Browse Articles:   By Category   /   By Author
HIDE

Other Publications

Insights

Publications

Tax Roulette: Buying a Business Jet in 2017 – Why Following the Patriot’s Example May Lead to a Jackpot

/
Tax Roulette: Buying a Business Jet in 2017 – Why Following the Patriot’s Example May Lead to a Jackpot

The New England Patriots recently made headlines with the purchase of two private team jets.  Was this plan implemented only to provide more space for beefy footballers, or did ownership identify the nifty situation that could lead to a jackpot of tax savings for high-ticket assets purchased in 2017?  Beate Erwin and Stanley C. Ruchelman explain that with increased depreciation deductions this year at high tax rates and possible recapture in a future year at low tax rates, the odds are good.

Read More

Insights Vol. 4 No. 6: Updates and Tidbits

/

This month, Beate Erwin, Astrid Champion, and Nina Krauthamer look briefly at several timely issues, including (i) the return of foreign certified acceptance agents to the passport certification process in connection with the issuance of U.S. I.T.I.N.’s, (ii) the effect of the French election on French tax reform proposals, and (iii) demands for the U.S. to provide the same type of information as is supplied to I.G.A. partner countries.

Read More

Sale of a Partnership Interest by a Foreign Partner – Is Rev. Rul. 91-32 Based on Law or Administrative Wishes?

/
Sale of a Partnership Interest by a Foreign Partner – Is Rev. Rul. 91-32 Based on Law or Administrative Wishes?

The I.R.S. has a long history in misapplying U.S. tax rules applicable to a sale of a partnership interest.  For U.S. tax purposes, a partnership interest is treated as an asset separate and apart from an indirect interest in partnership assets.  In Rev. Rul. 91-32, the I.R.S. misinterpreted case law and Code provisions to conclude that gains derived by foreign investors in U.S. partnerships are subject to tax.  No one thought the I.R.S. position was correct, but then, in a field advice to an agent setting up an adjustment, the I.R.S. publicly stated that the ruling was a proper application of U.S. law when issued and remains so today. The adjustment was challenged in the Tax Court, and the tax bar is eagerly awaiting a decision.  Stanley C. Ruchelman and Beate Erwin examine the I.R.S. position, the string of losses encountered by the I.R.S. when challenged by taxpayers, and the Grecian Magnesite case awaiting decision.

Read More

Qualified Small Business Stock & the EB-5 Visa Program – An Attractive Combination for Potential Investors

/
Qualified Small Business Stock & the EB-5 Visa Program – An Attractive Combination for Potential Investors

Ever heard of qualified small business stock (“Q.S.B.S.”) as a means of investing in start-up companies?  Although it is not typically thought of as a tax planning tool for foreign investors, when the foreign person is an applicant for an EB-5 visa, the tax results can be surprisingly good.  Fanny Karaman and Beate Erwin explain.

Read More

Code §163(J) – Ignoring U.S. Thin Capitalization Rules May Leave Tax Advisors Thinly Prepared for Audits

/
Code §163(J) – Ignoring U.S. Thin Capitalization Rules May Leave Tax Advisors Thinly Prepared for Audits

B.E.P.S. Action 4 focuses on the need to address base erosion and profit shifting using deductible payments, such as interest, that can give rise to double nontaxation in inbound and outbound investment scenarios. The U.S. addressed this problem many years ago with Code §163(j).  In light of recent I.R.S. guidance providing a step-by-step plan to assist auditors when analyzing interest payments, non-U.S. practitioners should be aware of the thin capitalization debt rules when planning for multinational structures.  Kenneth Lobo and Beate Erwin explain how the provision works in general and in several illustrative fact patterns. 

Read More

Basis Planning in the Usufruct and Bare Ownership Context

/
Basis Planning in the Usufruct and Bare Ownership Context

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.

Read More

Accumulated Earnings Tax Will Hit Taxpayers, Despite Lack of Liquidity or Control

/
Accumulated Earnings Tax Will Hit Taxpayers, Despite Lack of Liquidity or Control

Even absent a distribution, shareholders of U.S. corporations may, under certain circumstances, be subject to a second layer of tax: the accumulated earnings tax (“A.E.T.”).  The tax is imposed on the accumulation of earnings beyond the reasonable needs of the business.  Although rarely imposed on well-advised taxpayers, the A.E.T. could become increasingly important if the tax rate disparity between the corporate and individual income taxes increases under proposals put forth by the current administration.  Fanny Karaman and Beate Erwin look at a recent Chief Counsel Advice Memorandum where the absence of liquidity within the corporation was found to be an irrelevant factor in determining that earnings were unreasonably accumulated by the corporate taxpayer.

Read More

Insights Vol. 4 No. 1: Updates & Other Tidbits

/

This month, we look briefly at several timely issues, including (i) the termination of foreign acceptance agent agreements used to confirm copies of passports outside the U.S. when a non-U.S. individual obtains an I.T.I.N., (ii) a court order in Canada upholding a demand for disclosure of client names and documentation relating to participation in a discredited tax shelter, (iii) E.U. steps that identify potentially blacklisted low-tax or no-tax countries, and (iv) worsening relations between the U.S. and the E.U. stemming from widening differences in tax policies.

Read More

Transfer Pricing Adjustment Does Not Reduce Dividend Received Deduction from C.F.C.

