Tag Archives: FOREIGN TAX PLANNING

Best International Tax Attorney or International Tax Accountant

The best international tax attorney international tax accountant must know both the 1,000,000 pages domestic tax laws, the “common laws” from court cases and international tax law.   

The best international tax attorneys and accountants use the tax pyramid.

The best international tax attorney and tax accountant have an advance degree in taxation.

The best international tax attorney and tax accountant have an advance degree in taxation.

The best tax attorneys and best tax accountants are experts in both the common law and the tax code before they learn international tax law.

The best tax accountants and best tax attorneys have an advance degree in taxation.  Law schools and accounting schools do not teach tax law.  Up tp two additional years of schooling is required to be a tax expert.

The international tax adviser studies the “character of your income.  Each type of income has its own tax laws.

 The tax law for consulting income is different than the tax law for importing income.  The best international tax CPA looks at your business’s operations and dissects each step.

Here is an example:  A U.S.  website designer has employees in India.  After dissecting his activities, he decided to incorporate in a tax-free country.  The tax haven corporation files an IRS Form 1120F (F is for Foreign).  Only half of his net income is U.S. taxable. The other half is not taxable.  His business operates the same.

At International Tax Counselors, our international taxation experts have more than 30 years of experience.  Each expert has an advance degree in taxation.

If you need planning, consulting, or compliance, your team at International Tax Counselors has the needed international accounting and legal expertise and skills.

We have unique expertise in:

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IRS International Wish List of Updated Foreign Income Tax Planning Laws

Domestication of a foreign trust

Applying for an IRS ruling on your international tax planning will save you taxes in the long run.

With little money to spend on attorneys to draft new regulations and rulings,  (because of the Republican Party’s cut in IRS funding), the international tax division has a short wish list. Here is the list:

1. Guidance under section 954(c), including regarding foreign currency gains.
2. Guidance under section 954, including regarding foreign base company sales and services income. [See T.D. 9733.]
3. Regulations under section 956 regarding the treatment of loans to foreign partnerships and related issues. [See T.D. 9733; REG-155164-09.] This is a hot topic to the IRS. This loophole has existed for fifty years, but the IRS learned about it just recently.
4. Final regulations on the treatment of upfront payments on swaps under section 956. Temporary and proposed regulations were published on May 8, 2015. This is a sophisticated tax saving strategy. If you have a controlled foreign corporation, this method is worth exploring.
5. Final regulations under section 959 on previously taxed earnings and profits. Proposed regulations were published on August 29, 2006. Please note, the IRS started this project a decade ago.
6. Final regulations under section 964 on accounting method elections. Proposed regulations were published on November 3, 2011. This is a KEY international tax planning law. If your CPA has not helped you, then you can contact me.
7. Guidance under sections 1295, 1297, and 1298 on passive foreign investment companies. Proposed regulations regarding foreign insurance companies were published on April 24, 2015. Temporary and proposed regulations regarding reporting requirements were published on December 31, 2013. Another major loophole that the IRS just recently discovered. It has been around for decades.

Some of these topics have been on the IRS wish list for almost a decade.  As you read this list, you can see tax strategies that continue to save you money. 

The Best International Taxation Planning Audiobook and Kindle for the Entrepreneur

Chairman Robert Lee Doughton of the Congressional House Ways and Means wrote today's tax laws. , This Civil War baby wrote today's tax law. High school educated in the 1870s!

Chairman Robert Lee Doughton of the Congressional House Ways and Means wrote today’s tax laws. , This Civil War baby wrote today’s tax law. High school educated in the 1870s!

Just how good is Congress doing?.  Today’s tax laws follow the blueprint designed by this man, named after General Robert E. Lee.   Born in the 1860s, his view of the World is in today’s tax laws.  Text messaging was via the Telegraph.

His ancient concepts have created legal loopholes for the cloud based business,  E-commerce small business, and the business selling merchandise without the need for inventory.

Take a three-minute test drive of the audiobook below, at the end of this article.    

For example, did you know that by placing having a British Virgin Island corporation own your website, you may reduce or eliminate U.S. taxation?  You will learn how this is done in my book.

