Tax Archives

Jan 19, 2022

Deadlines for Investing 2021 Gains in Opportunity Zones

M&A activity set a new record in 2021, reaching $5.8 billion globally.[1] After such a heated year of sales, mergers, and financings, those investors who saw taxable gains must now account for the inevitable tax bills. One alternative is to roll over these otherwise taxable gains in opportunity zone funds. Opportunity zone funds (“OZ funds”) are investment vehicles created under the 2017 Tax Cuts and Jobs Act. OZ funds were created to incentivize the making of investments in distressed economic areas. Provided an OZ fund meets numerous requirements and conditions, investors can obtain two significant tax benefits. First, the cash… Read more

Apr 28, 2021

International Taxation of the Digital Economy: Can the OECD Unify Its Members?

As the global economy rapidly shifts and accelerates, the OECD has been focusing intently on developing and strengthening international tax rules in recent years. Back in February 2013, the OECD released a report addressing its concerns that existing international tax standards do not reflect an increasingly global economy, and more specifically, an ever-growing digital economy. The OECD is focused on answering two key questions that frequently come up: First, as multi-national enterprises (MNEs) make up a larger proportion of the global economy over time, and as more MNEs offer digital products and services to consumers worldwide, where is the value… Read more

Feb 23, 2021

Key Tax Trap for Foreign Individuals Who Move to the United States

Many individuals who move to the U.S. for work, study or investment, often understand that they will need to be careful to comply with the applicable immigration rules, such as obtaining a visa. And while such persons often have a general idea that they will need to file U.S. tax returns, far less time is spent on tax planning. This blog post outlines a commonly overlooked filing status that may be of substantial use to foreign investors, workers and students. U.S. Tax Filing Status by Residency Under U.S. tax rules, individuals are divided into three general categories, each of which… Read more

Feb 1, 2021

Recent U.S. Case Highlights Tax Risks for Foreign Equipment Leasing Arrangements

Recently the U.S. Tax Court issued another opinion in the long-running saga of a UK vessel that was chartered for use in U.S. waters. The case has been in audit or before the Tax Court since 2014 and highlights several issues that directly impact foreign equipment leasing firms. On January 8, 2020, the U.S. Tax Court issued the first opinion in the case, addressing whether the income from leasing the vessel was subject to U.S. taxation. Because the owner of the vessel was a U.K. resident, special rules in the U.S.-U.K. tax treaty came into play. (Note that these rules… Read more

Jun 4, 2020

Tax Consequences of Deferring or Restructuring Payments

During the current economic downturn arising from the COVID 19 pandemic, many businesses are struggling with payments to lenders, landlords and contractors. This SGR Tax Blog posting addresses the tax consequences to each party when a payment is deferred or renegotiated. While the tax consequences of such are frequently not foremost in the minds of debtors, they often drive decisions on the creditor side. Accordingly, even for debtors an overview of these rules can help explain positions taken by creditors. The tax rules on debt instruments (“DI’s”) are more complicated and we address them first. Leases and other arrangements are… Read more

Mar 30, 2020

Business Tax Relief Under the CARES Act

The following table outlines at a high level the major business tax changes in the CARES Act. Please contact Joe Mandarino, if you have any follow up questions. § Title Description 2301 Employment tax credit Eligible employers allowed a refundable credit against their social security tax liability equal to 50% of the qualified wages of each employee. Credit capped at $5,000 per employee. Applies to wages paid after 3/12/2020 and prior to 2021. Eligible employer: business is fully or partially suspended due to COVID-19, or gross receipts decline by at least 50% 2302 Employment tax payment deferral … Read more

Nov 11, 2019

Finance Leases, Operating Leases and Hybrids: GAAP and Tax Considerations

Over the past few years, there have been several recent changes in GAAP and tax rules that impact the treatment of leases. With some of these changes going into effect in 2020, it is an opportune time to review the cumulative effect of these changes. Caveat – The following discussion is intended to survey only tax and accounting aspects of leases, not the rules that would apply to determine ownership and title under state law, remedies, UCC issues, and the like. Those rules use tests that are often different from the tax and accounting standards and add additional complexity. Finance… Read more

Sep 30, 2019

IRS Finalizes Safe Harbor for Rental Real Estate Activities

On September 24, 2019, the Treasury Department finalized a safe harbor for rental real estate activities which should provide some tax benefits for lessors and investors. We addressed the draft safe harbor in a previous tax blog posting which can be found here. In this posting, we provide a summary of the final version of the safe harbor and recommendations for maximizing the benefits available under it. Background IRC Section 199A is a tax incentive for pass-through entities and sole proprietorships. It effectively reduces the federal tax rate on income arising from certain activities by as much as 20%. Thus, if… Read more

Feb 7, 2019

Selling a Corporation – Asset vs. Stock Sale?

The 2017 Tax Act creates new opportunities for asset sales, particularly for sellers of businesses that are carried on in corporate form. Whenever a business owned by a corporation is sold, the parties have to negotiate whether the transaction will be structured as an asset sale or a stock sale. For tax purposes, asset sale treatment is generally more attractive to a buyer and may induce a buyer to pay a premium over what it would pay for a stock purchase. Conversely, an asset sale will usually trigger higher tax expense to the seller. Prior to the recent tax law… Read more

Jan 22, 2019

Final Pass-Through Deduction Rules Grant Welcome Relief for Rental Real Estate Activities

On Friday, January 18, 2019, the Treasury Department issued final rules under IRC Section 199A. As part of this regulation package, Treasury also provided much-needed relief and clarity for rental real estate activities. This development creates some hope that similar rules may be in store for Opportunity Zone Funds. Background IRS Section 199A is a tax incentive for pass-through entities and sole proprietorships. It effectively reduces the federal tax rate on income arising from certain activities by as much as 20%. Thus, if income from an activity qualifies, a taxpayer who would otherwise pay taxes at the current top federal… Read more