The June 3rd deadline for FATCA FFI registration to be included on the July 1 GIIN list has come and now gone. In the past two weeks, only four additional IGAs have been added to the list (Turkey, Seychelles, UAE and Barbados) so that as of Tuesday June 3, 2014, only 70 FATCA IGAs have been signed or treated as if signed. These 70 include 29 signed Model 1s with another 34 treated as if signed, and 5 signed Model 2s with 2 treated as if signed. (Thank you to reader Alain Thielemans who alerted me to the two new IGAs published by Treasury today before I posted this story).
140 IGAs still left to be agreed by Treasury?
The USA recognizes 196 independent states in the world (the IRS recognizes Palestine as a State according to the 23 State of Palestine FFIs on the IRS FATCA list, otherwise the State Department only recognizes 195, at least according to its website), 67 dependencies of states, and has contacts with Taiwan. But not each of these 67 dependencies requires an IGA. 14 of these jurisdictions are dependencies of the United States for which the financial institutions are not included in the definition of “foreign financial institutions” subject to FATCA registration.
Approximately 16 dependencies of the remaining 53 have both local responsibility with regard to tax policy and more than de minimis US source income exposure, such as investments in US Treasuries, for the local authorities to seek an IGA. Such dependencies include by example Bermuda, Cayman Islands, and Hong Kong. Taiwan has its own peculiar status, claiming to represent the central government of greater China (the US of course recognizes Beijing). Other dependencies, like the French departments of French Guiana, Guadeloupe, Martinique, Mayotte and Reunion, do not have local responsibility for fiscal policy and thus are protected within the IGA of the parent-state. And a host of dependencies, such as Antarctica and various atolls, have no (current) global economic relevance.
Yet interestingly, even the British Indian Ocean Territory has a registered FATCA financial firm, albeit a Russian financial institution AK BARS Investments Corporation (see http://www.akbars.ru/en/about/). Falkland Islands even had a registration, a branch, as did Wallis and Futuna (a French Pacific territory).
Thus, 196 recognized states and 16 economically relevant, semi-autonomous dependencies form the pool of 212 states and jurisdictions that probably need an IGA. As of June 3rd, 70 have an IGA recognized by US Treasury, leaving 142 without. FFIs in the remaining 140 countries and jurisdictions that did not register by today will have 30% withheld for Title IV (FATCA) purpose by US withholding agents who are gearing up their software systems to begin this withholding for payments made from July 1st.
How many FFIs did not register for FATCA (yet)?
FATCA Portal registration remains open, but the formal IRS deadline for inclusion on the July 1st GIIN list of participating foreign financial institutions (“PFFI”) passed. See my previous article about the May 5th deadline and consequences of its passing that applied to all FFIs in the non-IGA states and jurisdictions.
Did all the FFIs that are in the 142 countries and jurisdictions that do not have an IGA register for a GIIN? Not even close since only 77,353 registered by the May 5 deadline to be included on the June 2nd GIIN list, and 20% of those were Cayman Islands firms (see my article yesterday breaking down the list).
There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration. It is a range of as few as 80,000 entities that qualify as FFIs still need to register or complete registration for a GIIN, but it could be as many as 380,000 still need to register. The list of FFIs requiring registration includes by example trusts companies, investment funds, and banks. The IRS has said that “At this time, the full FFI list is expected to be less than 500,000 records.” If Cayman Islands is an indicator of a jurisdiction, then at 14,836 registered, the GIIN list will swell to the 500,000 figure by end of year.
BVI has 1,837 so far, 2.053 Netherlands financial firms registered, and nearly twice as many Swiss firms, 4,040, had GIINs. Liechtenstein only had 239 register. Of the BRIC countries, only 211 China firms were registered to date, 246 Indian ones, and 514 Russian ones, compared to 2,258 for Brazil.
It is possible that on July 1st an unregistered FFI is considered non-participating (NPFFI) for purposes of FATCA withholding, but by example, on August 1st its country agrees an IGA in substance that Treasury announces on its FATCA site and the NPFFI goes back to FFI non-withholding status because of the extension related to IGAs, at least until that final December 22 deadline mentioned in Announcement 2014-1. Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W8-BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.
Is the June 3rd Deadline a Drop-Dead Deadline?
Yes and No. The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.” (See Notice 2014-17, page 6: “FFIs that finalize their registrations after … June 3 may still be included on the … July 1 IRS FFI List; however, the IRS cannot provide assurance that this will be the case.”)
Yet, the IRS built in a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received:
§1.1471-3(e)(3)Participating FFIs and registered deemed-compliant FFIs—(i)In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added)
Do FFIs in IGA countries have an extension until December 22 for FATCA Registration?
Financial institutions (FFIs) in the 68 IGA countries have an extension to register with the IRS in order to obtain a GIIN and thus appear on the IRS’ FATCA compliant list. FATCA 30% withholding for FFIs in these Model 1 IGA countries and jurisdictions only begins January 1, 2015.
See Reg. § 1.1471-3(d)(4)(iv)(A): § 1.1471-3(d)(4)(iv) Exceptions for payments to reporting Model 1 FFIs.— (A) For payments made prior to January 1, 2015, a withholding agent may treat the payee as a reporting Model 1 FFI if it receives a withholding certificate from the payee indicating that the payee is a reporting Model 1 FFI and the country in which the payee is a reporting Model 1 FFI, regardless of whether the certificate contains a GIIN for the payee.
The situation of the last list to be published for 2014 and, more importantly, the last date to register as a Model 1 FFI to ensure being included on that list, is somewhat fluid. In the past 18 months, the IRS has several times amended its deadlines and its timelines for GIIN registration. Thus, it is at least feasible that another registration or withholding start date extension is granted before the end of 2014 (obviously Treasury will vehemently deny any more extensions on the horizon, but last year it did not expect a government shut down and this year it extended the registration date by at least 10 days weeks before the deadline of April 25).
Thus, while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015. (emphasis added)
However, at least one IGA country is suggesting an earlier (perhaps more prudent) date than December 22, 2014 for GIIN registration in order to be included on the IRS’ last 2014 FATCA compliant list. The United Kingdom’s Law Society and Institute of Chartered Accountants in May 2014 published combined guidance to members stating:
To ensure that the registration has been processed in time for inclusion on that list the last practical date for registration is 25 October 2014.
The IRS will release its final 2014 list of FATCA compliant financial institutions (thus not subject to FATCA 30% withholding on January 1, 2015 and onward) most likely on Wednesday, December 31, 2014 (according to the United Kingdom guidance quoted above), albeit it seems just as reasonable for a Friday, January 2 list to be released. The 90 day safeguard mentioned above is also in place for the IGA deadlines.
Jurisdictions that have reached agreements in substance and have consented to being included on this list (beginning on the date indicated in parenthesis):
Model 1 IGA – 34
Azerbaijan (5-16-2014)
Bahamas (4-17-2014)
Barbados (5-27-2014) <– new IGA agreed
Brazil (4-2-2014)
British Virgin Islands (4-2-2014)
Bulgaria (4-23-2014)
Colombia (4-23-2014)
Croatia (4-2-2014)
Curaçao (4-30-2014)
Czech Republic (4-2-2014)
Cyprus (4-22-2014)
India (4-11-2014)
Indonesia (5-4-2014)
Israel (4-28-2014)
Kosovo (4-2-2014)
Kuwait (5-1-2014)
Latvia (4-2-2014)
Lithuania (4-2-2014)
New Zealand (4-2-2014)
Panama (5-1-2014)
Peru (5-1-2014)
Poland (4-2-2014)
Portugal (4-2-2014)
Qatar (4-2-2014)
Romania (4-2-2014)
Seychelles (5-28-2014) <– new IGA agreed
Singapore (5-5-2014)
Slovak Republic (4-11-2014)
South Africa (4-2-2014)
South Korea (4-2-2014)
Sweden (4-24-2014)
Turkey (6-3-2014) <– new IGA agreed
Turks and Caicos Islands (5-12-2014)
United Arab Emirates (5-23-2014) <– new IGA agreed
Model 2 IGA – 2
Armenia (5-8-2014)
Hong Kong (5-9-2014)
Practical Compliance Aspects of FATCA and GATCA
The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters by 50 industry experts grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. A free download of the first of the 34 chapters is available at http://www.lexisnexis.com/store/images/samples/9780769853734.pdf
2 IGAs “agreed in substance” have been added this past week, importantly Hong Kong, and to the chagrin of Turkish diplomats – Armenia. The IGA with Gibraltar has also been released and thus added to the published list. This brings the total IGAs published and treated as in effect up to 64, comprised of 27 published Model 1, 5 published Model 2, while 30 Model 1 have been agreed in substance and 2 of the Model 2 agreed.
Yet, the important US foreign direct investment jurisdictions of China and Taiwan, as well as the Middle Eastern jurisdictions of United Arab Emirates and Saudi Arabia, remain deafeningly absent from the list as of May 9. Commentators do not think that Russia, given the geopolitical tension over the Ukraine and Crimea, will enter the IGA list by the July 1 start of FATCA withholding.
