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San Diego FBAR Attorney | International Tax Lawyers California

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If you have foreign financial accounts and reside in San Diego (California), you would be looking for a San Diego FBAR Attorney in California. In your search, you could consider out-of-state attorneys such as Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.

San Diego FBAR Attorney: International Tax Attorney

First of all, it is very important to understand that, by looking for a San Diego FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.

Ever since the FBAR enforcement was turned over to the IRS (in 2001), the term FBAR attorney applies exclusively to tax attorneys.

Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.

San Diego FBAR Attorney: Out-Of-State International Tax Attorney

It is further important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in San Diego, California. On the contrary, you could consider international tax attorneys who reside in other states and help San Diego residents with their FBAR compliance.

Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including San Diego, California.

San Diego FBAR Attorney: Broad Scope of Compliance

When retaining a San Diego FBAR Attorney, you should consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.

Moreover, as part of an offshore voluntary disclosure, an FBAR attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.

Contact Sherayzen Law Office If You Need A San Diego FBAR Attorney

Sherayzen Law Office has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.

Thus, if you are looking for an attorney to help with your FBAR compliance, contact Sherayzen Law Office as soon as possible to secure Your Confidential Consultation!

California Streamlined Disclosure Lawyer | FBAR FATCA Tax Attorney

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If you are a California resident with undisclosed foreign assets and you believe that you were non-willful with respect to your prior reporting noncompliance, you would be looking for professional help to bring your US tax affairs into full compliance with US international tax law through Streamlined Domestic Offshore Procedures. In other words, you are looking for a California streamlined disclosure lawyer. In this essay, I would like to analyze everyone included within the definition of a California streamlined disclosure lawyer.

California Streamlined Disclosure Lawyer: International Tax Lawyer

The first point to understand is that all California streamlined disclosure lawyers are international tax lawyers. The reason for this is very simple: an offshore voluntary disclosure of noncompliance concerning foreign assets and foreign income generated by these assets falls within a specific sub-area of US international tax law. In other words, an offshore voluntary disclosure is part of US international tax law. This means that, when you are looking for a lawyer who can help you with Streamlined Domestic Offshore Procedures, you are searching for an international tax lawyer.

California Streamlined Disclosure Lawyer: Voluntary Disclosure Expertise

You are not searching, however, for just any international tax lawyer. You want to find a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law.

This means that you are looking for an international tax lawyer who specializes in offshore voluntary disclosure and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.

California Streamlined Disclosure Lawyer: Geographical Location Does Not Matter

While the expertise and experience in offshore voluntary disclosures are highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer resides) does not matter. The reason for it is also very simple: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law; the local California law has no influence over how SDOP will be processed. This means that any international tax lawyer who specializes in this field may be able to help you irrespective of whether this lawyer resides in California or Minnesota.

Moreover, the development of modern means of communications pretty much eliminated any communication advantages that a lawyer in California might have had in the past over the out-of-state lawyers. This is especially true in our world today where the pandemic greatly reduced the number of face-to-face meetings.

Sherayzen Law Office May Be Your California Streamlined Disclosure Lawyer

Sherayzen Law Office, Ltd. is a highly-experienced international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in California, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

§318 Downstream Trust Attribution | Foreign Trust Tax Lawyer & Attorney

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The attribution of stock ownership to constructive owners is a highly important feature of US domestic and international tax law. The Internal Revenue Code (“IRC”) §318 contains complex constructive ownership rules concerning corporate stock; these rules vary depending on a specific §318 relationship. This article focuses on an important category of §318 relationships – trusts. Since these rules are very broad, I will discuss today only the §318 downstream trust attribution rules; the upstream rules and important exceptions to both sets of rules will be covered in later articles.

§318 Trust Attribution: Downstream vs. Upstream Attribution

Similarly to other §318 attribution rules, there are two types of §318 trust attribution: downstream and upstream. The downstream attribution rules attribute the ownership of corporate stocks owned by a trust to its beneficiaries. The upstream attribution rules are exactly the opposite: they attribute the ownership of corporate stocks owned by beneficiaries to the trust. As I stated above, this article focuses on the downstream attribution.

§318 Downstream Trust Attribution: Attribution from Trust to Beneficiary

Under §318(a)(2)(B)(i), corporate stocks owned, directly or indirectly, by or for a trust are considered owned by the trust’s beneficiaries in proportion to their actuarial interests in the trust.

