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Check-the-Box Rules Introduction | International Tax Lawyer Delaware

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Let’s put it put it this way: a majority of foreign companies would be considered as foreign corporations under US Law except the check-the-box rules, that’s a major exception. You can choose what the company will be irrespective of its default classification under US Tax Law.

So, in your example if the US Company, a limited liability partnership would create a SARL outside of the United States and transfer the assets, (I’m going to use this example a little bit later again, because it’s going to be very interesting as with respect to pointing out a specific reporting requirements), so in this case, if they were to transfer all the assets to that SARL company, and they would file a form 8832 choosing for this company to be treated as a partnership, no problem. The IRS will accept its designation as a partnership as long as it’s properly named, timely and properly.

If this were SA as I’ve mentioned a societe limitee, then check-the-box rules would not apply. Per Se corporations are always corporations; Check-the-Box rule exception does not apply.

Check-the-Box Rules Have Tax Consequences | International Tax Lawyers Miami

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But you have to be conscious of the fact that if you’re going to change the classification of a foreign entity, you have to be extremely careful because the very fact that you change the classification of an entity could result in huge, absolutely huge tax liability to your clients.

I’ll give you an example from my practice. My client owned a Polish partnership. How do I know that it was a partnership? One of the owners did not have? Any guess? Limited Liability; that’s right.

So, it was a Polish partnership. He was the 55% owner of the company, okay? He also owned a Polish corporation; he was a 98% owner of it, okay? A Controlled Foreign Partnership, he (my client was a US Citizen), a Controlled Foreign Corporation. As a result of a change in the local Polish laws, they decided that it may well be a good idea to switch this company to a corporation, (sorry) to partnership and this company to corporation. This was a real estate and this was trade. In reality this partnership didn’t do anything directly. But most importantly, most important for our purposes: they were switching this; so, they were switching exactly the opposite: the corporation and the partnership.

In this case, a Polish partnership to a Polish corporation and a Polish corporation to a Polish partnership, in the same country, everything outside of the United States. This company did not have any built-in gains. It was a trading company. It didn’t really have anything except inventory; it didn’t really have any assets of importance.

This one had real estate, so you can imagine, and this was real estate development company; so, there were really some built-in gains here in the assets.

For the purposes of US International Tax Law, what had happened here, by the way, this happened on the same day; so what happened here was that this Polish partnership contributed to its assets in return to the corporate shares and immediately dissolved. Distributing the shares of a corporation to, shares to the Taxpayer, okay? a US Citizen In this case; there was no tax liability. There could have been but in this particular partnership, let’s just say for the moment that there’s not any, but there was no tax liability, but there’s a potential for the partnership distribution without any (but) in actual gain; so, in this case nothing, no tax consequences.

In this case, what happened for US Tax purposes, is that the corporation distributed all of the assets to its shareholders at Fair Market Value. So there were big, big gains here and then the assets were treated as contributed into the partnership at the Fair Market Value. On top of that, this is a Controlled Foreign Corporation. (Later you’ll learn toward the end of my presentation) that since this is a CFC, Controlled Foreign Corporation, Subpart F rules kicked in and prevented the gain from being treated as a capital gain.

There were other stretches that I utilized to lower the tax liability, but that’s a different point; when I first looked at, it I saw this; when I looked at it a second time, I started working it and that’s a different story.

You have to be very conscious that when you check the box; it’s not as if this is some insignificant event and you just check the box; it’s a real dissolution of the entity and a real creation of another one. Even though, I should mention that in both cases, under the Polish accounting, they did not do anything to distinguish the Polish accounting to the pre-dissolution from the post-dissolution; for them for Polish purposes, it was a change of name. In both cases with no tax consequences whatsoever. They did not treat it as a taxable event at all.

So, obviously he had Polish tax advisors and they said, ‘No problem, we’ll then switch it; it’s going to be pretty good for you’. But, he never took into account the fact that as a US Citizen, he’s taxable on his worldwide income and he would be taxed very much on this even though it never left Poland, and even under Polish law, it didn’t mean anything.

James Bond & Worldwide Income Tax Reporting | International Tax Lawyer & Attorney

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Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd. And today we are continuing our blog from the Czech Republic in Karlovy Vary. And in making this video one of my clients was a fan of James Bond. This is the place where ‘Casino Royale’ was filmed in 2006.

And an interesting thought occurred to me: ‘that had James Bond been a resident of the United States, the winnings that he made in this casino would have been taxed in the United States even though he made them here in Karlovy Vary in the Czech Republic.’ The reason for this is the unique rule in US International Tax Law that US Tax Residents, irrespective of their physical residence must report their worldwide income on their US Tax Returns.

So, James Bond, if he were a green card-holder, even though he was not in the United States would have to declare his income from Casino Pupp on his US Tax Returns.

Thank you for watching until next time…

FBAR and Form 8938 May Both Be Required | FBAR FATCA Lawyer

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FBAR requirements are a separate requirement form from Form 8938. The FBAR requirement does not replace the requirement to file a Form 8938; it’s in addition to. So, if you own the assets individually, you might have to file a Form 8938 and FBAR at the same time. And not really at the same time because of a change in the FBAR deadline.

An entity, the domestic entities never have to file Form 8938 but they did have to file FBARs. So the change is really more affecting domestic entities and you know very specific, specified domestic entities with respect to reporting foreign assets.

US Cryptocurrency Taxation | Cryptocurrency Tax Lawyer & Attorney

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Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I am an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today we are continuing our series of blogs from the Czech Republic and I would like to discuss a very interesting issue. An issue that concerns the growing sector of our economy, indeed a growing sector of world economy: Cryptocurrency.

Today, I would like to discuss how cryptocurrency is taxed from a US perspective. The first and most important thing to understand is that despite its name, cryptocurrency, the IRS would not treat any of the digital currencies as actual currency or money. From the IRS perspective, cryptocurrency is property.

So when you sell cryptocurrency, you generate capital gains. They may be short-term capital gains or long-term capital gains but never-the-less, these will be capital gains. Where do you disclose capital gains? On your US Tax Return, on your Schedule D of Form 1040.

What if you exchange one currency for another? Would this be treated as a reportable event for US Tax Purposes? Yes, absolutely. Barter exchanges are treated as taxable events. So, let’s say you have Bitcoin, and you have Ethereum. Let’s say you decided to exchange 100 Bitcoins for whatever the nominal equivilant number of Ethereum coins. This type of an exchange would be taxable in the United States and reportable in the United States.

An interesting issue arises: what if you were to lose the password to for your for your Bitcoins, for your wallet? Is this a loss or not? Right now we don’t have a clear idea on this issue, but it’s an interesting issue to explore. If we were to take the UK law as a potential guide for how the IRS might address this issue, we would say that, yes as long as you can persuade the IRS that the password has been irrefutably lost, then you can claim a capital loss. What if Bitcoins were stolen from you? That is an interesting issue as well because under the UK law, these Bitcoins are still owned by you, despite being stolen. How would the IRS look at it? Right now, we do not know ; it is too early to say and there hasn’t been sufficient guidance on this point.

If you would like to find out more about how your cryptocurrency will be taxed in the United States and how to properly report it in the United States, you should call me at (952) 500-8159 or you can email me at [email protected]. Thank you for watching, until the next time.