148 IGAs still left to be agreed by Treasury?
The USA recognizes 195 independent states in the world, 67 dependencies of states, and has contacts with Taiwan. But not each of these 67 dependencies requires an IGA.
Approximately 16 dependencies of the 67 have both local responsibility with regard to tax policy and more than de minimis US source income exposure, such as investments in US Treasuries, for the local authorities to seek an IGA. Such dependencies include by example Bermuda, Cayman Islands, and Hong Kong. Taiwan has its own peculiar status, claiming to represent the central government of greater China (the US of course recognizes Beijing). Other dependencies, like the French departments of French Guiana, Guadeloupe, Martinique, Mayotte and Reunion, do not have local responsibility for fiscal policy and thus are protected within the IGA of the parent-state. And a host of dependencies, such as Antarctica and various atolls, have no (current) global economic relevance.
Thus, 195 recognized states and 16 economically relevant, semi-autonomous dependencies form the pool of 212 states and jurisdictions that probably could benefit from an IGA. As of May 9th, 64 have an IGA recognized by US Treasury, leaving 148 without.
What if these 148 Non-IGA countries agree an IGA after July 1?
FATCA Portal registration remains open, but the formal IRS deadline for inclusion on the June 2nd GIIN list of participating foreign financial institutions (“PFFI”) passed May 5th. See my previous article about the May 5th deadline and consequences of its passing that applied to all FFIs in the non-IGA states and jurisdictions.
Did all the FFIs that are in the 148 countries and jurisdictions that do not have an IGA register for a GIIN? There is not one reliable number of how many financial entities in the world qualify as a financial institution requiring FATCA registration. Industry experts have put forward a reasonable range of 20,000 to 30,000 such entities that qualify as FFIs that still need to register or complete registration for a GIIN, though figures as high as 80,000 have been suggested (probably such estimates include branches in the count of financial institutions). The list of FFIs requiring registration includes by example trusts companies, investment funds, and banks.
It is possible that on July 1st an unregistered FFI is considered non-participating (NPFFI) for purposes of FATCA withholding, but by example, on August 1st its country agrees an IGA in substance that Treasury announces on its FATCA site and the NPFFI goes back to FFI non-withholding status because of the extension related to IGAs, at least until that final December 22 deadline mentioned in Announcement 2014-1. Model 1 IGA FFIs with a GIIN are classified as “Registered Deemed-Compliant Foreign Financial Institutions” (RDCFFI) on the new W8-BEN-E (see previous article) instead of as Participating Foreign Financial Institutions (PFFIs) pursuant to the regular FATCA FFI agreement and Model 2 IGA.
Was the May 5th Deadline a Hard Deadline?
Maybe Not. The IRS states the following on its FATCA Registration Portal: “the IRS believes it can ensure registering FFIs that their GIINs will be included on the July 1 IRS FFI List if their registrations are finalized by June 3, 2014.” (See Notice 2014-17, page 6: “FFIs that finalize their registrations after May 5 or June 3 may still be included on the June 2 or July 1 IRS FFI List, respectively; however, the IRS cannot provide assurance that this will be the case. The IRS will continue processing registrations in the order received; however, processing times may increase as the May 5 and June 3 dates approach.”)
Moreover, the IRS built in a 90 day safeguard for FFIs when a GIIN has been applied for but not yet received:
§1.1471-3(e)(3)Participating FFIs and registered deemed-compliant FFIs—(i)In general. … A payee whose registration with the IRS as a participating FFI or a registered deemed-compliant FFI is in process but has not yet received a GIIN may provide a withholding agent with a Form W-8 claiming the chapter 4 status it applied for and writing “applied for” in the box for the GIIN. In such case, the FFI will have 90 calendar days from the date of its claim to provide the withholding agent with its GIIN and the withholding agent will have 90 calendar days from the date it receives the GIIN to verify the accuracy of the GIIN against the published IRS FFI list before it has reason to know that the payee is not a participating FFI or registered deemed-compliant FFI. … (emphasis added)
Do FFIs in IGA countries have an extension until December 22 for FATCA Registration?
Financial institutions (FFIs) in the 64 IGA countries have an extension to register with the IRS in order to obtain a GIIN and thus appear on the IRS’ FATCA compliant list. FATCA 30% withholding for FFIs in these Model 1 IGA countries and jurisdictions only begins January 1, 2015. See Reg. § 1.1471-3(d)(4)(iv)(A):
§ 1.1471-3(d)(4)(iv)Exceptions for payments to reporting Model 1 FFIs.— (A)For payments made prior to January 1, 2015, a withholding agent may treat the payee as a reporting Model 1 FFI if it receives a withholding certificate from the payee indicating that the payee is a reporting Model 1 FFI and the country in which the payee is a reporting Model 1 FFI, regardless of whether the certificate contains a GIIN for the payee.
The situation of the last list to be published for 2014 and, more importantly, the last date to register as a Model 1 FFI to ensure being included on that list, is somewhat fluid. In the past 18 months, the IRS has several times amended its deadlines and its timelines for GIIN registration. Thus, it is at least feasible that another registration or withholding start date extension is granted before the end of 2014 (obviously Treasury will vehemently deny any more extensions on the horizon, but last year it did not expect a government shut down and this year it extended the registration date by at least 10 days weeks before the deadline of April 25).
Thus, while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015. (emphasis added)
However, at least one IGA country is suggesting an earlier (perhaps more prudent) date than December 22, 2014 for GIIN registration in order to be included on the IRS’ last 2014 FATCA compliant list. The United Kingdom’s Law Society and Institute of Chartered Accountants in May 2014 published combined guidance to members stating:
To ensure that the registration has been processed in time for inclusion on that list the last practical date for registration is 25 October 2014.
The IRS will release its final 2014 list of FATCA compliant financial institutions (thus not subject to FATCA 30% withholding on January 1, 2015 and onward) most likely on Wednesday, December 31, 2014 (according to the United Kingdom guidance quoted above), albeit it seems just as reasonable for a Friday, January 2 list to be released. Either way, the 90 day safeguard mentioned above is in place.
What Deadlines has Treasury NOT moved?
For “individual” held accounts, Treasury has neither provided an extension to the FATCA compliance requirements, nor from withholding as of July 1st. Thus, from July 1 these accounts must be characterized as “new” accounts for FATCA diligence procedures to determine whether the beneficial owner is a US person.
For accounts of ‘entities’ , while an FFI may still characterize accounts opened until December 31 as “pre-existing” accounts, Treasury did not mention extending the deadlines applicable for FATCA diligence procedures to determine whether the entity’s beneficial owner is a US person.
The pre-existing account due diligence analysis remains with three deadlines:
December 31, 2014 for prima facie FFI account holders,
June 30, 2015 for high value accounts, and
June 30, 2016 for all remaining accounts, such as “pre-existing” entity accounts).
Note that FATCA withholding does not apply to all FATCA withholdable payments immediately on July 1. FATCA has a phase-in period for withholding on certain types of payments, see Ch 13: Withholdable Payments.
Model 1 IGA = 30 (in red added since my > last IGA update < of May 6)
Bahamas (4-17-2014)
Brazil (4-2-2014)
British Virgin Islands (4-2-2014)
Bulgaria (4-23-2014)
Columbia (4-23-2014)
Croatia (4-2-2014)
Curaçao (4-30-2014)
Czech Republic (4-2-2014)
Cyprus (4-22-2014)
India (4-11-2014)
Indonesia (5-4-2014)
Israel (4-28-2014)
Kosovo (4-2-2014)
Kuwait (5-1-2014)
Latvia (4-2-2014)
Liechtenstein (4-2-2014)
Lithuania (4-2-2014)
New Zealand (4-2-2014)
Panama (5-1-2014)
Peru (5-1-2014)
Poland (4-2-2014)
Portugal (4-2-2014)
Qatar (4-2-2014)
Singapore (5-5-2014)
Slovak Republic (4-11-2014)
Slovenia (4-2-2014)
South Africa (4-2-2014)
South Korea (4-2-2014)
Sweden (4-24-2014)
Romania (4-2-2014)
Model 2 IGA = 2
Armenia(5-8-2014) <— new
Hong Kong (5-9-2014) <— new
jurisdiction that have signed and entered into a formal IGA
Over 600 pages of in-depth analysis of the practical compliance and analysis by 50 experts in 34 chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance requirements (Chapters 17–34), including information exchange protocols and systems. See Lexis Guide to FATCA Compliance (complimentary chapter download: http://www.lexisnexis.com/store/images/samples/9780769853734.pdf)
If you are interested in discussing the Master or Doctor degree of international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour”
In February of 2012, the former APA Program was moved from the Office of Chief Counsel to the Office of Transfer Pricing Operations, Large Business and International Division of the IRS (TPO) and combined with the United States Competent Authority (USCA) staff responsible for transfer pricing cases, thereby forming the Advance Pricing and Mutual Agreement (APMA) Program. During the last quarter of 2013, new proposed revenue procedures governing APA applications and MAP applications were released for public comment in Notice 2013-79, 2013-50 I.R.B. 653, and Notice 2013-78, 2013-50 I.R.B. 633, respectively. These proposed revenue procedures reflect the changes in APMA’s structure, and more importantly, were informed by the cumulative experience of more than 20 years of APA practice in the United States, which has produced more than eleven hundred unilateral and bilateral agreements since 1991.
