April 28, 2017

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

April 28, 2017/ Ruchelman P.L.L.C.

This month, Astrid Champion, Nina Krauthamer, and Jennifer Lapper look briefly at several timely issues, including (i) instructions for Form 8975, Country-By-Country Report, and Schedule A, Tax Jurisdiction and Constituent Entity Information, for U.S.-based multinationals, (ii) tax breaks for midsized companies in China, (iii) an executive order calling for review of all I.R.S. regulations issued in 2016, with a view to their withdrawal, and (iv) the French Constitutional debate over penalties for nondisclosure of trust assets.

April 28, 2017

Valuation – More Art than Science

April 28, 2017/ Ruchelman P.L.L.C.

In a recent case, the Tax Court was asked to evaluate two Old Masters paintings from the 17th century. Sotheby’s provided the valuation for estate tax purposes on a gratuitous basis. The appraised value totaled $600,000 for the two works. The estate retained the same auction house to sell one of the paintings. The sale price at auction was $2.1 million before buyer’s premium, and the auction took place within 34 months of the issuance of the appraisal report. Kenneth Lobo and Nina Krauthamer explain why the court had no difficulty finding that the estate’s expert was not independent and that the subsequent sale was relevant

March 27, 2017

New Developments in the World of Reverse Like-Kind Exchanges

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

Tax planners to New York City real estate families understand that real estate should never be sold. Rather, it should be exchanged in a tax-free, like-kind exchange. The exchange can be bifurcated into two independent transactions – one a purchase and the other a sale – without affecting tax-free treatment, provided certain well identified rules are followed. Moreover, the replacement can be acquired before the sale of an existing parcel is effected. In a recent advisory opinion affecting property in New York State, the Department of Taxation and Finance issued a taxpayer-friendly advisory opinion involving real estate transfer tax exposure in a reverse like-kind exchange. Rusudan Shervashidze and Nina Krauthamer explain the ruling.

February 21, 2017

Insights Vol. 4 No. 2: Updates & Other Tidbits

February 21, 2017/ Ruchelman P.L.L.C.

This month, Astrid Champion and Nina Krauthamer look briefly at several timely issues, including (i) the expansion of the European Commission’s attack on illegal State Aid to the French multinational group Engie (formerly G.D.F. Suez), (ii) the request for review by the French Constitutional Court of the penalties imposed under Article 1736, IV bis of the French Tax Code, regarding the failure to disclose a connection with a foreign trust, and (iii) the decision of the European Commission in World Duty Free Group, which affirms the criteria for judging whether a measure by a Member State is selective in relation to certain companies and not others and, for that reason, constitutes illegal State Aid.

January 26, 2017

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

January 26, 2017/ Ruchelman P.L.L.C.

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.

January 26, 2017

Foreign Charities active in the U.S. – Public? Or Private Foundations?

January 26, 2017/ Ruchelman P.L.L.C.

Foreign nonprofit organizations have become more active in the U.S. in carrying out their charitable mandates. Such activities include performances in the U.S. by foreign artistic companies and the use by U.S. charities of technology and know-how developed by foreign charities. Fees earned by foreign charities could be subject to U.S. income or withholding taxes, but those taxes can be reduced or eliminated if specific procedures are followed. Much will depend on the status of organization as a “public charity” or a “private foundation,” terms that make reference to the organization’s funding sources. Nina Krauthamer and Galia Antebi explain the U.S. rules that are applicable.

November 30, 2016

Insights Vol. 3 No. 10: Updates & Other Tidbits

November 30, 2016/ Ruchelman P.L.L.C.

This month Sultan Arab, Nina Krauthamer, and Galia Antebi look briefly at several timely issues, including (i) a Swiss court order granting UBS the right to appeal an administrative order to disclose French client information to French tax authorities, (ii) the expansion of I.R.S. offshore tax avoidance investigations to banks in countries other than Switzerland, and (iii) a continuing controversy over the Common Consolidated Tax Base, known as the C.C.T.B., proposed by the E.U. Commission.

November 30, 2016

I.R.S. Adds New Theory Why Merger Termination Fees are Capital Rather than Deductible Costs

November 30, 2016/ Ruchelman P.L.L.C.

The I.R.S. and taxpayers have long argued whether fees paid by one party to another in a failed merger are capital costs or deductible costs. The consequences of capitalization may be severe, as sufficiently large capitalized costs may never be fully offset by future income. Recently, the I.R.S. enunciated a new theory in support of its capitalization position. Kenneth Lobo and Nina Krauthamer look at two recent internal memoranda indicating the I.R.S. will continue to characterize most merger termination costs as capital rather than deductible costs.

October 26, 2016

Insights Vol. 3 No. 9: Updates & Other Tidbits

October 26, 2016/ Ruchelman P.L.L.C.

This month, the authors look briefly at several timely issues, including (i) the filing of appeals briefs in two major cases lost by the I.R.S., Altera and Xilinx, (ii) recent competent authority activity between the U.S. and India, (iii) the future of U.K. automobile assembly plants operated by U.K. subsidiaries of Japanese automakers, and (iv) final State Department rules concerning the revocation of U.S. passports issued to individuals who have a seriously delinquent tax debt. Kenneth Lobo, Michael Peggs, Nina Krauthamer, and Sultan Arab contribute.

October 26, 2016

Estate of Bartell Offers Taxpayer Relief in a Reverse Deferred §1031 Exchange

October 26, 2016/ Ruchelman P.L.L.C.

Many countries provide a tax deferral benefit for property gains through the form of a reinvestment reserve. Although U.S. tax law does not provide reserves, it does permit a taxpayer to participated in a three-party exchange of properties that may offer deferral benefits that are comparable to a reserve. Most three-party exchanges involve a sale as the first step and a reinvestment of proceeds as the second step, but in some instances, the reinvestment may occur before the sale. The I.R.S. position on these reverse exchanges is that several enumerated hurdles must be overcome before tax deferral is allowed. However, as one recent U.S. Tax Court case demonstrates, the I.R.S. view is not the last word. Rusudan Shervashidze and Nina Krauthamer explain the holding in the case, place it in context, and suggest that it may offer hope for reverse three-party exchanges that do not meet I.R.S. guidelines.

October 26, 2016

Global Exchange of Information: How Does the U.S. Fit into the Puzzle? Meet the U.S. Foreign Trust

October 26, 2016/ Ruchelman P.L.L.C.

In the context of a model 1 I.G.A. under F.A.T.C.A., the U.S. undertakes certain reciprocal information exchanges. But reciprocal may not mean equal. This produces interesting results when a U.S. foreign trust is formed by a foreign individual. Galia Antebi and Nina Krauthamer compare C.R.S. reporting and F.A.T.C.A. reporting in the context of a U.S. foreign trust that invests in U.S. assets producing tax-free income for a foreign investor.

September 29, 2016

Insights Vol. 3 No. 8: Updates & Other Tidbits

September 29, 2016/ Ruchelman P.L.L.C.

Fanny Karaman, Galia Antebi, and Nina Krauthamer address recent developments involving (i) the U.S. Treasury Department’s Priority Guidance Plan in the international arena, (ii) the negotiation of a new income tax treaty between the U.S. and Ireland, and (iii) a recently discovered abuse when a disregarded L.L.C. owned by a single foreign member sells U.S. real estate.

June 30, 2016

Insights Vol. 3 No. 6: B.E.P.S. Around the World