The audiobook edition of  International Taxation in America for the Entrepreneur,  available at Amazon on this link along with the paper and Kindle versions. My Book that is changing tax planning for the E-commerce and cloud-based business.  Easy to read in less than two hours.  Learn our tried and true innovative tax plans with my book,

Myths that restrict your offshore tax planning include:
1. Income deposited into a foreign bank account is foreign source income. Place of bank deposit does not determine so the source of income.  Deposits into U.S. banks can still be foreign income and deposits in a foreign bank can be U.S. taxable income. 

2.The “Dutch Sandwich” helps U.S. firms avoid U.S. taxes.  This ancient tax treaty plan is used to prevent European tax.  E-commerce and cloud base businesses do not need to use tax treaties to avoid taxes.
3. Switzerland is a tax haven.  Switzerland is a high tax country.  Each canton (which is similar to a state) determines the income tax for businesses in that canton. There is no Swiss federal income tax.  

Please enjoy a sample of the audiobook below by clicking on the play button.

IRS Updates Foreign Trust Tax Planning and Reporting

Offshore Trust International Tax Strategy and Planning is a sophisticated concept used by the wealthy. Learn more in my book, International Taxation in America, available at Amazon.

Offshore Trust International Tax Strategy and Planning is a sophisticated concept used by the wealthy. Learn more in my book, International Taxation in America, available at Amazon.

There are many legitimate reasons why you might create a foreign trust or have transactions with a foreign trust.  

 Foreign trusts can be a wonderful foreign tax planning entity.   They can protect assets.  They can give you control of how your heirs will manage their inheritance.  Lastly, a trust can move from country to country.    This called a change of trust situs. 

The IRS has updated their website. I assembled the information below from various IRS web pages.  The IRS updated information is in blue below.
If you need to learn more ways to save taxes, then get my easy to read book from Amazon on this link for $9.50.

 Here are the key concepts:
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New IRS Attack on Gains Realized by Nonresident Alien Individuals on Sale Stocks, Bonds and Real Estate

Domestication of a foreign trust

Applying for an IRS ruling on your international tax planning will save you taxes in the long run.

International tax strategies for investing in U.S. real estate is tricky.  

Luckily for my readers, IRS international tax attorney,  Barbara A. Felker,  has written a letter (in some cases the IRS National Office will write letters to other government employees).

This letter discloses a new IRS secret attack on the foreign investor in real estate and the U.S. stock market.   To protect oneself, the non-citizen should not own or lease a home in the U.S. 

We found the letter and are providing it to our readers.  I have added annotations explaining some of the foreign tax planning issues and the IRS attack.

This letter shows a new international tax trap that the IRS is developing.  This letter is attacking two types of income.  The blog discusses the sale of real estate.  The IRS is trying to increase the tax rate from 20% to 30% with this new concept.

 This letter is full of tax jargon.  The concept is this.  If a non-citizen has a “tax home” in the U.S., he is doomed.

A “tax home” is  considered by the IRS to be his principal place of business or “post of duty.” Where the individual  maintains his family home or abode is ignored.  <1>

However, if the individual does not have a regular or main place of business because of the nature of his work, then the tax home is the place where he regularly lives, or the taxpayer is considered homeless for U.S. tax purposes.

 Many people are homeless for U.S. taxes.  Consider Hans. He s has a home in California, an apartment on the World Yacht, a home in Norway and a home in Singapore.  He is retired. He has no tax home.

 At the end of this blog, read what happens if the California home is a working ranch.

UIL: 9431.02-00
Release Date: 3/25/2016

Date: February 5, 2016

Refer Reply To: CC:INTL:B03: GENIN-122050-15

Reference:
U.S. Taxation of Gains Realized by
Nonresident Alien Individuals

Dear * * *:

Gain on the sale of stock by nonresident alien individuals is not subject to tax by the United States, either under the Internal Revenue Code or under the terms of an income tax treaty to which the United States is a party.

However, some stock gains may be subject to U.S. tax under section 897 (treating gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a United States real property interest, including stock of a domestic corporation that is a United States real property holding corporation, as gain or loss effectively connected with a trade or business within the United States).  (Author note: all stock gains are taxable if the corporation’s primary asset is real estate in the U.S.).

Also, nonresident alien individuals may be subject to U.S. tax on stock gains in certain unusual factual situations described below. (Author note: this part is important).