During 2013, the APMA Program continued to benefit from the merger and processing efficiencies that began in 2012. For the second year in a row, the number of executed APAs increased (from 140 in 2012 to 145 in 2013). The median completion time fell from 39.8 months in 2012 to 32.7 months in 2013. The increase in efficiency is further illustrated by the fact that the number of executed APAs (145) again surpassed the number of applications filed (111).
Part I of this report includes information on the structure, composition, and operation of the APMA Program; Part II presents statistical data for 2013; and Part III includes general
descriptions of various elements of the APAs executed in 2013, including types of transactions covered, transfer pricing methods used, and completion time.
The 111 APA applications received during 2013, represent a slight decrease from the 126 received in 2012. Almost 75 percent of the bilateral applications filed in 2013 involved either Japan or Canada. The APMA Program increased the number of APAs executed in its second year. The 145 APAs executed in 2013 surpassed the previous record of 140 executed agreements set in 2012. Of the 145 agreements executed in 2013, 68 of the agreements (47 percent) were new APAs (i.e., not renewal APAs), an increase from the 57 (41 percent) new APAs executed in 2012.
In 2013, approximately 55 percent of the APAs executed involved transactions between a non-U.S. parent and a U.S. subsidiary; 40 percent of the APAs executed involved transactions between a U.S. parent and a non-U.S. subsidiary; and the remaining 5 percent involved transactions that included either a partnership or a branch. In 2012, approximately 75 percent of the APAs executed involved transactions between a non-U.S. parent and a U.S. subsidiary, while the remaining 25 percent involved transactions between a U.S. parent and a non-U.S. subsidiary.
Although more than 75 percent of covered transactions involve tangible goods and services transactions, the IRS also has successfully completed numerous APAs involving transfers of intangibles. More than 60 percent of the tested parties in the APAs executed in 2013 involved distribution or related functions, e.g., marketing and product support.
In controlled transactions using the CPM/TNMM, the Operating Margin was the most common profit level indicator (PLI) used to benchmark results for transfers of tangible and intangible property. Per the applicable regulations, Operating Margin is defined as the ratio of operating profits to sales. The Berry Ratio, defined as the ratio of gross profit to operating expenses, was applied as the profit level indicator in 8 percent of the controlled transactions that used the CPM/TNMM. Each other profit level indicator accounted for a smaller share.
For services transactions, the majority of cases applied the Services Cost Method or the CPM/TNMM. The Services Cost Method evaluates the amount charged for certain services with
reference to the total services costs.
For the APAs executed in 2013 that used external comparables data in the analysis, the most widely used data source for comparables was the Standard and Poor’s Compustat database. Other sources were also used in appropriate cases, e.g., where the tested party was not the U.S. entity. The most commonly used sources are:
Disclosure
Mergent
Orbis
GlobalVantage
Worldscope
OneSource
Osirus
Lexis’ Practical Guide to U.S. Transfer Pricing, 28 chapters from 30 expert contributors led by international tax Professor William Byrnes, is designed to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign. Fifty co-authors contribute subject matter expertise on technical issues faced by tax and risk management counsel.
The IRS published Tax Tip 2014-29 with 6 helpful tips for deciding whether to itemize deductions or to rely upon the standard deduction. The IRS stated that a taxpayer should calculate the available deduction using both methods and then choose the deduction method that produces the greater deduction (thus lower amount of tax).
1. Figure the itemized deductions. Add up deductible expenses paid during the year. These may include expenses such as:
Home mortgage interest
State and local income taxes or sales taxes (but not both)
Real estate and personal property taxes
Gifts to charities
Casualty or theft losses
Unreimbursed medical expenses
Unreimbursed employee business expenses
2. Know the standard deduction. If a taxpayer does not itemize, the basic standard deduction for 2013 depends on your filing status:
Single $6,100
Married Filing Jointly $12,200
Head of Household $8,950
Married Filing Separately $6,100
Qualifying Widow(er) $12,200
The standard deduction is higher for persons when 65 or older or blind.
3. Check the exceptions. Some taxpayers do not qualify for the standard deduction and therefore should itemize. This includes married couples who file separate returns and one spouse itemizes.
5. File the right forms. To itemize deductions, use Form 1040 and Schedule A, Itemized Deductions. Standard deduction is on Forms 1040, 1040A or 1040EZ.
6. File Electronically. Some taxpayers are eligible for free, brand-name software to prepare and e-file the tax return. IRS Free File will do the work for you.
For more than half a century, Tax Facts has been an essential resource designed to meet the real-world tax-guidance needs of professionals in both the insurance and investment industries. For over 110 years, National Underwriter has been the first in line with the targeted tax, insurance, and financial planning information you need to make critical business decisions.
Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.
“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”
EU Council Announces March 2014 Adoption of Expanded EU Savings Directive
On Saturday, March 22, 2014 the EU Council’s General Secretariat announced that it will adopt major amendments to the EU Directive on taxation of savings income at its next March 2014 meeting. The amendments will address the current loopholes, such as application to trusts, to foundations, and to investment income that is comparable to interest income.
Brief Background on EU Savings Directive
The liberalization of capital markets and the free movement of capital within the EU borders revealed how important it was to establish cooperation with a view to preventing, in the direct taxation area, fraud and evasion linked to cross-border financial investments. The problem with taxpayers moving their investments to Member States which did not impose taxation at source while the taxpayers simultaneously under-reported to their respective State of residence (or not reporting at all) the income earned. The EU Savings Directive was adopted to address this situation, coming into effect in 2005.
The mechanism of the Directive works by imposing an obligation to any paying agent in an EU Member State which makes a payment to an individual resident in the other Member State which is the beneficial owner of the income, to report that payment of interest to the competent tax authorities of the Member State in which the paying agent is established. The competent tax authorities of that (source) State in turn transfer the information collected to the competent tax authority of the residence of the beneficial owner. Based on the information received it is possible for the State of residence of the beneficial owner to verify if the amount is declared for tax purposes and to tax the corresponding income.
Loopholes Reported in 2008
In his 2004 Report on the Regulatory, Competitive, Economic and Socio-Economic Impact of the European Union Code of Conduct on Business Taxation and Tax Savings Directive to the United Kingdom Foreign and Commonwealth Office and the Overseas Territories of The Virgin Islands (British), Turks & Caicos Islands, Anguilla and Montserrat, Professor William Byrnes undertook an in-depth analysis of the EU Savings Directive identifying several loopholes that would require later amendments for it to achieve its objectives.
The Savings Directive loopholes include:
• Territorial scope: It is limited to intra-community situations in which a paying agent from one Member State pays to an individual resident in another Member State. It does not apply to payments from outside the EU, i.e. when the paying agent is located in a third (non-EU) State or to payments to beneficial owners who reside in third States.
• Personal scope: it does not apply to persons other than individuals, in particular payments made to legal entities. This limitation provides individuals with opportunities to circumvent the Savings Directive by using an interposed legal person or arrangement.
• Material scope: it does not cover other forms of savings like insurance products, pensions, some tailored investment funds, return on derivative contracts, structured products, etc.
These and other loopholes have been formally reported by the European Commission since 2008. The main findings of a report produced by the Commission identified as a major problem lack of “consistent treatment of other comparable situations”.[1] Pursuing this aim of consistency requires that interest payments obtained by an individual through intermediate vehicles are consistently put on an equal footing with interest payments directly received by the individual. This consistency of coverage is required not only to ensure the effectiveness of the Directive, but also compliance with the rules of the internal market and fair competition between comparable financial products and structures.
European Council Announces Amended Savings Directive Adoption in March 2014
On March 22, 2014 the European Council reported in a press release[3] that (emphasis added):
The European Council welcomes the Commission’s report on the state of play of negotiations on savings taxation with European third countries (Switzerland, Liechtenstein, Monaco, Andorra and San Marino) and calls on those countries to commit fully to implementing the new single global standard for automatic exchange of information, developed by the OECD and endorsed by the G20, and to the early adopters initiative.
The European Council calls on the Commission to carry forth the negotiations with those countries swiftly with a view to concluding them by the end of the year, and invites the Commission to report on the state of play at its December meeting. If sufficient progress is not made, the Commission’s report should explore possible options to ensure compliance with the new global standard.
In the light of this, the Council will adopt the Directive on taxation of savings income at its next March 2014 meeting.
The European Council invites the Council to ensure that, with the adoption of the Directive on Administrative Cooperation by the end of 2014, EU law is fully aligned with the new global standard.
What About the Withholding Exception for Austria and Luxembourg?