Notice that the size of the actuarial interest does not matter. Moreover, §318(a)(2)(B) will apply even if the beneficiary does not have any present interest in a trust, but only a remainder interest (also calculated on an actuarial basis). This rule is the exact opposite of the §318 estate attribution rules.

Furthermore, the decision to attribute shares based on the actuarial interest, rather than actual one, may result in a paradoxical result where stocks are attributed to a person who will never become the actual owner of the shares.

§318 Downstream Trust Attribution: Determination of Actuarial Interest

Treas. Reg. §1.318-3 stated that, in determining a beneficiary’s actuarial interest in a trust, the IRS will use the factors and methods prescribed (for estate tax purposes) in 26 CFR § 20.2031-7.

The attribution of shares from the trust to its beneficiary should be made on the basis of the beneficiary’s actuarial interest at the time of the transaction affected by the stock ownership.

§318 Downstream Trust Attribution: Unstable Proportionality

The adoption of the attribution of stock based on the actuarial interest in a trust creates a constant calculation problem for beneficiaries, because the actuarial interest of the beneficiary in a trust varies from year to year. The variation of actuarial interest means that the number of shares attributed from a trust to its beneficiary will change every year.

For example, the actuarial interest of a beneficiary with a life estate in a trust will decrease every year as he ages. On the other hand, the actuarial interest of the owner of the remainder interest in the trust will increase with each year. Hence, the number of stocks attributed to the life tenant will decrease each year, while the attribution of stocks to the holder of the remainder interest will increase each year.

§318 Downstream Trust Attribution: Special Presumption Concerning Power of Appointment

Based on 95 Rev. Proc. 77-37, §3.05 (operating rules for private letter rulings), the IRS has adopted a special presumption with respect to when children will be considered beneficiaries for the purpose of §318 trust attribution rules. In order to understand this rule, we need to describe the setting in which it will most likely apply.

Oftentimes, estate plans are set up where the surviving spouse will have a life interest in a trust’s income and a power of appointment over the trust corpus. In such situation, estate planners often insert a clause that, if a spouse fails to exercise the power of appointment, the trust corpus will automatically go to the children.

In this situation, the IRS stated that, absent evidence that the power of appointment was exercised differently, it is presumed that it was exercised in favor of the children. By adopting this presumption, the children are immediately considered beneficiaries for the purpose of the stock attribution rules under §318.

§318 Downstream Trust Attribution: Planning to Avoid Attribution

In order to prevent the application of the trust attribution rules under §318, a beneficiary must renounce his entire interest in the trust. See Rev. Rul. 71-211. Such renunciation is valid only if it is irrevocable and binding under local law.

§318 Downstream Trust Attribution: Special Case of Voting Trusts

Under Rev. Rul. 71-262 and CCA 200409001, §318(a)(2)(B) does not apply in the context of a voting trust (i.e. where trustee has the right to vote the stock held in trust, but the dividends are paid to the certificate holder). This is because the certificate holder is deemed to be the owner of the shares and there is no attribution of ownership from the trust.

§318 Downstream Trust Attribution: Grantor Trusts and Employee Trusts

While it is beyond the scope of this article to describe them in detail, there are special rules that apply to the attribution of stock from grantor trusts and employee trusts. I will discuss these rules in more detail in the future.

Contact Sherayzen Law Office for Professional Help With US Tax Issues Concerning Foreign Trusts

If you are considered an owner or a beneficiary of a foreign trust, contact Sherayzen Law Office for professional help with your US tax compliance issues. Our firm is highly experienced in US international tax law, including foreign trust compliance. We have also helped taxpayers around the world with their offshore voluntary disclosures involving foreign trusts.

Contact Us Today to Schedule Your Confidential Consultation!

§318 Partnership Attribution | International Corporate Tax Lawyers

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This article continues a series of articles on the Internal Revenue Code (“IRC”) §318 constructive ownership rules. In this essay, we will discuss the §318 partnership attribution rules – i.e. attribution of ownership of shares from partnership to partners and vice versa.

§318 Partnership Attribution Rules: Two Types

There are two types of the IRC §318 partnership attribution rules: downstream and upstream. The downstream attribution rules attribute the ownership of corporate stocks owned by a partnership to its partners. The upstream attribution rules attribute the ownership of corporate stocks owned by partners to the partnership. Let’s explore both types of attribution rules in more detail.

