Moodys Gartner musings


Updated IRS streamlined filing program: snowbirds beware

On October 8, 2014, the IRS issued FAQs clarifying its amnesty programs for non-compliant taxpayers who want to catch-up on their U.S. tax filing obligations.1 These FAQs address the recently amended streamlined filing compliance procedures, offshore voluntary disclosure program (OVDP), and delinquent information return and FBAR submission procedures.2 The FAQs are not relatively enlightening, except for the FAQ on the nonresident streamlined procedures (dubbed the “Streamlined Foreign Offshore Procedures” by the IRS). After briefly summarizing some relevant general rules regarding streamlined, this blog will address the consequences of that FAQ for snowbirds who have not filed during the three-year period for which tax returns must be submitted under streamlined and, according to the IRS, spend too much time in the United States. Ultimately, these snowbirds are ineligible for streamlined and must find an alternative way to catch-up with their U.S. tax filing obligations.

IRS’s new procedure for Canadian retirement plans: not all good news

On October 7, 2014 the IRS released Revenue Procedure 2014-55, which purports to make US tax filing easier for US citizens or residents who own Canadian Registered Retirement Savings Plans (“RRSPs”) or Registered Retirement Income Funds (“RRIFs”). Almost immediately, journalists and commentators breathlessly heralded the development as a softened and practical solution for individuals that own these Canadian retirement plans. You can’t blame the commentators for their ebullience: the prior procedures for electing tax deferral were complex, expensive, and produced uncertain results. Further, even the IRS’s press release hinted at merciful relief: IRS Simplifies Procedures for Favorable Tax Treatment on Canadian Retirement Plans and Annual Reporting Requirements. Close examination of the new procedures, however, reveals a mixed offering of good, bad, and outright confusion.

Does the increased fee for renouncing US citizenship indicate a change in attitude toward expatriates?

Uncle Sam just managed to dig out a quarter hiding in his couch. Or maybe his patience is just running thin with renouncers. On August 28, 2014, the United States Department of State published an interim final rule raising the application processing fee for renunciation of US citizenship from $450 to $2,350, a 422% increase. Read More »

Is the Canadian FATCA lawsuit a Pyrrhic War?

In 280 BC the Greek King Pyrrhus won a decisive battle against the Roman army. However in winning the battle, Pyrrhus’s army suffered great losses and when Rome had a chance to reconnoiter, it easily defeated what remained of the Greek’s army. Hence is derived the modern term Pyrrhic victory, or a victory gained at too great a cost... at least that’s what Wikipedia has to say about the term. After all, we’re not historians, we’re tax professionals, and we prefer to leave the interpretation of history to those who do it well. Similarly, it occurs to us that the litigants in a recently filed lawsuit could be headed, at best, to a Pyrrhic end. Just as we’re in no position to comment with any authority on ancient history, neither are we in a position to comment on the strength of the arguments in the lawsuit. The lawyers representing the plaintiffs are among the best in Canada, so we are confident that they are well prepared for the battle that lies ahead… the question we’ll address is what comes afterward.

Are United States limited liability limited partnerships the Holy Grail?

One thing is for sure… Canadians continue to invest significant amounts of money in the US. When investing for business or commercial purposes, Canadian residents are often faced with a fundamental question: what legal structure should be used to ensure that an appropriate balance of tax and non-tax objectives are met? Such a question is not easily answered. As my colleague, Roy Berg, says: “... if someone tells you emphatically what the answer is without exploring all of your facts, then politely ask the person to validate your parking and leave”. One of the structures that has recently been recommended by many US and Canadian advisors is the US limited liability limited partnership (“LLLP”). Accordingly, we will explore that alternative in this article.

Taxation of restrictive covenants – caution when trying to qualify for exceptions to full income inclusions!

Our firm has written about the taxation of restrictive covenants many times before. Section 56.4 of the Income Tax Act is mind-numbingly complex. However, to oversimplify, if a person grants a restrictive covenant, such as a non-compete agreement (which is often part of a purchase and sale agreement for the sale of business), then the person granting the covenant needs to concern themselves with the new section 56.4. If section 56.4 applies, then any amount received or receivable by the grantor (or deemed to be received or receivable pursuant to section 68 of the Act – I call this the “deemed receipt” rule) in respect of that restrictive covenant grant will be taxed as a full income inclusion. This surprises many taxpayers...

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