/

When the I.R.S. successfully maintains an adjustment to transfer pricing within an intercompany group, taxable income is increased to one participant but cash remains at the level that existed at year-end prior to the I.R.S. adjustment.  To avoid a second tax adjustment, the party with excessive cash – as determined after the I.R.S. adjustment – may be treated as if it incurred an account payable, which can be repaid free of additional tax.  In Analog Devices, the I.R.S. attempted to argue that the account payable of the C.F.C. should be treated as an actual borrowing.  The effect of an actual borrowing limited the favorable tax treatment under Code §965.  That provision temporarily allowed an 85% dividends received deduction for a U.S. corporation receiving a dividend from a controlled foreign corporation.  The Tax Court disagreed with the I.R.S. position. Kenneth Lobo and Beate Erwin explain.

Read More

Trump and the Republican-Led Congress Seek Overhaul of International Tax Rules

/
Trump and the Republican-Led Congress Seek Overhaul of International Tax Rules

Elizabeth V. Zanet and Beate Erwin compare the proposals that comprise the Trump tax plan and the House Republican Tax Reform Blueprint, which will be submitted to Congress as part of a massive overhaul of U.S. tax law.  Tax rates for individuals and corporations would likely be lowered, the standard deduction would be increased, and capital gains tax rates would remain at the same level.  The net investment income tax would be repealed.  The estate tax and generation skipping tax would be repealed.  The gift tax would remain.  Other provisions are discussed, also.

Read More

European State Aid: The Makings of A Global Trade War

/
European State Aid: The Makings of A Global Trade War

This month, we reminisce on the best of 2016, with articles on the brewing transatlantic trade war disguised as European Commission attacks on illegal State Aid given to U.S.-based groups.

Read More

Treasury Attacks European Commission on State Aid – What Next?

/

On August 30, 2016, the European Commission ordered Ireland to claw back €13 billion ($14.5 billion) plus interest from Apple after favorable Irish tax rulings were deemed to be illegal State Aid.  The U.S. Treasury Department issued a white paper shortly before the decision staking out the reasons why the European Commission crusade is unjustified, especially in relation to its retroactive effect.   This trans-Atlantic conflict is placed in context in an article by Kenneth Lobo and Beate Erwin.

Read More

O.E.C.D Targets Hybrid Mismatch Arrangements Using Branch Structures

/

Advisers who took comfort in the belief that the B.E.P.S. Project’s attack on hybrid mismatches did not apply to transactions between two branches of the same entity were disappointed when the O.E.C.D. released draft recommendations for domestic law that would neutralize income inclusion mismatches using branches located in different countries.  Kenneth Lobo and Beate Erwin explain that D/NI, DD, and indirect D/NI outcomes are not legitimized when branches, rather than affiliates, are used.

Read More

E.U. State Aid – The Saga Continues

/

For several years, the European Commission has been on a mission to raise on a retroactive basis the income tax of large corporations that received favorable tax rulings from national authorities. Using as its tool the rules prohibiting State Aid, the Commission has gone after Fiat Chrysler, McDonald’s, Starbucks, and others.  Christine Long and Beate Erwin explore the Commission’s latest push and the outcry it is causing on both sides of the Atlantic.  Luxembourg and the Netherlands have appealed recent rulings and the mood in Washington, D.C. is chilly, at best.

Read More

U.S. Tax Residency Certification and Spanish Withholding Tax: Early Application Recommended

/

Global taxpayers live in a process driven world. It is not enough to be correct when claiming a benefit, the paperwork must be completed.  In a detailed article on proper procedure, Beate Erwin and Christine Long explain that U.S. persons claiming treaty tax benefits with regard to payments from Spanish entities face two hurdles. First, they must meet the treaty qualification tests under the limitation on benefits article. Second, they must obtain a U.S. Tax Residency Certification from the I.R.S. before payment is met.

Read More

On the Blacklist – Is Delaware a Tax Haven?

/

One of the fallouts of the Panama Papers is a European call for a blacklist of countries that fail to meet the O.E.C.D. C.R.S. standards.  The European Parliament and several E.U. Member States contend that if the U.S. should be declared a tax haven and added to the European Commission’s new blacklist if it does not implement the C.R.S. and B.E.P.S. Project recommendations.  Are these contentions based on fact or on political agenda?  Christine Long and Beate Erwin explain a trend that that is inching towards an outright trade war.

Read More

Final Regulations Limit Importation of Built-In Losses

/

In the heyday of tax shelters, transactions involving transfers of low value assets with high tax bases were elevated to an art form. The fervor effectively ended when the American Jobs Creation Act of 2004 enacted anti-loss importation provisions under Code §§334(b)(1)(B) and 362(e)(1). In March, the I.R.S. issued final regulations to stop base erosion through shifting of loss property into the U.S. Christine Long and Beate Erwin explain all.

Read More

What Is a Corporate Business Purpose for a Tax-Free Corporate Division?

/

As Insights continues to look at various provisions of the Internal Revenue Code applicable to corporate reorganizations and divisions, Elizabeth V. Zanet and Beate Erwin delve deeper into the requirements to address an eternal question relating to a tax-free spin-off.

Read More

Insights Vol. 3 No. 3: Updates & Other Tidbits

/

In the March 2016 edition of Insights, Kenneth Lobo, Sheryl Shah, and Beate Erwin look at the following recent developments: (i) an A.B.A. recommendation for higher Cuban compensation for seized U.S. businesses, (ii) U.S. inversions and European State Aid investigations targeting U.S. companies, (iii) an increase in the stakes faced by Coca Cola in its transfer pricing dispute with the I.R.S., and (iv) the U.K. reaction to the Google Settlement tax payment.

Read More

Apple in Europe – The Uphill Battle Continues

/

U.S. multinationals are the target of a global trade war initiated by the European Commission, resulting from its attack on State Aid in the form of advance rulings. Christine Long and Beate Erwin explain the latest developments and the brewing response in the U.S. Congress.

Read More