§318 Partnership Attribution Rules: Attribution from Partnership to Partners

Pursuant to §318(a)(2)(A), corporate stocks owned, either directly or indirectly, by or on behalf of a partnership is deemed constructively owned by its partners proportionately. Interestingly, the attribution of corporate stock from a partnership to its partners continues to happen even if the partnership does not do any business or stops all of its operation. See Baker Commodities, Inc. v. Commissioner 415 F.2d 519 (9th Cir. 1969); Sorem v. Commissioner 40 T.C. 206 (1963), rev’d on other grounds, 334 F.2d 275 (10th Cir. 1964).

The biggest problem with applying §318(a)(2)(A) is determining what “proportionate attribution” means. Where a partner owns the same interest in capital, profits and losses of a partnership, the proportionality is easy to apply. However, in situations where a partner owns varying interests in capital, profits and losses, it is much more difficult.

Unfortunately, this problem is not addressed at all by the IRS or courts – the proportionality of attribution is not defined in any IRC provision, Treasury Regulations and even case law. Looking at Treas. Reg. §1.318-2(c) Ex. 1, however, it is likely that the IRS will accept a position where proportionality of attribution is based on the “facts-and-circumstances” test of §704(b).

§318 Partnership Attribution Rules: Attribution from Partners to Partnership

Under §318(a)(3)(A), a partnership constructively owns corporate stocks owned by a partner. There are no limitations on the attribution – all stocks held by a partner are deemed to be owned by the partnership irrespective of the percentage of an ownership interest in the partnership held by the partner. There is no de minimis rule that would apply to §318(a)(3)(A).

For example, assume that partner P (an individual) owns 25% in a partnership X. P also owns 100 shares out of the total 200 shares outstanding of Y corporation; X owns the remaining 100 shares. Under §318(a)(3)(A), X actually owns 100 shares of Y and constructively owns P’s 100 shares of Y; in other words, X owns 100% of Y.

§318 Partnership Attribution Rules: Certain Attributions Not Allowed

There are two special §318 rules concerning partnership attributions that I would like to mention in this article. First, there is no partner-to-partner attribution of stock under the §318 partnership attribution rules. In other words, stocks owned by a partner will not be owned by another partner simply by virtue of both partners having an ownership interest in the same partnership (however, this does not mean that stocks may not be attributed through another provision of §318).

Second, §318(a)(5)(C) prevents re-attribution of stocks that were already attributed from a partner to the partnership. This means that, where stocks are attributed from a partner to a partnership, they cannot be then re-attributed from the partnership to another partner.

§318 Partnership Attribution Rules: S-Corporations

Under §318(a)(5)(E), an S-corporation and its shareholders are respectively considered to be a partnership and its partners. Hence, corporate stocks owned by an S-corporation are attributed to its shareholders proportionately to each shareholder’s ownership of the S-corporation’s stock. Also, stocks owned by shareholders are deemed to be owned by the S-corporation.

It is important to emphasize that §318 partnership attribution rules do not apply to the stock of the S-corporation. Id. In other words, §318 does not treat shareholders in an S-corporation as being constructive owners of the stock of the S-corporation itself.

§318 Partnership Attribution Rules: Comprehensive Example

I would like to finish this article with a comprehensive example of how §318 partnership attribution rules work. Let’s suppose that A and B own Y partnership in equal portions (i.e. 50% each); Y owns 120 shares of X, a C-corporation, out of the total 200 outstanding shares; another 80 shares are owned by A.

Let’s analyze each parties’ actual and constructive ownership of X. A actually owns 80 shares and constructively owns half of Y’s ownership of X shares (60 shares) under §318(a)(2)(A) – i.e. he owns a total of 140 shares.

B constructively owns half of Y’s ownership of X shares – i.e. 60 shares. He does not constructively own any of A’s shares, because there is no partner-to-partner attribution of stocks and there is no attribution to B of A’s shares that were attributed to Y.

Finally, Y actually owns 120 shares and constructively owns all of A’s 80 shares. In other words, Y is deemed to be a 100% owner of X.