While most Member States adopted the exchange of information regime provided in the 2005 Savings Directive, three Member States with a tradition of bank secrecy—Belgium, Luxembourg and Austria—preferred to adopt, during a transitional period, a withholding tax regime. They were authorized to adopt a withholding tax (now 35%) on interest income that is paid to individual savers resident in other EU Member States. In the meantime Belgium decided to discontinue applying the transitional withholding tax as of 1 January 2010 and exchange information instead.
Therefore, only Luxembourg and Austria are currently entitled to levy a withholding tax. Luxembourg has notified the EU Commission that from next year, January 1, 2015 it will discontinue applying the transitional withholding tax and thus begin automatically exchanging information for applicable accounts from that date.
Thus, only Austria has expressed that it will maintain the withholding tax option. Austria’s finance minister is quoted in April 2013 stating: “All this data exchange will not put one red cent in my tax coffers, …. I want to have the money, not a data cemetery.”[4] However, in light of the Council’s press release on Saturday, this position has probably changed.
The Austria’s Chancellor had also indicated that Austria may begin automatic exchange regarding the interest from savings accounts beginning 2014.[5] Although this statement is different from the Luxembourg commitment towards automatic exchange of information, it would not be surprising that Austria will soon also endorse this automatic exchange standard within the scope of applying the Savings Directive, in light of FATCA, GATCA, and the Council’s press release.
Practical Compliance Aspects of Exchange of Information, FATCA and GATCA
For in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance, 2nd Edition just published!
William H. Byrnes, author of six Lexis international tax titles, has achieved authoritative prominence with more than 20 books, 100 book chapters and supplements, and 1,000 media articles. In 2008 he was appointed Associate Dean at Thomas Jefferson School of Law, previously obtaining Professor of Law with Tenure at St. Thomas University. William Byrnes was a Senior Manager, then Associate Director of international tax for Coopers and Lybrand, and consulted for clients involved with Africa, Europe, Asia, the Indian sub-continent, and the Caribbean. He has been commissioned by a number of governments on tax policy.
[4]“All this data exchange will not put one red cent in my tax coffers,” finance minister Maria Fekter said on 13 April. “I want to have the money, not a data cemetery.” Stamatoukou, Eleni, “EU Savings Directive to be modified”, New Europe Online, (April 15, 2013) Available at http://www.neurope.eu/article/eu-savings-directive-be-modified.
[5] Austria’s position regarding the extension of the EU Savings Directive requires that such extension be also imposed through international agreements with San Marino, Switzerland, Lichtenstein, Andorra, and Monaco. However, it is unclear if Austria has since backtracked and made these five agreements a pre-condition for its own automatic information exchange on savings income for depository accounts. See Bodoni, Stephanie, EU Push For Savings-Tax Deal Fought By Luxembourg, Austria, Bloomberg (Nov 14, 2013). Available at http://www.bloomberg.com/news/2013-11-14/eu-set-to-fail-to-meet-savings-tax-goal-on-luxembourg-opposition.html.
Threats of heightened regulatory scrutiny have loomed large in the first weeks of 2014, and perhaps no area has received greater attention than the IRA rollover transaction.
Both the SEC and FINRA have issued warnings to advisors who provide guidance to clients looking to roll traditional workplace 401(k) accounts into private IRAs, and this focus on the importance of proper guidance should be keeping all advisors on their toes. For many advisors, this means a new course in IRA rollover compliance is called for, as even the most experienced professionals may find themselves in the dark over the new requirements being ushered in by the industry’s most prominent regulators.
Read the analysis of William Byrnes and Robert Bloink at > ThinkAdvisor <
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In Announcement 2014-15 that will be published in IRB 2014-16 on April 14, 2014, the IRS alerted trustees that it has had a major about turn on how its views the one-per-year limit on IRS rollovers. It’s view will now be much more restrictive on roll overs. What brought about the change of thinking? The January 28, 2014 Tax Court decision of Bobrow v. Commissioner.
Section 408(d)(3)(A)(i) provides generally that any amount distributed from an IRA will not be included in the gross income of the distributee to the extent the amount is paid into an IRA for the benefit of the distributee no later than 60 days after the distributee receives the distribution. Section 408(d)(3)(B) provides that an individual is permitted to make only one rollover described in the preceding sentence in any one-year period.
Proposed Regulation § 1.408-4(b)(4)(ii) and IRS Publication 590, Individual Retirement Arrangements (IRAs), provide that this limitation is applied on an IRA-by-IRA basis. However, a recent Tax Court opinion, Bobrow v. Commissioner, T.C. Memo. 2014-21, held that the limitation applies on an aggregate basis, meaning that an individual could not make an IRA-to-IRA rollover if he or she had made such a rollover involving any of the individual’s IRAs in the preceding 1-year period. The Tax Court stated at page 12:
“The plain language of section 408(d)(3)(B) limits the frequency with which a taxpayer may elect to make a nontaxable rollover contribution. By its terms, the one-year limitation laid out in section 408(d)(3)(B) is not specific to any single IRA maintained by an individual but instead applies to all IRAs maintained by a taxpayer. Section 408(d)(3)(B) speaks in general terms: An individual may not receive a nontaxable rollover from “an individual retirement account or individual retirement annuity” if that individual has already received a tax-free rollover within the past year from “an individual retirement account or an individual retirement annuity.””
The Tax Court continued at page 13, looking at Congress’ intent surrounding the enactment of section 408(d)(3)(B):
“Section 408 was enacted as part of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, sec. 2002(b), 88 Stat. at 958. Recognizing that the American workforce had become much more mobile than in previous years, Congress enacted the section 408(d)(3)(A) exemption as a way of providing employees with some measure of flexibility with regard to their retirement planning. However, Congress added the section 408(d)(3)(B) limitation as a way to ensure that taxpayers did not take advantage of section 408(d)(3)(A) to repeatedly shift nontaxable income in and out of retirement accounts.”
Thus, the Tax Court concluded that: “Had Congress intended to allow individuals to take nontaxable distributions from multiple IRAs per year, we believe section 408(d)(3)(B) would have been worded differently.”
The IRS announced that it anticipates that it will follow the interpretation of § 408(d)(3)(B) in Bobrow and, accordingly, intends to withdraw the proposed regulation and revise Publication 590 to the extent needed to follow that interpretation. These actions by the IRS will not affect the ability of an IRA owner to transfer funds from one IRA trustee directly to another, because such a transfer is not a rollover and, therefore, is not subject to the one-rollover-per-year limitation of § 408(d)(3)(B). See Rev. Rul. 78-406, 1978-2 C.B. 157.
What Happens Now?
The IRS has received comments about the administrative challenges presented by the Bobrow interpretation of § 408(d)(3)(B). The IRS understands that adoption of the Tax Court’s interpretation of the statute will require IRA trustees to make changes in the processing of IRA rollovers and in IRA disclosure documents, which will take time to implement. Accordingly, the IRS will not apply the Bobrow interpretation of § 408(d)(3)(B) to any rollover that involves an IRA distribution occurring before January 1, 2015. Regardless of the ultimate resolution of the Bobrow case, the Treasury Department and the IRS expect to issue a proposed regulation under § 408 that would provide that the IRA rollover limitation applies on an aggregate basis. However, in no event would the regulation be effective before January 1, 2015. The Announcement is available http://www.irs.gov/pub/irs-drop/a-14-15.pdf
Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefitsshows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices. Often complex tax law and regulations are explained in clear, understandable language. Pertinent planning points are provided throughout.
Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts delivers the latest guidance on:
Estate & Gift Tax Planning
IRAs
HSAs
Capital Gains, Qualifying Dividends
Non-qualified Deferred Compensation Under IRC Section 409A
And much more!
Key updates for 2014:
Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
Expanded coverage of Annuities
New section on Structured Settlements
New section on International Tax
More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
Q. In general, what are the tax benefits of real estate investment?
What limitations may restrict enjoyment of those benefits?
As a general rule, an investor takes the same deductions and credits and recognizes income whether the investor owns the property directly or has an interest in a limited partnership that “passes through” the deductions, credits, and income. However, …..
For the three-page analysis of Income, Interest, Taxes, Credits, Depreciation, Deductions, Limitations, and other issues, read William Byrnes and Robert Bloink of Tax Facts Online on > Think Advisor <
2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments. Pertinent planning points are provided throughout.
Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Investments delivers the latest guidance on:
Mutual Funds, Unit Trusts, REITs
Incentive Stock Options
Options & Futures
Real Estate
Stocks, Bonds
Oil & Gas
Precious Metals & Collectibles
And much more!
Key updates for 2014:
Important federal income and estate tax developments impacting investments, including changes from the American Taxpayer Relief Act of 2012
Expanded coverage of Reverse Mortgages
Expanded coverage of Real Estate Investment Trusts (REITs)
More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
Limitations on Loss Deductions
Charitable Gifts
Reverse Mortgages
Deduction of Interest and Expenses
REITs
Plus, you’re kept up-to-date with online supplements for critical developments. Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.
Following his October presentation in Moscow at Moscow Finance University organized with University of Amsterdam, Professor William Byrnes was invited to lecture last week for the intersession international tax course of the University of Amsterdam’s Centre for Tax Law. While at the University of Amsterdam, he engaged with Dean Dr. Edgar du Perron on collaborative distance education opportunities, and attended the European Law Student Association’s (ELSA) annual Groot Juridisch Dictee of the Amsterdam chapter.
