundation.  In our telephone calls, Suzan labeled the foundation as a Panama trust.

As you expect, U.S. taxation of a foreign trust is very different from a foreign corporation.  Two factors differentiate corporations from trusts.  They are:
(1) the presence of associates; and
(2) the objective to carry on business and divide the gains.

One court case held that term “associates” does not mean plural.  The court held that a trust with a single beneficiary has associates.   Because of this case, the IRS seems to be focusing on the objective to carry on business.   An IRS legal opinion, on this link, highlights this.

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Foreign Investors Learn Why a Foreign Corporation is U.S. Death Tax Trap

The problem for the non-resident alien is that their estate tax exemption is $60,000 and not $5.3 million (as it is for Americans).   And there is one more problem… the U.S. estate tax planner.  While the U.S. has a tax on the estate, other countries tax the recipient.  This tax is called an “inheritance tax.”

Thus the  American tax planner also must know “international inheritance tax planning” for the foreign country of the investor.

They advise the nonresident alien (the term for estate and gift taxes is “nondomiciled“) to own their U.S. investments and U.S. real estate through a foreign corporation (such as a Panamanian company or a British Virgin Island company).  

Since the 1950’s, this tax plan has failed.  The U.S. courts have ruled for the IRS (more on these cases on this link).  These court cases focused on the power to revoke (section 2038) and the right to the corporate dividends (section 2036).  These tax laws  required the assets owned by the foreign entity to be included in the deceased’s U.S. taxable estate

The best estate tax planning method for the foreign investor involves a trust.   Here is a link on the basics.  In Europe and the United Kingdom have an inheritance tax.  Estate taxes and inheritance differ.  This difference challenges international inheritance tax planners. 
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