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The Devil in the Detail: Choosing a U.S. Business Structure Post-Tax Reform

The Devil in the Detail: Choosing a U.S. Business Structure Post-Tax Reform

Prior to the T.C.J.A. in 2017, the higher corporate income tax rate made it much easier to decide whether to operate in the U.S. market through a corporate entity or a pass-thru entity. With a Federal corporate income tax rate of up to 35%, a Federal qualified dividend rate of up to 20%, and a Federal net investment income tax on the distribution of 3.8%, the effective post-distribution tax rate was 50.47%, before taking into account State and local taxes. With the post-tax reform corporate income tax rate of 21% and the introduction of the qualified business income and foreign derived intangible income deductions, the decision to choose a pass-thru entity is no longer apparent. In their article, Fanny Karaman and Nina Krauthamer look into some important tax considerations when choosing the entity for a start-up business in the U.S.

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Can Tax Authorities Demand Access to Audit Workpapers? Canadian Experience Follows U.S. Rule

Can Tax Authorities Demand Access to Audit Workpapers? Canadian Experience Follows U.S. Rule

Recent victories in litigation have allowed the Canada Revenue Agency to review tax accrual workpapers of Canadian corporations, provided the request for access is not a “fishing expedition” attempting to find issues.In the U.S., the I.R.S. has enjoyed that power for many years. Sunita Doobay of Blaney McMurtry L.L.P., Toronto, examines the scope and limitations of the Canadian decisions. Stanley C. Ruchelman reviews case law in the U.S., the role of FIN 48, and the purpose behind Schedule UTP (reporting uncertain tax positions), which surprisingly is designed to limit examinations of tax accrual workpapers.

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Failure to Prevent – The Future of Adviser Obligations

Failure to Prevent – The Future of Adviser Obligations

The concept of failure to prevent has grown from its roots in the U.S. Foreign Corrupt Practices Act and is making inroads into the responsibilities of tax advisers.  The recent trend begs the question, do advisors have a duty to prevent the evasion or improper reduction of tax or to report the activity in advance?  A team of international advisors looks at the evolution of obligations: Peter Utterström of Peter Utterström Advokat AB, Stockholm, looks at the origin of the concept.  Gary Ashford of Harbottle & Lewis, London, looks at recently adopted legislation in the U.K. imposing strict liability on advisers to naughty clients.  Lawrence Feld, Attorney at Law, New York, looks at its presence in the U.S. Swiss Bank Program of the Justice Department.  Dick Barmentlo of Jaegers & Soons, Amsterdam, addresses a recent case in the Netherlands that imposes civil liability on a Netherlands trust company and its employees for lost taxes suffered by the Dutch tax administration.

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US Tax Reforms - Anti-Abuse Regime for CFCs

Published on Out-law.com (March 2018).

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Reform of the U.S. Tax Regime – The Swiss Perspective

Published by Prager Dreifuss, Tax Newsletter (February 2018).

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Treasury Turns Back the Clock on 2016 Tax Regulations

Treasury Turns Back the Clock on 2016 Tax Regulations

On October 4, the “other shoe dropped” on eight regulations issued by the Obama administration in 2016 and January 2017.  These eight measures, which were first identified in an interim report to the president as unnecessary, unduly complex, excessively burdensome, or failing to provide clarity and useful guidance, will be withdrawn, revoked, or modified.  Stanley C. Ruchelman, Sheryl Shah, and Neha Rastogi identify the targets and explain the plans of the Treasury Department.

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Caveat Dominus: A Comparison of Post-Employment Entitlements in the U.S. and Italy When Executive Employment is Terminated Without Cause

Caveat Dominus: A Comparison of Post-Employment Entitlements in the U.S. and Italy When Executive Employment is Terminated Without Cause

When companies expand business operations across the Atlantic Ocean, various cultural differences between the U.S. and Europe come to the fore.  The most noticeable are found in the area of employment, and among those are expectations of the rights of employers, employees, and executives at the time of termination of employment.  George Birnbaum of the Law Offices of George Birnbaum P.L.L.C. and Ariane Rauber and Fabio Tavecchia of Palmer Studio Legale compare and contrast employee rights in the U.S. and Italy.

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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.

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

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.

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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.

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The Resurrection of Code §385: Treasury Department Revises Regulations on Related-Party Debt

The Resurrection of Code §385: Treasury Department Revises Regulations on Related-Party Debt

In 2016, the U.S. Treasury Department resurrected an area of the tax law that lay dormant for almost 40 years – the debt-equity regulations under Code §385. As we reminisce on the best of 2016, we offer detailed analysis of the new tax treatment adopted under Code §385. These comprehensive and detailed regulations address whether a debt instrument will be treated as true debt for U.S. income tax purposes or re-characterized, in whole or in part, as equity. 

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In the Matter of GKK 2 Herald LLC – Effects of the Step Transaction Doctrine

In the Matter of GKK 2 Herald LLC – Effects of the Step Transaction Doctrine

Clients that invest in U.S. real property have discovered that income tax planning for the structure is only once piece of the planning puzzle.  A second piece relates to the imposition of transfer taxes on the sale.  If the property is in New York City, planning must consider the real property transfer tax rules of both the city and New York State.  Both jurisdictions impose tax.  Rusudan Shervashidze looks at recent cases in the State of New York Division of Tax Appeals Tribunal and the New York City Appeals Tribunal involving the same plan, implemented by the same taxpayer, regarding the same parcel of real property.  For New York State purposes, the plan was successful.  However, for New York City purposes, the plan was overturned.  The statutes at the state and city level are almost identical.

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French v. U.S. Share-based Compensation Plans: A Comparative Analysis

French v. U.S. Share-based Compensation Plans: A Comparative Analysis

Share-based compensation incentives are commonly used by corporations worldwide.  Employees defer income or realize income immediately at a low value, and the employer accepts a deferred or reduced deduction for compensation expense.  Three or four key moments in the life of a stock-based compensation plan can be identified as taxable events: (i) the grant of share-based compensation, (ii) the exercise of an option, (iii) the “vesting” of the underlying shares, and (iv) their subsequent sale.  Fanny Karaman and Stanley C. Ruchelman explore tax treatment in France and the U.S. in the context of a French employee who participates in a French plan and is then assigned to the U.S.

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Contract Manufacturing in a US-Controlled Group

First published by the Canadian Tax Foundation in (2016) 24:7 Canadian Tax Highlights.

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U.S. Immigration Tax Planning – Covered Expatriates

Published in Taxes & Wealth Management by Thomson Reuters, Issue 9-1: February 2016. (p.14)

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IRS Faces House Concerns About BEPS Initiative’s Impact on U.S. Companies

Published in GGi FYI International News No. 4, Spring 2016 (p.12).

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The Peripatetic Client: What to Expect When a Foreign Settlor Becomes a U.S. Tax Resident

Published in GGi Insider No. 81, January 2016 (p.35).

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Lawyer Monthly: Expert Insight Into... TAX

Published in Lawyer Monthly, Issue 69-16: January 2016.

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Planning for Canadian Parents with U.S. Children

Published in Taxes & Wealth Management by Thomson Reuters, Issue 8-4: November 2015.

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President's Legislative Proposals

In late September, the Obama Administration released the tax revisions that are part of its Fiscal Year 2016 Budget Proposal (the Proposal). These changes are designed to provide deficit reduction measures through additional revenue increases and spending cuts. We explain the new twists to seasoned proposals. If enacted, the changes described in the Proposal could influence global patterns of investment and employment by U.S. multinationals.

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