William Byrnes noted, “Dr. Dennis Weber, the Director of the Amsterdam Centre for Tax Law, is a renowned jurist and author on tax issue brought before the European Court of Justice. He is frequently referred to as a powerhouse among European Tax Law faculty. In 2015, Amsterdam will begin offering the LL.M. of International Taxation in English for a very selective group of professionals. With his robust full-time tax faculty and cadre of Ph.D. candidates from around the world, I expect it to quickly become the premier international tax degree within Europe, perhaps globally.”
Professor Dennis Weber included, “I visited Thomas Jefferson’s campus last February when I lectured to its tax students about international tax risk management and also about practical aspects of careers in the tax field. I became very intrigued with how Associate Dean William Byrnes dynamically engaged students on campus and worldwide through leveraging communication and multimedia technologies. We are investigating potentially collaborating on joint online initiatives in the future and look forward to discussing these further when I return to San Diego this March to deliver my next international tax lectures.”
“Of all my international invitations” Professor Byrnes added, “University of Amsterdam is my favorite because I am an alumni and have fond memories and friends from my three years on campus when I studied international tax law, and participating as an active member of ELSA Amsterdam. The University of Amsterdam led to my initial academic opportunities in South Africa because my fellowship dissertation on transfer pricing profit-margin based methodologies was, at that time, quite unique and South Africa was re-thinking its tax system. With the G20 and OECD’s new agenda against base erosion and profit shifting (BEPS), transfer pricing is now a prominent topic of study in most tax law programs, but two decades ago only Amsterdam offered me the opportunity to delve deeply into it via a shared research program at the IBFD.”cts of careers in the tax field. I became very intrigued with how Associate Dean William Byrnes dynamically engaged students on campus and worldwide through leveraging communication and multimedia technologies. We are investigating potentially collaborating on joint online initiatives in the future and look forward to discussing these further when I return to San Diego this March to deliver my next international tax lectures.”
Professor Byrnes continued, “Also, Dr. Weber, Bruno Da Silva, and I had the opportunity to discuss several future collaborative publications stretching out through 2015 and beyond, including authoring a Lexis book on international tax for the Asian academic and professional market to be translated into several local languages, reworking a Lexis publication on tax treaties, and finally, expansion of my Lexis transfer pricing publication from the U.S. perspective to a global, comparative approach. Bruno Da Silva, who is just completing his doctoral candidacy at UvA on the topic of information exchange, and I just collaborated on the second edition of LexisNexis Guide to FATCA Compliance. His representation of the China Territory of Macau, his OECD research and his work with Loyens and Loeff is establishing him as a leader among his European colleagues for understanding cross border information information flows.”
“Moreover, I explored with Dr. Edgar du Perron, Dean of University of Amsterdam Faculty of Law, and Dr. Weber the ‘flipping the classroom’ approach to distance education and how we may implement some joint international tax courses in this regard that can receive status as professional designations from various financial service authorities and associations. Such courses could become the starting point for Amsterdam to leverage for the undergraduate law courses. It was interesting to learn from Dean Perron that a group of entrepreneurial Amsterdam law students have captured lecture recordings of some of their courses, splicing them into multimedia course outlines and then selling them, albeit potentially without obtaining the faculty members authorization.”
On December 26 the IRS released Rev Proc 2014-10: FFI Agreement for Participating FFI and Reporting Model 2 FFI. The final FFI agreement contains a number of changes to provisions of the draft FFI agreement that required correction or clarification. The Rev Proc provides four areas of such changes and clarifications that occur in the final FFI agreement.
First, several of the cross-references in the FFI agreement (notably, in section 2 of the FFI agreement) are modified in anticipation of the publication of two sets of temporary regulations to which the updated cross-references relate. Both sets of temporary regulations are expected to be published in early 2014.
Second, the FFI agreement contains revisions to correct minor technical errors in the draft FFI agreement.
Third, revisions are made to further clarify the FFI agreement and conform it to the temporary chapter 4 regulations. By example, as contemplated in Notice 2013-69, the FFI agreement provides that, with respect to calendar years 2015 and 2016, participating FFIs that are required to report foreign reportable amounts paid to nonparticipating FFIs shall report this information on Form 8966.
Finally, the FFI agreement also provides for a two-year transition period during which a reporting Model 2 FFI may elect to apply the due diligence procedures described in the FFI agreement in lieu of those in Annex I of an applicable Model 2 IGA and the FFI agreement is also revised to reflect that this election is made by the reporting Model 2 FFI and not the reporting Model 2 IGA jurisdiction. Read my previous FATCA coverage > herein <
FATCA Compliance Program and Manual
Fifty contributing authors from the professional and financial industry provide expert analysis within the LexisNexis® Guide to FATCA Compliance (2nd Edition): many perspectives – one voice crafted by the primary author William Byrnes. The second edition has been expanded from 25 to 34 chapters, with 600 pages of regulatory and compliance analysis.
The previous 25 chapters have been substantially updated, including many more practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA. The nine new chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters. Chapter 7 has been drafted for a financial institution’s compliance officer, Chapter 9 for the trust department compliance officer, and Chapter 10 for the insurance firm’s compliance officer. Chapter 7 provides a new section analyzing the compliance risks with the IRS’ released FFI agreement.
The LexisNexis® Guide to FATCA Compliance (2nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of FATCA’s application for certain trading partners of the U.S. (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems.
…. But the very rich are different in other ways too. For one thing, they’re elusive. Thomas Stanley’s famous book was called “The Millionaire Next Door” because he found that by and large, millionaires are modest, hard-working people who don’t flaunt their wealth. Perhaps apart from the fact that many of them are business owners, that means there’s no special way to prospect for them. ….
Here, as always, knowledge is power. For prospecting HNWs, the first thing to know is where and how to find them, so that is where we begin. However, once you’ve found them the key thing is to know their psychology. …
Read William Byrnes and Robert Bloink on ThinkAdvisor !
ThinkAdvisor.com supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.
The Director of Siberian Federal University, Irina Shisko and Head of the Comparative Law Department jointly wrote: “We received excellent feedback from the students concerning your course of lectures and three or four of them would like to get your advice to study International Tax Law in the future. “ …
“We thank you kindly for the brilliant presentation in the plenary session of the international conference, which certainly brightened up our forum”, they continued.
Professor William Byrnes recently returned from a week in Krasnoyarsk, Siberia (Russia) wherein he presented an international tax and investments course at the Siberian Federal University Law Institute, and led a two-hour faculty workshop on distance education. In between his lecture schedule, he made three conference appearances.
At the Siberian Comparative Law Department Conference on Constitutionalism, William Byrnes delivered a talk on the topic of “DTAs, TIEA, IGAs and the U.S. Constitution. Exploring the Executive / Senate Treaty authority, House of Representative “Origination” of Tax authority, and Congressional Regulation of Commerce with Foreign Nations authority”. For the opening of the Siberian Tax Conference, William Byrnes addressed the scope and procedures of financial information exchange about tax matters between Russian and the USA in the context of the current negotiation for an intergovernmental agreement to resolve Russian firms’ challenges of compliance with Russian law and that of the US’ new FATCA financial information gathering regime. Finally, William Byrnes sat on a two hour afternoon tax panel discussing appropriate transfer pricing methodologies to apply to complex multinational transactions and value added chains.
William Byrnes said of the events: “All the professors, students, government officials from Siberia and Moscow, and attorneys from the prestigious Russian law firm Pepeliaev that I met were very warm and accommodating. I spent many dining hours in discussions on topics as diverse as learning theory to Eastern Orthodox ethos. I heard many intriguing viewpoints, reminding me that there are often several perspectives of an issue outside of the US norms.”
William Byrnes responded about his approach to teaching: “For the international tax lectures, I provided context and captivated interest by employing case studies of Apple, Google and Starbucks from which to examine a series of issues. Leveraging company reports, videos, Congressional and Parliamentary testimony, articles and selections from my books, students are able to obtain a variety of perspectives of the companies’ activities and a deep understanding of select issues.”
“I was impressed by the high quality of the facilities at Siberian Federal University, including state-of-the-industry smart-boards and multimedia in each classroom, as well as the attentiveness and engagement of the students and the faculty during and after lectures. The university library with more than two million English volumes in print, and its Sciences department equipment has high resolution electron microscope equipment that rivals University of California, San Diego (UCSD).”
William Byrnes concluded: “By invitation of Dr. Dennis Weber, renown European Union tax expert, I am being hosted at the end of October by Moscow Finance University in cooperation with University of Amsterdam’s Tax Center to engage in similar topic matter at a series of workshops. I look forward to building on the discussions that originated at Siberia Federal University in this regard.”
When it comes to lifetime income planning, clients are always looking for the latest and greatest strategy to ensure that their income needs will be met during retirement.
