January 24, 2021

French Treatment of Foreign Trusts

January 24, 2021/ Ruchelman P.L.L.C.

The French Trust Register was introduced in December 2013 by a law enacted to stop tax fraud and serious economic and financial crimes. In October 2016, the French Constitutional Court ruled that public access to the Trust Register was unconstitutional. In the period since that decision, French authorities have issued two rulings allowing a broad class of persons to gain access to trust data. including tax officers, customs officials, professionals having compliance duties to combat money laundering and terrorist financing, journalists, and N.G.O.’s. Dimitar Hadjiveltchev, Partner, Adea Meidani, Counsel, and Loïc Soubeyran-Viotto, Associate, all of CMS Francis Lefebvre Avocats in Paris, address recent events regarding French tax treatment of foreign trusts and beneficiaries. They begin with the trust register – who must report, what must be reported and who have access – and move on to explain the myriad of taxes that may be imposed on trusts, settlors, and beneficiaries including income tax on distributions, inheritance and gift taxes, and real estate wealth tax.

March 20, 2020

Variety Is the Spice of Life: Alternate Tax Structures for a U.S. Individual Disposing of Foreign Real Property

March 20, 2020/ Ruchelman P.L.L.C.

When U.S. individuals acquire personal use real property or fallow land located abroad, the property often is owned by a corporation. Typically, that decision is driven by local considerations, of one kind or another. However, corporate ownership poses income tax issues in the U.S. at the time the property or the shares are sold. Neha Rastogi, Nina Krauthamer, and Stanley C. Ruchelman explore various ways by which a sale can be effected and the U.S. tax considerations that result. The answers may not be what the client expects to hear, especially if the sale transaction is cast as a sale of real property by a foreign corporation.

January 24, 2020

A gRETT-able Situation: New Trends in German Real Estate Transfer Tax on Share Deals

January 24, 2020/ Ruchelman P.L.L.C.

For decades, the German Real Estate Transfer Tax Act ("gRETT Act") has imposed a transaction tax on the sale of real estate in Germany. In recent years, the tax has applied to the sale of shares that indirectly transfer real estate located in Germany. When initially enacted, a sale of all shares was taxable under the gRETT Act. In the year 2000, the triggering percentage was reduced to 95%. Last year, proposed legislation would have reduced the triggering percentage to 90%, but the draft bill was never enacted. In 2020, the triggering percentage may be reduced to as low as 75% or some other percentage whenever new legislation is adopted. Exactly what constitutes an indirect sale of German real estate is surprisingly broad, and unlike comparable taxes in other countries, the sales need not be related nor contemporaneous. In recent years, a populist clamor has arisen to broaden the scope of indirect transfers subject to the tax. Michael Schmidt of Schmidt Taxlaw, Frankfurt am Main, Germany, explains how and when the tax is imposed under current law and how it may be modified in the coming months.

November 20, 2019

Saving Clementine: Improving the Code §163(j) Deduction

November 20, 2019/ Ruchelman P.L.L.C.

While the proposed regulations amending Code §163(j) are helpful in many instances, they do not help certain taxpayers. Those that borrow funds to make investments in real estate through partnerships will find themselves on the wrong side of the tax reform provision that limits a taxpayer’s deduction for business interest to 30% of adjusted taxable income arising from the business. Exempt from the cap are (i) taxpayers having gross receipts that do not exceed $25 million and (ii) taxpayers engaged in, inter alia, a qualifying real property trade or business, or “R.P.T.O.B.” The election for exemption is irrevocable for as long as a taxpayer conducts the R.P.T.O.B. In their article, Andreas A. Apostolides, Nina Krauthamer, and Stanley C. Ruchelman identify the fact patterns that are problematic, explain why they are not covered, and suggest that the I.R.S. may wish to revisit this matter.

June 28, 2019

Qualified Opportunity Zones: Second Set of Proposed Regulations Offers Greater Clarity to Investors

June 28, 2019/ Ruchelman P.L.L.C.

The Opportunity Zone tax benefit, which was crafted as part of the 2017 tax reform, aims to encourage taxpayers to sell appreciated capital properties and rollover the gains into low-income areas in the U.S. One major benefit – reducing recognition of deferred gains by up to 15% – is available only to investments made before the end of 2019, although other benefits will continue to be available to later investments. The clock is ticking on the 15% reduction, and the I.R.S. is accelerating the issuance of guidance. In late April, the I.R.S. released a second set of proposed regulations that address many of the issues that were deferred in the initial set. They also address issues raised by written comments and testimony at the well-attended public hearing in February. In their article, Galia Antebi and Nina Krauthamer lead the reader through the important and the practical parts of the second set of guidance.

March 27, 2017

Basis Planning in the Usufruct and Bare Ownership Context

March 27, 2017/ Ruchelman P.L.L.C.

Concepts of usufruct and bare legal ownership are widely used estate planning tools by parents resident in civil law jurisdictions in Europe. However, when the next generation is resident in a common law jurisdiction such as the U.S., the results are not always pretty. Fanny Karaman and Beate Erwin examine the tax consequences for the U.S. children and the steps available to the European parents that may limit adverse tax consequences in the U.S.