June 14, 2018

Vol. 5 No. 5: Updates and Other Tidbits

June 14, 2018/ Ruchelman P.L.L.C.

This month, Rusudan Shervashidze and Nina Krauthamer look at several interesting updates and tidbits, including (i) limited relief for transition tax, (ii) a new twist to phishing that involves fake I.R.S. calls, (iii) another twist on phony correspondence requesting W-8BEN information that is used to obtain persona information often used by banks to confirm identities of customers, and (iv) new FinCEN money transmitter rules that apply to I.C.O.’s.

May 09, 2018

Insights Vol. 5 No. 4: Updates & Other Tidbits

May 09, 2018/ Ruchelman P.L.L.C.

This month, Tomi Oguntunde and Nina Krauthamer look briefly at several recent developments in international tax: (i) the Financial Accounting Standards Board continues to study the effect of the recent tax reform legislation on quarterly and annual reports, (ii) winners and losers under the recent tax reform legislation, and (iii) South Dakota v. Wayfair, Inc., a case involving the right of a state to impose an obligation on out-of-state internet retailers who maintain a “digital presence” in the state through internet sales.

May 09, 2018

I.R.S. Notice 2018-28 Announces Code §163(j) Regulations on Interest Payment Deductions

May 09, 2018/ Ruchelman P.L.L.C.

Prior to recent tax reform legislation, Code §163(j) was an earnings stripping provision that placed a cap on interest expense deductions on debt instruments held or guaranteed by foreign related persons that were not subject to full 30% withholding tax on U.S.-source interest income or guarantee fees. Under the T.C.J.A., Code §163(j) is now simply a cap on all business interest expense. Notice 2018-28 addresses open matters arising from the change. This includes the carryover of disallowed interest from prior years to 2018, the Super-Affiliation Rules under the new law, and the loss of excess limitation carryforwards. Elizabeth V. Zanet and Beate Erwin explain these and other items in the Notice.

May 09, 2018

A Comparative View of the Principal Purpose Test – U.S. Tax Court v. B.E.P.S.

May 09, 2018/ Ruchelman P.L.L.C.

In a post-B.E.P.S. world, aggressive tax planning is a mortal sin. If a principal purpose or a main purpose of entering a transaction is tax avoidance, the tax benefits are lost. A ruling in a recent pre-trial hearing in the U.S. Tax Court addressed a clearly abusive transaction aimed at importing high-basis, low-value assets into a U.S. partnership so that the U.S. investors could benefit from losses on nonperforming loans. The I.R.S. moved for summary judgment in its favor, but the motion was denied. Under applicable case law, a transaction can be respected even if it is tax motivated as long as economic substance is present. Consequently, the taxpayer is entitled to a day in court, even if the prospect of victory is slim. Rusudan Shervashidze and Stanley C. Ruchelman compare the approach followed by the U.S. Tax Court with the principal purpose test rules of the A.T.A.D. and B.E.P.S.

May 09, 2018

Code §962 Election Offers Benefits Under U.S. Tax Reform

May 09, 2018/ Ruchelman P.L.L.C.

Two provisions in the recent tax reform legislation – Code §§965 (transition tax) and 250 (50% deduction for G.I.L.T.I.) – focus on C.F.C.’s and their U.S. Shareholders. In each case, corporate U.S. Shareholders are entitled to a deduction that is not granted to an individual with regard to income that is taxed under Subpart F. However, Code §962 may allow an individual who is a U.S. Shareholder of a C.F.C. to elect to be taxed on the Subpart F Income as if a corporation. This allows for tax at a lower rate and a foreign tax credit for corporate income taxes paid by the C.F.C. Elizabeth V. Zanet and Galia Antebi explain the workings of Code §962 and focus on the position of naysayers who caution that it may not provide the relief it appears to provide.

May 09, 2018

New Tax Treaty Between France and Luxembourg: French Tax Implications for Investors

May 09, 2018/ Ruchelman P.L.L.C.

France and Luxembourg signed a new double tax treaty on income and capital in late March. Ratification by the end of the year is anticipated. The new treaty reflects the current post-B.E.P.S. environment. Among other things, the residence definition is tightened, the test for the existence of a permanent establishment is loosened, real estate funds face higher withholding tax, a credit method is adopted to avoid double taxation. Christophe Jolk, Attorney at Law, Paris, explains the implications for investors.

May 09, 2018

Failure to Prevent – The Future of Adviser Obligations

May 09, 2018/ Ruchelman P.L.L.C.

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.

April 01, 2018

Insights Vol. 5 No. 3: Updates & Other Tidbits