Under section 865(a) of the Code, a United States resident’s gain from the sale of personal property (author note: real estate is not personal property) is U.S. source income, unless an exception applies.

For these purposes, a United States resident means a U.S. citizen or resident alien who does not have a tax home in a foreign country or a nonresident alien who has a tax home in the United States. Section 865(g)(1)(A)(i)(II).

Certain individuals who would otherwise be resident aliens under the substantial presence test of section 7701(b)(3) and Treas. Reg. § 301.7701(b)-1(c) may be treated as nonresident aliens if the individuals are “exempt individuals” whose days of presence are not counted for purposes of the test under section 7701(b)(5) and Treas. Reg. § 301.7701(b)-3. (Author note:  This is important tax planning).

Such an individual may nevertheless be a United States resident for purposes of section 865(g)(1)(A)(i)(II) if the individual’s “tax home” is in the United States  (author note: the tax planning is a double negative.  If you need, help contact me.  This means that the individual is a non-resident except for the taxation on the sale of stocks and bonds and real estate).

“Tax home” for this purpose is defined in section 911(d)(3) and Treas. Reg. § 1.911-2(b) as the individual’s regular or principal place of business, or his or her place of abode if he or she has no regular or principal place of business. 

A “foreign government-related individual” is an “exempt individual” whose days of physical presence are not counted under Treas. Reg. § 301.7701(b)-3(b) in determining residency would have a tax home in the United States because his or her regular or principal place of business or place of abode is in the United States.

Similarly, exempt individuals who are teachers, trainees, and students or foreign professional athletes may have a tax home in the United States and be treated as U.S. residents for purposes of section 865(a), even though their days of presence are not counted for purposes of the substantial presence residency test. Seehttps://www.irs.gov/Individuals/International-Taxpayers/Nonresident-Alien-Students-and-the-Tax-Home-Concept.

The source of a nonresident alien individual’s gain from personal property sales (including sales of stock of any company, irrespective of whether that company is a U.S. or non-U.S. resident company) would be the United States under the general rule of section 865(a) if the individual’s tax home is in the United States  (author note: here is the tax trap).

Similarly, Treas. Reg. § 1.865-2(a)(1) provides that a loss recognized on stock is allocated to the class of gross income on which gain from the sale of such stock would give rise in the hands of the seller.

Those nonresident alien individuals who both have a tax home in the United States and are present in the United States for 183 days or more are taxable on the excess of U.S.-source capital gain over a U.S.-source capital loss at a rate of 30 percent under section 871(a)(2).  (Author note:  I do not think this is correct  They are taxed the same as a U.S. citizen.  Capital gains are taxed at 20%),

However, that tax is not subject to withholding under section 1441, see Treas. Reg. § 1.1441-2(b)(2)(i). As noted above, such gains may be exempt from tax under the provisions of an applicable income tax treaty (author note: for example the United Kingdom – U.S. tax treaty; learn more on this link).

This information letter calls attention to certain general principles of the law. It is intended for informational purposes only and does not constitute a ruling. See Rev. Proc. 2016-1, § 2.04, 2016-1 I.R.B. 1 (Jan. 4, 2016).

If you have any additional questions, please contact * * * at * * *.

Sincerely yours, 
Barbara A. Felker
Branch Chief, Branch 3, Office of Associate Chief Counsel  (International)

Back to Hans. The man with the apartment on the World Yacht.  His home is California includes an avocado orchard.  

He has ranch hands on the property.  He sales commercially sales the avocado.  The home is his business tax home despite the fact that his primary home in Norway.

His retirement portfolio includes U.S. publically traded stocks.     Since the Great Depression, Congress has encouraged foreign investment into U.S. businesses.  The sale of stocks has been tax-free and still is tax-free.  But not for my client under this new IRS tax attack.

Since he has a business home, he is taxable on the sale of personal property.  Stocks are a type of intangible personal property.     

Thus, the IRS will want to tax him at 30% despite more than eighty years of Congressional intent. 

Your Author’s Footnotes

<1> IRS  Revenue . Ruling . 75-432, 1975-2 C.B. 60; Revenue  Ruling. 60-189, 1960-1 C.B.
60, amplified by IRS  Revenue . Ruling 83-82, 1983-1 C.B. 45.