On December 9, 2009, the U.S. House of Representatives approved H.R. 4213, the “Tax Extenders Act of 2009.” The bill would extend for one more year more than forty tax provisions that are set to expire at the end of this year, including the research credit and a number of important tax breaks for individuals. […]
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The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car will be: 50 cents per mile for business miles driven 16.5 […]
Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (the “FBAR”) with the U.S. Department of Treasury if two conditions apply.
The first condition is that the U.S. person must have either a financial interest in or signature authority (or other comparable authority)over one or more financial accounts in a foreign country. Several clarifications are necessary in order to understand the applicability of this first condition. First, for the purposes of the FBAR, the definition of a “U.S. person” includes U.S. citizens, U.S. residents, and persons in, and doing business in, the United States. “Person” is defined to include not only individuals, but also all forms of business entities, trusts, and estates.
When dealing with the international transactions, the United States tax law usually divides income into two broad categories: foreign source income and the U.S. source income. The determination of whether the income is foreign or U.S. in origin depends on a set of rules – the source-of-income rules – created by Congress, elaborated by the U.S. Treasury regulations, refined in courts, and further modified by the international treaties. While jurisdictional in nature, the income source rules are fundamentally and critically important to the understanding and operation of international transactions, primarily because these rules generate real operational consequences that affect a variety of substantive U.S. tax provisions. For the purposes of this essay, these consequences may be classified according to the grouping of the affected taxpayers.
Under I.R.C. §911, if certain conditions are met, a qualified individual can exclude as much $91,400 (for tax year 2009) of foreign earned income from taxable gross income. Two questions arise: what is earned income, and when is such income considered to be foreign earned income?