Deferred income annuities are finally experiencing a dramatic growth spurt in the market, which has motivated insurance carriers to design products with features that allow each product to be tailored to meet the individual client’s needs. As the number of carriers offering deferred income annuities expands, a corresponding boost in client demand is expected — especially when clients discover that they can find the income features they have come to expect from an annuity product, but with a level of flexibility in required contributions and income options unique to the deferred income annuity market.
When William Byrnes returned to the United States in 1998 to establish the International Finance and Taxation program leveraging online communication technologies, both international tax programs and distance learning programs were in their infancy. Through engaging a renown and talented faculty of industry professionals, and the support of an immensely engaged student body from professional and financial service firms, the international tax program blossomed over the past 15 years to become a cutting edge industry leader that it is today.
Just recently, National Law Journal wrote “Perhaps no one in legal academia has more experience with online master’s degrees than William Byrnes, Associate Dean for Graduate and Distance Education Programs at Thomas Jefferson School of Law.” (May 20, 2013)
His article that reviews the development of the first Internet delivered LL.M program in the United States may be downloaded at > William Byrnes’ SSRN academic page <
The article comprises four sections: In Part 1 the economics reasons for, and logistics considerations of, the Internet delivered Program are addressed. Part 2 reviews the pedagogical approach to legal education employed in the United States, criticisms thereof, and finally examines an emerging pedagogical trend in the United Kingdom. Part 3 reviews the teaching tools employed in the LL.M. Program, and Part 4 reviews the practical aspects of developing the LL.M. Program, obtaining ABA acquiescence, and reviews the Internet delivered law courses that came before it. Finally, the article concludes with some personal observations.
by Patricie Barricelli, Attorney, São Paulo Bar Association, Brazil *
The Brazilian General World Cup Law was enacted last June with the aim to amend Brazil’s legal regime for sporting events as required to meet International Federation of Association Football (Fédération Internationale de Football Association, hereinafter “FIFA”) hosting country requirements. However, some politicians and scholars have proposed that the host country event requirements imposed by FIFA conflict with some important aspects of Brazilian laws that should be preserved. Brazil’s recent hosting of the FIFA Confederation Cup has re-ignited the debate.
* Please send questions or comments to the Author Patricie Barricelli e-mail: patricie.barricelli@yahoo.com.br. Ms. Barricelli is a legal compliance counsel for a tier 1 Brazilian financial institution, specializing in consumer financial law
The U.S. Court of Appeals for the Ninth Circuit recently affirmed the Tax Court’s position on the use of surrender charges in the valuation equation when a nonqualified employee benefit plan that holds a life insurance policy distributes that policy to a taxpayer upon winding up of the plan.
When these life insurance policies are distributed to the taxpayer-employees under such a plan, the taxpayers are responsible for paying taxes on the value of the policies. According to the IRS, the policy value equals the cash value of the policy without regard to any surrender charges. So what do your clients have to include in income if the actual cash surrender value of their life insurance policy is negative?
The Foreign Account Tax Compliance Act (“FATCA”) provides for withholding taxes to enforce reporting requirements on specified foreign accounts owned by specified U.S. persons or by U.S. owned foreign entities.
FATCA requires specified U.S. persons (U.S. citizen, residents and certain non-resident aliens) and specified domestic entities to report interests in specified foreign financial assets (SFFAs) if the aggregate value of those assets exceeds certain threshold. The regulations apply to domestic entities formed or availed of to hold, directly or indirectly, specified foreign financial assets. These specified entities include certain closely held corporations and partnerships that meet certain conditions and aggregation rules. Specified entities include domestic trusts if they meet certain criteria and exceed certain reporting threshold.
A U.S. owned foreign entity is an entity with one or more substantial U.S. owners. With certain exceptions, a substantial U.S. owner is any U.S. person with greater than 10% direct or indirect ownership interest in the foreign entity.
FATCA applies to U.S. persons who have specified foreign financial assets (SFFAs) whose value exceeds certain thresholds. The IRS announced in January 2013 that reporting by domestic entities with interests in specified foreign financial assets will not be required to file the IRS reporting form for FATCA, Form 8938, until after the date specified by final regulations, which will not be earlier than taxable years beginning after December 31, 2012.1
All foreign entities and foreign trusts are potentially subject to FATCA, in addition to the current Qualified Intermediary (QI) rules. Withholding rules and reporting requirements under FATCA depend upon the entity’s classification. FATCA classifies foreign entities as either financial entities or non-financial entities. Financial entities are classified as Foreign Financial Institutions (FFIs) [see infra. Chapter 7] while non-financial entities are classified as Non-Financial Foreign Entities (NFFEs) [see infra. Chapter 8].
Entities and trusts are very different under U.S. law. Entities include partnerships, limited liability companies (LLCs), international business companies (IBCs), foundations, usufructs, and corporations. In entities, the title to the property owned is not divided.
In a trust, however, U.S. law splits the ownership of the title into two parts, legal and equitable. The trustee of the trust owns the legal title for the benefit of the beneficiary, who owns the equitable title. A trust is a relationship, not an entity, and is treated differently under both the existing QI rules and FATCA.
Specified Foreign Financial Assets (SFFAs)
Financial Accounts
The most common type of SFFA that banks will encounter is a financial account such as any depository or custodial account that is maintained by an FFI.2 A financial account also includes non-publically traded equity or debt interest in a depository or custodial institution, an insurance company, or an investment entity.3 …
Moreover, a financial account includes a non-publically traded equity or debt interest in a holding company or treasury center in an expanded affiliated group [See infra. Chapter 8]. This applies if the holding company or treasury center has at least one investment entity or passive NFFE and the income of the investment entity or passive NFFE in the group exceeds 50% of the group’s aggregate income.4 …
Assets
SFFAs include assets not held in an account. Stocks and securities issued by a non-U.S. person that are held for investment are SFFAs whether they are held in an account with a FFI or not. The same holds true for capital or profits interests in a foreign partnership, any form of debt issued by a non-U.S. person, or a beneficial interest in a foreign trust, foreign estate, or foreign entity. A litany of financial instruments collectively referred to as “swaps” are also SFFAs whether held in an account or not. Options and derivative instruments that have any non-U.S. parties or are issued by a non-U.S. issuer are also SFFAs.5 …
Exemptions from SFFA Definitions
FATCA does provide exemptions. An interest in a foreign security or social insurance program is not a SFFA. A stock of precious metals held in a foreign safe deposit box is not a SFFA. Any security or partnership interest used or held in the conduct of normal trade or business is considered not to be held for investment under FATCA. Stock, however, cannot be considered to be held in the conduct of normal trade or business for purposes of FATCA. Therefore, foreign stock is a SFFA.6 …
Example of SFFA
To clarify what may be considered an SFFA, consider the following example. Mr. Smith, a U.S. person resident in the U.S., has $1 million in a Swiss bank account. He owns a partnership interest in a hedge fund established in the Cayman Islands, and directly owns 5,000 shares of a publically traded Japanese corporation, JapanCo. He also has social security benefits in a foreign country. …
1. IRS Notice 2013-10, “Information Reporting by Domestic Entities under Section 6038D with Respect to Specified Foreign Financial Assets”.
3. IRC §1471(d)(2), Treas Reg §1.1471-5(b)(1)(iii)(A). “Investment entity” is defined in Treas Reg §1.1471-5(e)(4)(i).
4. IRC §1471(d)(2), Treas Reg §1.1471-5(b)(1)(iii)(B)(1). “Treasury center” is defined in Treas Reg §1.1471-5(e)(1)(v).
5. See generally IRS Form 8938, Statement of Specified Foreign Financial Assets.
6. See generally IRS Form 8938, Statement of Specified Foreign Financial Assets.
7. Foreign social security or social insurance programs are not specified as FFA, so they are not subject to FATCA reporting. Instructions to IRS Form 8938, Statement of Specified Foreign Financial Assets, p. 4.
National Law Journal is doing a public survey that includes the category “Best Tax LLM Program” PLEASE – please – VOTE for Thomas Jefferson School of Law (I am very surprised to even be considered, but alas, now to be voted in the top class would be incredible…)
The voting begins today and below is the link for the survey. It is very long so please scroll through the questions until #63.
Your small business clients are faced with the increasing likelihood of higher taxes in 2013 and beyond; those aiming to reduce the slope of the fiscal cliff next year will want to take a closer look at the benefits of a defined benefit plan. …. read our strategy article at http://www.advisorone.com/2012/12/13/fully-funded-retirement-in-10-years-a-db-plan-for
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was endorsed by President Obama as an asset providing the “strongest consumer financial protections in history.” However, almost a year after the Act was introduced, implementation of its broad reforms is slowing
The complexity of the Act is the root of it’s first problem: The bill came in at an overwhelming 2,319 pages, or 300,000 words, about half the length of the entire Christian Bible. By comparison, other paradigm-shifting financial acts were short-stories; the Federal Reserve Act was 31 pages, Glass-Steagall was 37 pages, and Sarbanes-Oxley was 66 pages long. Even the gargantuan Health Reform Act was shorter than Dodd-Frank. Consequently, even the Federal government can’t fully ascertain the Act.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
Clients often want to use Qualified Terminal Interest Property trusts (QTIPs) to separate certain funds to care for a surviving spouse, while retaining some measure of control over the general distribution of the funds—whether they will be distributed to children or a charity. But navigating the QTIP rules as client’s circumstances naturally endure change can be cumbersome. The danger exists when errors that seem trivial, result in eliminating any transfer tax benefit of the trust.
