October 02, 2024

Blunders in International Estate Planning

October 02, 2024/ Ruchelman P.L.L.C.

Trust & estate lawyers who dabble infrequently in cross border matters, take notice! It is relatively easy to lose your way when advising a non-U.S. person with assets in the U.S. Shortcuts that work when clients and properties are located in the same jurisdiction may lead to horrific problems when clients are domiciled in one jurisdiction and property is located in another. Examples are (A) drafting two wills where each revokes the other, (B) allowing an individual having a foreign domicile to directly own financial assets in the U.S., such as shares of publicly traded stock or mutual funds, can result in unanticipated estate tax and long delays before heirs have access to the assets, (C) not knowing which I.R.S. information reporting forms must be filed when a new client is a recent arrival from abroad can yield significant penalties for the client, (D) allowing a resident, non-citizen individual to return to the home country is an invitation to unnecessary U.S. estate tax if the client retains investment assets and real property in the U.S., and (E) not noticing inconsistencies in residuary clauses in a principal will drafted in the home country and a U.S. property only will drafted in the U.S. begs for a will fight. Diane K. Roskies, a principal in the New York office of the Offit Kurman law firm, and Zachary Weitz, an attorney in the Los Angeles office of the same firm, explain the severe problems that may be encountered, but do so in a light hearted manner.

May 31, 2024

Information Reporting on Foreign Trusts and Gifts – New Regulations

May 31, 2024/ Ruchelman P.L.L.C.

On May 8th, the Treasury Department and the I.R.S. proposed regulations regarding information reporting in the context of U.S. persons, foreign trusts, and gifts from non-U.S. persons. When adopted in final form, they will affect (i) U.S. persons who engage in transactions with, or are treated as the owners of, foreign trusts and (ii) U.S. persons who receive large gifts or bequests from foreign persons. The scope of the proposed regulations is broad, and many existing regulations are affected. Wooyoung Lee and Stanley C. Ruchelman take a deep dive addressing specific regulatory provisions that are affected. Many “open doors” that currently exist have been closed. The authors tell all, linking explanations in the preamble to the proposed regulations with specific regulations in the proposal.

March 28, 2023

Insights Volume 10 Number 2: Updates & Other Tidbits

March 28, 2023/ Ruchelman P.L.L.C.

This month, Michael Bennett and Wooyoung Lee look briefly at four items. The first is Bittner v. U.S., a Supreme Court case holding that the non-willful penalty for failing to file a complete and accurate F.B.A.R. form is $10,000 for the annual form and not $10,000 for each account. The second is Aroeste v. U.S., a U.S. District Court case holding that a dual resident individual whose residence is allocated to a treaty partner jurisdiction is not a U.S. person for purposes of filing F.B.A.R. reports. The third is a concession by the I.R.S. that a person had reasonable cause for the failure to file Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) when following bad advice from his tax adviser. Finally, the BE-12 Benchmark Survey of Foreign Direct Investment in the U.S., conducted every five years by the Department of Commerce’s Bureau of Economic Analysis, is due this year. The final due date for filing is (i) May 31 for those filing by mail or fax or (ii) June 30 for those filing electronically.

November 29, 2022

Late Filed Form 3520 – What Penalties to Expect and How to Respond

November 29, 2022/ Ruchelman P.L.L.C.

When a U.S. person is faced with an asserted penalty for late filing of Form 3520 reporting the receipt of a foreign gift or bequest, the process to have the penalty abated is long and winding. Neha Rastogi and Stanley C. Ruchelman explain all the steps and suggest a strategy for supporting the taxpayer’s contention that reasonable cause exists for the compliance shortfall. In many areas of the tax law, less is more. The authors point out that as much favorable information as possible must be given to the Appeals Officer in order to demonstrate that the shortfall in compliance was not the result of negligence or disregard of the rules by the taxpayer.

November 29, 2022

When It Comes To Penalty Abatement, Is the I.R.S. Offside?

November 29, 2022/ Ruchelman P.L.L.C.

When it comes to abatement of penalties regarding late filing of international information returns, the voluntary disclosure system adopted by the I.R.S. in its Delinquent International Information Return Submission Procedures suggests that penalties may be assessed but that there is a procedure to have them abated. In practice, penalties always seem to be assessed and the standard that must be met in order to have them abated is high. Reasonable cause from the viewpoint of a taxpayer need not be reasonable when reviewed by an I.R.S. Appeals Officer. Wooyoung Lee looks at the decided cases and the approaches taken by the I.R.S. to reduce penalties without fully abating them. He also comments on the facts of a case that has been filed in U.S. District Court challenging the apparent policy of mitigation rather than full abatement.

September 29, 2022

Tax 101: U.S. Tax Compliance For Dual Citizen Young Adults

September 29, 2022/ Ruchelman P.L.L.C.

It is not uncommon for a young adult who was born in the U.S. to noncitizen parents living temporarily in the U.S. to live abroad. Although he or she may never have returned to the U.S., the young individual is a U.S. citizen, and that status brings with it U.S. tax obligations. In their article, Nina Krauthamer, Wooyoung Lee, and Stanley C. Ruchelman address the tax obligations in the context of Ms. A, a typical young adult, born in the U.S., but living abroad. She may have a bank account in a foreign county, but ordinarily will not have her own source of income. At some point, Ms. A may receive gifts and bequests from her foreign parents or grandparents. At this point in her life, Ms. A’s U.S. tax compliance obligations become complex. Just how complex is explained by the authors.

March 30, 2022

The Price is Right: Former I.R.S. Attorney Discusses Information Return and F.B.A.R. Penalties

March 30, 2022/ Ruchelman P.L.L.C.

Ever wonder what happens to well-crafted reasonable cause statements attached to late-filed I.R.S. information returns, such as Forms 5471, 5472, and 3520? In a presentation before the San Francisco Tax Club, a retired long-term I.R.S. attorney named Daniel Price provided the answer: nothing happens to them. Over the years, the I.R.S. has increased the number of information returns that must be filed by taxpayers. To keep up the pace, I.R.S. delegates many tasks to lower-level employees who may not have been trained sufficiently to make discretionary judgments. Moreover, they are managed by relatively inexperienced supervisors. Stanley C. Ruchelman and Wooyoung Lee explain the problem and several suggestions offered by Mr. Price. Recent experience with F.B.A.R. penalty inconsistencies are also discussed.

November 15, 2015

An Englishman in New York – Tax Considerations for Foreign Individuals

November 15, 2015/ Web Admin

The phrases “green card” and “U.S. citizen” have the ability to strike panic and even terror in tax advisors around the world. What inspires this fear? What tax challenges do foreign individuals face when they are present in the U.S. on a temporary, non-immigrant basis?