Published in The Licensing Journal vol. 37, no. 9 (October 2017): pp. 11-18.
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Publications
Members of Ruchelman P.L.L.C. contribute to publications throughout the world and the Firm’s monthly tax journal, Insights.
Other Publications
Insights
Publications
A Case of Nonacquiescence: I.R.S. Opposes Bartell Decision
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Tax-smart investors in U.S. real estate understand that the principal method of disposing real property is to participate in a two-party swap transaction with the ultimate purchaser or a three-party deferred swap through a qualified intermediary. In Bartell v. Commr., the U.S. Tax Court allowed a replacement property to be purchased by an exchange accommodation title holder with whom it was parked for 17 months prior to its transfer. However, the I.R.S. has issued a notice of nonacquiescence, advising taxpayers that it disagrees with the holding of the court. Rusudan Shervashidze and Nina Krauthamer explain the facts in Bartell, the safe harbor that was published in Rev. Proc 2000-37, and the status of the facilitator as a beneficial owner for purposes of allowing tax deferral in the swap transaction.
Read MoreEaton A.P.A. Cancellations Were an Abuse of I.R.S. Discretion
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A recent U.S. Tax Court decision involving Eaton Corporation affirmed that the I.R.S. cannot arbitrarily circumvent administrative rules that are set down in revenue procedures and relied upon by the I.R.S. and a taxpayer. As a result, the I.R.S. must reasonably exercise its discretion when seeking to terminate an advance pricing agreement with a taxpayer. Michael Peggs looks at the process of obtaining an advanced pricing agreement and comments on the court’s decision.
Read MoreO.E.C.D. Issues Proposed Changes to Permanent Establishment Provisions Under Model Tax Convention
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Earlier this year, the O.E.C.D. proposed amendments to Article 5 (Permanent Establishment) of the Model Tax Convention and Commentary. The revisions eliminate loopholes that exist for commissionaire arrangements, artificial characterization of core activities as “preparatory,” avoidance of permanent establishment status through artificial fragmentation of contracts, and the use of not-so-independent agents. Neha Rastogi, Beate Erwin, and Stanley C. Ruchelman explain the replacement provisions.
Read MoreBilateral Investment Treaties: When Double Taxation Agreements Are Not Enough
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The U.S. enters into bilateral investment treaties to protect and promote foreign investment. Unlike double taxation agreements, which relate exclusively to tax matters, they are not usually seen as a defense mechanism when dealing with foreign tax authorities. Interestingly, they are! Rusudan Shervashidze and Nina Krauthamer explain.
Read MoreTax 101: Deemed Annual Royalty on Outbound Transfers of I.P. to Foreign Corporations
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U.S. tax law contains provisions that attempt to discourage the outbound migration of intangible assets including specific rules that target transfers affected through corporate inversions. Elizabeth V. Zanet and Stanley C. Ruchelman discuss the history and current standing of those provisions, while pointing out an alternative that is currently available to limit ongoing tax liability in the context of a start-up operation.
Read MoreTax Roulette: Buying a Business Jet in 2017 – Why Following the Patriot’s Example May Lead to a Jackpot
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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 MoreIndia: Legal and Practical Strategies for Managing Tax Disputes
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Most readers of this journal are front-end tax planners, proposing plans to be implemented by clients. Regrettably, not all plans escape examination by the tax inspector, and in India, that number is on the rise. Sanjay Sanghvi of Attorneys Khaitan & Co., Mumbai explains how to prepare for a tax examination in India and provides practical insights into the examination, appeals, and judicial review processes.
Read MoreThe Economic Substance Doctrine: A U.S. Anti-Abuse Rule
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While the O.E.C.D. and the European Commission have only recently discovered the “principal purpose” test as a tool to combat aggressive tax planning, U.S. case law has enforced an economic substance rule for over 85 years and that rule was codified in 2010. Fanny Karaman, Neha Rastogi, and Stanley C. Ruchelman explain the hurdles that must be achieved in order for a plan to have economic substance.
Read MoreSpontaneous Exchange of Tax Rulings – The Swiss Angle
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Most – but not all – global tax advisers know that the tax planning universe has changed. The few holdouts hoping that the old ways may yet be available were disappointed, again, when Switzerland announced procedures for the spontaneous exchange of tax rulings. Rulings issued on and after January 1, 2010, will be exchanged beginning January 1, 2018. Michael Fischer and Marc Buchmann of Attorneys Fischer Ramp Partner AG, Zurich, explain the new procedures and how taxpayers may take steps to stop the spontaneous exchange of existing rulings.
Read MoreInsights Vol. 4 No. 8: Updates & Other Tidbits
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This month, Neha Rastogi and Nina Krauthamer look briefly at certain timely issues: (i) a European parliament proposal to extend the scope of country-by-country (“CbC”) reporting by group members when the group parent is not obligated to report and (ii) regulations identified by the I.R.S. as imposing undue burden on taxpayers.