A recent IRS private letter ruling (PLR 201117005) provides us with a good reminder of the QTIP rules and an example of creative QTIP planning that provides the surviving spouse with adequate lifetime income while giving the grantor (and the surviving spouse) a degree of post-death control over disposition of the trust assets.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber)
On Thursday, July 28, the 72 Brazilian lawyers who studied at Thomas Jefferson School of Law for the month said “adeus” to the law school and to each other in a closing ceremony in the Earl B. Gilliam Moot Court Room.
“It’s the end of a journey but it’s the beginning of a new journey,” said Carla McEwen, the director of the Brazilian exchange program at TJSL. “
“We are privileged to have been able to accommodate you for the past month,” William Byrnes, Associate Dean for Distance Learning, told the lawyers, who were here to study the U.S. legal system as well as learn something about American culture. “We hope we have created lasting relationships between the United States and Brazil.”
“I am very, very glad I participated in the program,” said Barbara Gimenez, one of the participants. “I highly recommend it to my colleagues in Brazil.”
“It was a good overview of the U.S. legal system,” according to Julia Cadete, another participant. “The course fulfilled its goals.”
Luiz Fabricio said it was an enlightening experience for him. “I not only found out about the U.S. legal system, but I got to know the lovely San Diego and its many wonders.”
“We were learning every moment we were here,” said Franciann Araujo, “even when we were not in the classroom. It wasn’t just a legal exchange, but a cultural exchange as well.”
Carla McEwen was happy the students benefitted from the program, adding “we did benefit greatly too.” She is “very sad to see them go,” but has a sense of accomplishment that the exchange program went so well. “We fulfilled our mission.”
Members of the Attorney General Union (AGU), Central Bank, SUSEP (Seguros), and members of the Sao Paolo Bar may contact William Byrnes at wbyrnes@tjsl.edu or Carla McEwen (mcewenc@tjsl.edu) for more information for sessions in November 2011 (Central Bank only), January 2012 (all government) and next July 2012.
From the experts of National Underwriters …. The Portability of the Spousal Credit webinar is an exclusive session covering the opportunities presented by the deceased spouse unused exclusion amount (DSUEA). This no-cost webinar will cover the intricacies of the DSUEA and ensure that you know everything you need to help your clients take full advantage of this tax break. Time will allotted for questions.
The Internal Revenue Service announced earlier this week a special voluntary disclosure initiative (the second one of its kind in the past few years). The Internal Revenue Service states the program is designed to bring offshore money back into the U.S. tax system and assist individuals that may have undisclosed income from hidden offshore accounts to pay taxes owed. The new voluntary disclosure initiative will be available through Aug. 31, 2011.
The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. According to the IRS, the first special voluntary disclosure program finished with 15,000 voluntary disclosures on Oct. 15, 2009. Since that time, the Service notes, more than 3,000 taxpayers have come forward to the IRS with bank accounts from around the world.
The new initiative is being called the 2011 Offshore Voluntary Disclosure Initiative, which includes several changes from the 2009 Offshore Voluntary Disclosure Program. The overall penalty structure for 2011 is higher, meaning that people who did not come in through the 2009 voluntary disclosure program will not be rewarded for waiting. However, the 2011 initiative does have additional features.
For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. However, some taxpayers will be eligible for lower 5 or 12.5 percent penalties. Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.
Dates: Video-conference course starting March 28 ending 10 weeks later in late May
Medium – Wimba live lectured webcam video-conference and LexisNexis blackboard course-ware
Enrollment Contact: Associate Dean William H. Byrnes – wbyrnes@tjsl.edu
or call +1 (619) 961-4211
includes access to full online international tax library of databases such as IBFD, CCH, Checkpoint, RoyaltyStat, EdgarStat, LexisNexis, Westlaw, amongst many others.
Lead Professor Dr. Alfredo Garcia-Prats (University of Valencia, formerly IMF), Lecturers include Knut Olsen on EU Tax Risk Management – Head of Global Tax & Legal for a Nordic-based multinational corporation with responsibility for 80 countries of operation, overseeing over 100 subsidiaries.
The SEC has finally released its anxiously awaited study of whether a fiduciary standard of care should be applied to broker-dealers; but, like the study on adviser examinations, the report leaves as many questions as it answers. The fiduciary standard study recommends that brokers be held to the same standard as register investment advisers (RIAs). Although the study doesn’t provide details on how the switch to the fiduciary standard will be implemented, there are hints as to what brokers can expect.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
The Congressional Research Service last week released a publication describing the employer healthcare mandate and penalties for large employers under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. Although penalties under the Health Care Act will not be applicable until 2014, the Act brings about a sea of change in the employer’ role in employee health insurance that requires significant present preparation.
Contrary to popular miscomprehensions about the Act, it does not mandate that employers provide their employees with health insurance; however, the Act does incentivize large employers to do so by penalizing them if their employees are not covered to a minimum level by employer-provided health insurance. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
The Securities and Exchange Commission (SEC) submitted to Congress a staff study recommending a uniform fiduciary standard of conduct for broker-dealers and investment advisers — no less stringent than currently applied to investment advisers under the Investment Advisers Act of 1940– when those financial professionals provide personalized investment advice about securities to retail investors.
Section 913 of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required SEC to conduct a study to evaluate:
The effectiveness of existing legal or regulatory standards of care (imposed by current authorities) for providing personalized investment advice and recommendations about securities to retail customers; and
Whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to the standards of care for providing personalized investment advice about securities to such customers that should be addressed by rule or statute.
In the study, the SEC notes that investment advisers and broker-dealers are regulated extensively under different regulatory regimes. But, the study claims, many retail investors do not understand and are confused by the roles played by investment advisers and broker-dealers. The study finds that “many investors are also confused by the standards of care that apply to investment advisers and broker-dealers” when providing personalized investment advice about securities. Read the analysis at http://www.advisorfyi.com/2011/01/new-dodd-frank-study-calls-for-stringent-standards/
With our Custom Imprint program, you can place your company’s logo on the cover of this analysis and you’ll leave a lasting impression. Call 1-800-543-0874 for additional information.
Robert Fier was employed as a gaming machine operator in Las Vegas, Nevada. He worked his way up through the company to be promoted to a managerial position. During this time, Fier enrolled in an insurance program offered by the company to managers. The enrollment entitled Fier to two insurance policies, a Long Term Disability Policy and a Group Life and Accidental Death and Dismemberment Insurance Policy.
The long term disability plan stated, in essence, Fier was entitled to payments upon the occurrence of disability if he earned less than 80% of what he had before the accident. Also, the policy payments terminated if he starting making over 80% of what he had before the accident. The group life and accidental death and dismemberment policy will be discussed in more detail below.
After five years with the company, Mr. Fier was shot in the throat during a hunting accident. The individual who shot Fier on that hunting trip (in the great state of Utah) was evidently intoxicated. The accident left Fier a quadriplegic for life.
Mr. Fier was then offered a position at the same company that was designed specifically to fit his new disability. The company continued to pay Fier the same amount as it had before the accident. However, after four more years, the company assigned Fier to a new position and lowered his salary by $20,000 annually. Mr. Fier then filed a claim under his long term disability policy. To read this article excerpted above, please access AdvisorFYI
Reverse mortgages are facing renewed scrutiny after the December 7 release of the Consumer Union Report, Examining Faulty Foundations in Today’s Reverse Mortgages. According to the report, reverse mortgages are suitable for only a small slice of low-income seniors, and seniors often enter into the contracts without understanding the financial consequences, including the high fees and interest charges attached to the mortgage products.
“Reverse mortgages are a very risky deal for borrowers who don’t understand the complicated terms of the loan and how quickly fees and interest charges can add up,” said Norma Garcia, an attorney with Consumer Union. Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
Some economists are reporting that the recession is officially over.
Others are less optimistic, suggesting that the recession could last into 2012. And with unemployment numbers hovering around 10 percent, median household income falling, and foreclosures mounting, the most important part of any potential recovery, the public, is still cynical.
What if even the most cynical predictions for the world economy are underestimating the length of the path to recovery?
One economist is predicting that the current recession could last until 2018. Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
Why is this Topic Important to Wealth Managers? Discusses and examines some long-term implications on the economy, through a macroeconomic perspective, of the Bush Tax Cuts. Examines financial data spanning over a decade to help wealth managers converse on current economic topics.
A recent report examined certain major economic indicators in relation to the Bush tax cuts. These indicators, in total, showed a negative overall effect that the Bush tax cuts had on the economy. The below chart presents common economic gauges before and after the tax cuts (which first occurred in 2001 and 2002).
