Category: Florida BAR article
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New §736.0505(3) Assures Tax/Asset Protection of Inter Vivos QTIP Trusts
Bob and Judy, a married couple, have a lot of money and want to make sure their kids get as much of it as possible when they die. They have $13.5 million, $3.5 million of which is their house and $10 million is in a joint bank account. Their accountant suggests that they put $5…
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Offshore Account Compliance: The Evolution of a Revolution
The head of the IRS, John Koskinen, made big changes to the Offshore Voluntary Disclosure Program in 2014. This was the fourth time the program had been changed. The changes were both good and bad, but they were needed to make the program fair and run better. If you have a bank account in a…
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State of the Same-sex Union: A Tax Perspective
The U.S. Supreme Court decided that same-sex married couples can now enjoy the same federal benefits as opposite-sex married couples. This means that same-sex couples can claim tax benefits and other rights previously unavailable to them. The decision also stated that same-sex marriages performed in any U.S. or foreign jurisdiction will be recognized for federal…
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Qualifying for Treaty Benefits Under the Derivative Benefits Article
Foreign persons are generally subject to U.S. federal income tax on two types of income: passive income from the U.S. (like interest and dividends) and income connected to a U.S. business. Most income tax treaties reduce or eliminate the 30 percent withholding tax on these types of income. To qualify for treaty benefits, the taxpayer…
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A Primer on Private Placement Life Insurance
PPLI is a type of life insurance that can help with income tax and estate planning. It’s like regular life insurance, but with more investment options and lower costs. It’s a good option for people who want to save on taxes and have more investment flexibility. However, there are certain rules and requirements that need…
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Using Administrative Law to Challenge IRS Determinations
Taxpayers who are in a dispute with the IRS should not forget to use all possible arguments and defenses available to them, including those under administrative law. These arguments have not been used often in the past, but they can be very helpful in certain situations. Both taxpayers and the IRS can benefit from finding…
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Personal Use of Florida Residential Realty by a Nonresident Alien Shareholder of a Foreign Corporate-related Structure
Non-US citizens who don’t live in the US can use a foreign company to buy property in the US. They or their family can live in the house, but there are tax and legal rules they need to follow. The foreign company can directly own the property, or it can own a US company that…
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Revisiting Nexus Standards: Establishing U.S. Jurisdiction to Tax Cross-border Commerce
Benjamin Franklin said that the only sure things in life are death and taxes. But with the rise of online shopping, it’s become uncertain how taxes should work for international business. The U.S. tax system is trying to figure out new rules for taxing cross-border commerce in the modern world. People are questioning if old…
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The New 3.8 Percent Tax on Net Investment Income of Individuals, Estates, and Trusts
During tax season, many tax preparers and their clients will be learning about the new 3.8 percent net investment income tax (NIIT), which affects certain passive investment income. This tax impacts many taxpayers, especially those with high earnings, and it’s important for taxpayers to understand how it works and how to minimize its impact. The…
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Internet Taxes on Trial: New Strategies for Litigating Remote-seller Sales and Use Tax Cases
In 2013, new legal theories emerged in Illinois and Colorado about whether states could tax online sales. The Illinois Supreme Court said a law about taxing online sales was not allowed under a federal law called the Internet Tax Freedom Act. In Colorado, a federal court said it didn’t have the power to decide a…
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After Death Does Us Part: Surviving Spouse as Fiduciary and Beneficiary
When spouses name each other as the person in charge of their will and estate, it can create conflicts of interest, especially in blended families. In these situations, it might be better to appoint an outside person, like a bank or trust company, to help. This can be more expensive, but it can help prevent…
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Identifying and Reporting the Proper Taxpayer in International Structures
One of the main issues in U.S. tax law is figuring out who is responsible for paying taxes on certain income. It can be tricky when dealing with non-U.S. entities, as their classification for tax purposes is really important. Sometimes, the person or company getting the income isn’t actually the one responsible for paying taxes…