Contact Sherayzen Law Office for Professional Help With §318 Partnership Attribution Rules

The constructive ownership rules of §318 are crucial to proper identification of US tax reporting requirements with respect domestic and especially foreign business entities. Hence, if you are a partner in a partnership that owns stocks in a domestic or foreign corporation, contact Sherayzen Law Office for professional help with §318 partnership attribution rules.

Contact Us Today to Schedule Your Confidential Consultation!

§267 Constructive Ownership Rules | International Tax Lawyer & Attorney

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In a previous article, I discussed the related person definition for the purposes of the Internal Revenue Code (“IRC”) §267. That article, however, focused on the definition itself rather than on a host of supplementary rules necessary to fully understand this definition. In this article, I would like to discuss one set of these rules – §267 constructive ownership rules.

§267 Constructive Ownership Rules: Purpose of §267(c)

During my initial discussion of the §267 related person definition, I focused only on the actual ownership by related persons. Congress, however, realized that the actual ownership limitations can be easily circumvented by utilizing individuals and entities closely connected to the related persons.

Hence, it enacted §267(c) and §267(e)(3) to expand the application of the related person definition to include the ownership by closely-connected individuals and entities. In other words, even where an individual or entity does not meet any of the §267(a) and (b) tests through his actual ownership, these tests may be met when his actual ownership is added to other persons’ ownership through the operation of §267(c) and §267(e) rules. These are the so-called §267 constructive ownership rules.

§267 Constructive Ownership Rules: Two Parts of the Rules

As explained in a previous article, the related person definition can be found in two different parts of §267 – thirteen categories of §267(b) and one category of §267(a)(2). Similarly, the constructive ownership rules are divided into two separate sections: §267(c) applies to the entire section and §267(e)(3) applies only to §267(a)(2).

§267 Constructive Ownership Rules: Three General Types of Ownership Attribution

§267(c) sets forth three general types of constructive ownership attribution rules:

  1. Entity-to-owner or beneficiary stock attribution – i.e. “stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries” §267(c)(1). I wish to emphasize there that §267(c)(1) applies to any type of an entity: corporations, partnerships, estates and trusts;
  2. Family member stock attribution – i.e. stocks owned by family members are treated as constructively owned by the related person (see §267(c)(2)). §267(c)(4) defines “family of an individual” to include: “only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants”; and
  3. Partner-to-partner stock attribution – i.e. “an individual owning … any stock in a corporation shall be considered as owning the stock owned, directly or indirectly, by or for his partner” §267(c)(3). This is a unique rule which is rarely found among other constructive ownership rules of the Internal Revenue Code.

§267 Constructive Ownership Rules: Chain Ownership Attribution

Generally, a taxpayer who is deemed to own stock under the §267 constructive ownership rules is treated as the actual owner of the stock. In other words, the stock that he constructively owns can be used for further attribution of ownership to others – this is the so-called “chain ownership attribution”.

There are three exceptions to this rule. I will mention here only one: §267(c)(5) limits attribution of ownership through a chain of related persons in the case of family member or partnership attribution.

§267 Constructive Ownership Rules: Fourth Type of Ownership Attribution

§267(e)(3) sets forth special constructive ownership rules for determining ownership of a capital or profits interest in a partnership; as it was mentioned above, this rule applies only to the deduction limitation rules of §267(a)(2). This fourth type of ownership attribution is basically an exception to the first three types of §267(c).

§267(e)(3) states that, for the purposes of determining ownership of a capital interest or profits interest of a partnership, §267(c) constructive ownership rules apply except that: (1) partner-to-partner stock attribution of §267(c)(3) shall not apply, and (2) with respect to interest owned (directly and indirectly) by and for C-corporation “shall be considered as owned by or for any shareholder only if such shareholder owns (directly or indirectly) 5 percent or more in value of the stock of such corporation” §267(e)(3)(B).

Contact Sherayzen Law Office for Professional Help With US Tax Law

US tax law is extremely complex, especially US international tax law. An ordinary person will simply get lost in this labyrinth of tax rules, exceptions and requirements. Once you get into trouble with US tax law, it is much more difficult and expensive to extricate yourself from it due to high IRS penalties.

This is why it is important to contact Sherayzen Law Office for professional help with US tax law as soon as possible. We have helped hundreds of US taxpayers around the world to successfully resolve their US tax compliance and US tax planning issues. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!