An employer who does not want to, or cannot, institute a qualified pension or profit-sharing plan, or who does not want to extend benefits to all of its full-time employees, can use a “Section 162 plan” to meet its executive compensation needs. A Section 162 plan leverages life insurance to provide supplemental compensation to select employees while also allowing the employer to take an income tax deduction for the premium payments.
In a Section 162 plan, an employer applies for, and pays premiums on, a life insurance policy on its employee’s life. The employee, however, owns the policy and has the right to appoint beneficiaries; the employer does not take an interest in the policy’s death benefit.
As an example of Section 162 plan and its tax advantages, … read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
Request an application or a continuing education enrollment form. If you have any curricular questions, I can discuss via Skype or telephone.
While the program will be online video-conference, if you should have the opportunity to visit our new campus it is considered one of the best for collaborative technology and research.
Regards – William Byrnes, Assoc. Dean – Graduate Programs & Distance Learning
Thomas Jefferson School of Law, 1155 Island Avenue, San Diego California 92101
During the first quarter of 2010, President Obama signed into law H.R. 2847, the Hiring Incentives to Restore Employment Act. “The act provides incentives for job creation, but in order to pay for the incentives, the act also contains significant changes that will affect foreign financial institutions that choose to do business with U.S. persons.” [1] Half of the “U.S. Congressional Record that contains the act” is “dedicated to foreign account tax compliance.” [2]
Therefore, “although the act is commonly referred to as the HIRE Act for its focus on job creation, one of its main purposes is to target tax dodgers’ use of foreign accounts.” [3] The act is basically a model of the 2009 Foreign Account Tax Compliance Act (FATCA) which was introduced by the Senate. “The act incorporates substantially all of FATCA, with one important exception: FATCA would have imposed reporting requirements on material advisors, including attorneys, accountants, and other professionals, who advise on acquisitions or formations of foreign entities.” [4]
Why is this Topic Important to Wealth Managers? Presents the general treatment of life insurance purchased through qualified pension plans. Discusses a common scenario where life insurance premiums may be deductible by an employer aw well as the consequential income tax effect on plan participants.
Suppose your client is the sole shareholder and president of a closely held corporation. The business generates significant positive income and cash-flow on a steady basis. Assume the client himself may have an insurance need without the funds personally to cover the obligation. Assuming further the business has a qualified pension (defined contribution or defined benefit) plan, one consideration may be to purchase life insurance through the qualified pension plan. [1] Assume this option, up to an insurable interest limit, was also offered to all employees participating in the qualified plan.
Since employer contributions to qualified plans are sometimes deductible, amount used to purchase life insurance may be also, subject to the incidental limitation. [2] First though, “[t]o qualify for deduction as a contribution to a qualified plan, the employer’s contribution must first qualify as an ordinary and necessary business expense within the limits of reasonable compensation.” [3] As a general rule, so long as the amount of the insurance is no more than 25% of the total cost of the plan the amount may be deducted as an incidental benefit to the plan.
An investment advisor accused of fraud faked his own death by parachuting D. B. Cooper-style out of his single-engine plane with ninety pounds of gold strapped to his chest, leaving behind a trail of twisted metal and offshore bank accounts.
Plot summary of the latest New York Times best seller? Nope. It is the true story of Marcus Schrenker, an Indiana financial advisor who was recently sentenced to prison for defrauding investors—including family members and friends—out of over $1 million.
Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
The federal government is taking the first steps toward regulating financial planners. The Financial Planning Association and other industry groups are welcoming the prospect of federal oversight. The federal push toward regulation is motivated by a perceived widespread misuse of “Financial Planner” and other similar designations.
The Wall Street Reform Act requires the Government Accountability Office to study state and federal regulation of persons who hold themselves out as financial planners. The study will consider whether there are regulatory gaps in federal and state law that permit unregistered financial planners and others who provide planning services to escape regulation. The use of �misleading titles, designations and marketing materials� by financial planners will also be scrutinized to determine whether current law adequately protects consumers.
Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
Why is this Topic Important to Wealth Managers? Provides general taxation of life insurance contracts owned by a third party transferee, including the payment of death benefits as well as sale or exchange gain treatment.
Today’s blogticle will discuss taxation of life insurance contracts from the purchaser’s prospective.
As discussed yesterday, an insurance contract that carries a built-up cash value can be loaned against, collected by the beneficiary, surrendered or sold to a third party. This blogticle deals in particular with payment of the face value to the third party caused by the death of the insured as well as another sale or exchange of the contract by the third party.
What are the tax implications if the third party collects the death benefits? What are the tax implications if the policy is sold to a third party?
As a starting point, gross income includes all income from whatever source derived including (but not limited to) income from life insurance contracts (unless otherwise excluded by law). Gross income specifically excludes amounts received (whether in a single sum or otherwise) under a life insurance contract, if such amounts are paid by reason of the death of the insured. For the complete article see AdvisorFYI….
Why is this Topic Important to Wealth Managers? Discusses how international planning can impact clients’ tax position domestically. Provides discussion on a number of common international tax concepts as they relate to U.S. taxpayers.
In previous blog this week, it has been briefly discussed that there may be a number of reasons a client may consider offshore planning, generally. Today we will focus on one major component of offshore considerations, the impact of world-wide income on U.S. taxpayers. It is generally accepted that U.S. taxpayers are expected to pay income taxes on income earned from sources worldwide. This concept is commonly referred to as “outbound” taxation.
It is the case that many sovereign nations will also have taxes on personal and/or corporate income that an individual or corporation could become subject to, creating in effect “double taxation.” And some foreign nations choose to have very low or no tax rate on certain types of income, or on corporations in general, thus allowing foreign income to potentially escape foreign taxation (and current U.S. taxation in the year that it is earned).
What are some rules that that Congress has attempted to avoid double taxation or subject foreign income to U.S. taxation?
An insurer recently won a major victory when the U.S. District Court for Delaware voided a life insurancepolicy that was purchased as part of a STOLI transaction. The case—Principal Life Insurance Co. v. Lawrence Rucker 2007 Insurance Trust—is significant because the court voided the policy for lack of an insurable interest based on the finding of insured’s intent to sell, even though the insured had not identified a particular purchaser for the policy at the time it was issued.
The business owner who supports his parent, or an adult family member, may be missing an opportunity to lower his tax burden. In the context of a properly established insurance funded buy-sell agreement, small business clients have an opportunity to provide an adult family member with a fixed income while also protecting the client’s interest in the business and avoiding adverse tax consequences.
Why is this Topic Important to Wealth Managers? Provides a view with respect to revocable trust concepts and estate planning. Presents identifying factors of the trust, what it’s commonly used for, as well as some of the benefits and detriments of its implementation.
This week has mainly discussed the use of trusts with characteristics of complete transfers by grantors. This edition will explore the revocable nature of trusts and how they are applicable to estate planning.
The main difference between a revocable trust and one that is not, is that “the settlor reserves the right to terminate the trust and recover the trust property and any undistributed income.” “The creation of a revocable living trust involves either the transfer of property to one or more trustees or the settlor’s declaration that he holds the property in trust for himself and that upon his death the property is to be held for other beneficiaries.”
For the complete blogticle and its analysis, see AdvisorFYI.
When an adult child has an active role in the family business, how can a client pass that business to the managing child while still providing for the client’s surviving second wife?
Why is this Topic Important to Wealth Managers? Provides an overview of how the pending tax cut provisions will affect the national economy and your clients as a part of it. Discusses generally the relationship between tax and Congressional budget as they relate to the taxpayer burdens.
In the face of bailouts, new legislation and regulation, and a stalling economy, one area, taxes, is certainly being discussed among the public scuttlebutt. Specifically, the Bush Era Tax Cuts are the center of attention because they will sunset or expire, without further legislative action by the end of this year.
In the face of opposition by the Obama administration to extending the Bush tax cuts, analysis recently released by the Congressional Budget Office (CBO) supports extending the breaks for another few years. Douglas Elmendorf, director of the CBO, believes that eliminating the tax cuts in a stagnant economy may hamper growth, and that continuing the cuts beyond December 31st sets the stage for some economic recovery next year: “Under that … scenario, economic growth would be stronger next year; unemployment would be lower next year.”
A capitalized entity sale to an intentionally defective grantor trust, utilizing the leveraged purchase of fixed-term life insurance policy to be owned by, and controlled for, the successor generations in order to ensure the efficient maturity of the plan.
Today’s analysis by our Expert by Don Goode, CMO is located at AdvisorFX Journal Avoid Transfer Taxes with a Capitalized Entity Sale to an IDGT.
Why is this Topic Important to Financial Professionals? Provides a basis for creative ideas to share with clients to create an overall more efficient insurance management plan. Offers examples of common alternative risk transfer techniques that are cost effective and generally easy to implement.
Why is this Topic Important to Financial Professionals? All businesses, as well as individuals face some risk, and that form can vary greatly. Knowledge and identification of certain risks can help position clients in better risk management positions as apposed to ignoring them.
Practical Compliance Aspects of FATCA and GATCA
William Byrnes' Tax, Wealth, and Risk Intelligence 