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Rethinking I.R.C. §2701 in the Era of Large Gift Tax Exemptions
For individuals or couples with a net worth of $5-10 million, there are new opportunities to transfer assets and minimize taxes as the tax exemptions have increased. One way to do this is through a “freeze partnership,” which allows for transferring appreciation of assets to younger generations while keeping control and access to income. This…
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Tax Planning for Cross-border Endorsement Payments to Professional U.S. Athletes
High-profile athletes like professional golfers and tennis players often make a lot of money from endorsing products. Recently, two golfers, Sergio Garcia and Retief Goosen, had legal issues about how their endorsement income should be taxed. The court decided that Garcia’s income was mostly from royalties, which are taxed differently, and that Goosen’s income was…
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Captive Insurance Companies: Florida Enters the Arena
A captive insurance company is a company formed by a business owner to insure the risks of their operating business and affiliated companies. It must be operated like a real insurance company and be licensed as one. Captive insurance companies have been around for a long time and are used by both large and small…
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Are Tax Expenditures Reaching Their Goals? A View from the Fiscal Cliff
Taxes help pay for things that make our society better, like roads and schools. The government gives tax breaks to encourage people to spend money. But sometimes these tax breaks don’t work as planned and end up costing the government money. Tax breaks for things like buying a house or going to college are examples…
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It’s 2013: Now What?
In 2011 and 2012, lawyers were advising clients about tax and estate planning opportunities to transfer up to $5 million tax-free. However, Congress passed the American Taxpayer Relief Act of 2012 (ATRA) at the beginning of 2013, making the planning efforts unnecessary in many cases. ATRA maintains the $5 million exclusion amount and other important…
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The Right to Intervene in Innocent Spouse Cases Disappears When the Affirmative Defense of Innocent Spouse Is Withdrawn
In 1998, Congress made it easier for innocent spouses to get relief from tax problems. The non-asking spouse has certain rights in Tax Court proceedings, including the right to be heard. This article will explain the innocent spouse law and the non-asking spouse’s rights in Tax Court. Married couples can choose to file their taxes…
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The Benefits of Tax Planning as Part of the Acquisition of an International Business
When a business is bought by someone else, it can be a good opportunity to make changes to how the company is taxed. This can help the new owner pay less in taxes. Tax planning is important for every business, and it’s different for each business and its owner. The main goal is to pay…
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Use of Disclaimers by U.S. Persons in the International Context
The concept of renunciation or disclaimer of property interest comes from common law. It means that if someone is given property but doesn’t want it, they can give up their right to it. This can be useful for estate planning, especially for people with international connections. For example, a U.S. citizen who becomes a beneficiary…
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Repatriation of Profits to Latin America: Who Needs Treaties!
If you’re not a U.S. taxpayer and you don’t do business in the U.S., you’ll only be taxed on certain types of income from the U.S., like dividends. Unless there’s a tax treaty to lower the tax rate, you’ll usually have to pay a 30 percent tax on U.S. dividends. Most Latin American countries don’t…
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The IRS and Their Pesky Summonses: A Primer on Enforcement and Common Defenses
The IRS uses summonses to get information from taxpayers and third parties for things like auditing tax returns and collecting taxes. Summonses don’t establish guilt or innocence, they just gather information. The IRS is allowed to issue summonses to taxpayers, witnesses, and third-party recordkeepers. For criminal investigations, the IRS can also issue summonses. Once a…
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Pay Early, Pay Less: Maximizing TPT Credit Availability for Married Couples
The federal estate tax credit allows married couples to save on taxes when one spouse dies within 10 years of the other. This happens because some of the property transferred from the first spouse to the second spouse is not subject to tax in the second spouse’s estate. As a result, the combined estate tax…
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U.S. International Tax Planning for Bona Fide Residents of Puerto Rico
If you are a U.S. taxpayer and a resident of Puerto Rico for the entire year, you may not have to pay U.S. federal income tax on interest, dividends, and possibly worldwide capital gains from Puerto Rico. To be considered a resident of Puerto Rico, you must pass a presence test, have your tax home…