Read MoreWhen the (Fake) I.R.S. Calls – Memoirs of the Tax Phishing World
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“Phishing.” Many have heard the word, which is used to describe scams intended to acquire sensitive information. Few are prepared to be its target. Unwary individuals are often drawn in by scammers pretending to call from the I.R.S. and threatening imprisonment unless a bogus tax bill is paid promptly. Rusudan Shervashidze offers insights into the workings of these scammers, relaying her personal experience with an “I.R.S.” phishing call and providing tips to avoid falling into one of these traps.
Read MoreForeign Partner Not Subject to U.S. Tax on Gain from Redemption of U.S. Partnership Interest
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Hurray! After three years, the U.S. Tax Court ruled that gain from the sale of a partnership interest or the receipt of a liquidating distribution by a retiring partner is not subject to U.S. income tax even though the partnership conducts business in the U.S. Neha Rastogi, Elizabeth V. Zanet, and Nina Krauthamer explain the reasoning behind the decision and the magnitude of the defeat for the I.R.S. Unless the case is reversed on appeal, the decision invalidates the I.R.S. position announced in Rev. Rul 91-32.
Read MorePancake Day – End to Permanent Non-Domicile Status and Charging Non-Doms I.H.T. on U.K. Residential Property
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In July, the U.K. government announced that proposals removed from the Finance Bill that was announced in March would be reproposed with a retroactive effective date, as if adopted when originally proposed. This is bad news for non-domiciled individuals (“Non-Doms”) in general and for the estates of Non-Doms who died between March and the ultimate date of enactment. If retroactive effective dates remain in the bill, rights granted by the European Convention for the Protection of Human Rights and Fundamental Freedoms, which were incorporated into U.K. law by the Human Rights Act 1998, could be violated. William Hancock and Daniel Simon of Collyer Bristow L.L.P. explain that Non-Doms should expect “too little jam and too little cream” on their pancakes if the provisions are enacted retroactively.
Read MoreTax 101: Taxation of Intellectual Property – Selected Issues Involving Corporations and Partnerships
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Tax 101 continues its series regarding the U.S. Federal tax considerations involving the creation, acquisition, use, license, and disposition of intellectual property (“I.P.”). This month, Elizabeth V. Zanet and Stanley C. Ruchelman focus on I.P. held through a corporation or a partnership/L.L.C. In particular, the not-well-understood rules regarding the sale of interests in a partnerships/L.L.C.’s owning “hot assets” are explained. Not all gain benefits from favorable long-term capital gains tax rates.
Read MoreEuropean Commission Proposes New Advisor Disclosure Obligation for Aggressive Tax Planning
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In June, the European Commission proposed a set of rules calling on tax advisers to report aggressive tax plans submitted to clients. The proposal identifies the hallmarks of aggressive plans and provides rules for the timing of reports and the exchange of information within Europe. Fanny Karaman and Stanley C. Ruchelman explain.
Read MoreI.R.S. Explains “Substantially Complete” in Relation to International Information Return
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Taxpayers having cross-border operations are confronted with numerous tax information forms to be filed as part of the annual tax return. Because the forms are not directly used to compute taxable income, they frequently are completed at the last minute and with less attention to detail. However, the I.R.S. imposes penalties for filing an incomplete form. Taxpayers faced with asserted penalties often argue that the forms are substantially complete. In a recent International Practice Unit (“I.P.U.”) issued by the Large Business & International Division of the I.R.S., the I.R.S. view regarding substantially complete form was explained. Not surprisingly, the I.R.S. view is significantly different from taxpayer expectations. It also differs from holdings in several Tax Court decisions involving other forms. Neha Rastogi and Stanley C. Ruchelman discuss the I.P.U. in detail.
Read MoreFamily Limited Partnerships in Estate Planning – Is Estate of Powell the End or the Beginning of Aggressive Tax Planning?
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When transactional tax advisers come across estate planning advice, amazement is often expressed over the importance given to form rather than economic substance. Value can be reduced when property is transferred to a family partnership. In Estate of Powell, the Tax Court went beyond form to look at substance in determining the scope of the decedent’s taxable estate. Galia Antebi and Rusudan Shervashidze explore the holding of the case.
Read MoreCircular Letter No. 17/E Clarifies Special Tax Regime for Italian “New Residents”
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Late last year, the Italian government enacted a new regime designed to entice wealthy individuals into becoming tax residents. In late May, operating rules for the new tax regime were announced. In broad terms, the regime imposes an annual tax charge of €100,000 in lieu of tax imposed at standard rates and an exclusion from inheritance and gift tax on foreign assets. Andrea Tavecchio and Riccardo Barone of Tavecchio Caldara & Associati in Milan, Italy explain the details of the new regime.
Read MoreCaveat Dominus: A Comparison of Post-Employment Entitlements in the U.S. and Italy When Executive Employment is Terminated Without Cause
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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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