<ul><ul><ul><ul><li>International Tax </li></ul></ul></ul></ul>“ Changes in the New Tax Act & International Tax Questions ...
<ul><ul><ul><ul><li>Tax Relief Bill of 2010 </li></ul></ul></ul></ul>Rowbotham   &   c  o  m  p  a  n  y  l l p <ul><li>Ex...
<ul><ul><ul><ul><li>Tax Relief Bill of 2010 (Cont’d) </li></ul></ul></ul></ul>Rowbotham   &   c  o  m  p  a  n  y  l l p <...
<ul><ul><ul><ul><li>Tax Planning Checklist- April 18th </li></ul></ul></ul></ul>Rowbotham   &   c  o  m  p  a  n  y  l l p...
<ul><ul><ul><ul><li>Reporting </li></ul></ul></ul></ul>Foreign Reporting U.S. Residents Filing “Activities” include owners...
<ul><ul><ul><ul><li>FBAR </li></ul></ul></ul></ul>Foreign Bank Account Reporting Rowbotham   &   c  o  m  p  a  n  y  l l ...
<ul><ul><ul><ul><li>FBAR </li></ul></ul></ul></ul>Offshore Voluntary Disclosure Initiative Rowbotham   &   c  o  m  p  a  ...
<ul><ul><ul><ul><li>Expatriation </li></ul></ul></ul></ul><ul><li>When do these rules apply? </li></ul><ul><li>Applies whe...
<ul><ul><ul><ul><li>Expatriation </li></ul></ul></ul></ul>Outcome of Expatriation Income Tax: IRS: Rowbotham   &   c  o  m...
<ul><ul><ul><ul><li>Estate Tax Rates and Exemption Amounts </li></ul></ul></ul></ul>Rowbotham   &   c  o  m  p  a  n  y  l...
<ul><ul><ul><ul><li>Gift Tax Exclusions and Unified Exemption </li></ul></ul></ul></ul>Rowbotham   &   c  o  m  p  a  n  y...
<ul><ul><ul><ul><li>Exemption Portability </li></ul></ul></ul></ul>Rowbotham   &   c  o  m  p  a  n  y  l l p <ul><li>Unus...
<ul><ul><ul><ul><li>Continuing Couples Trust </li></ul></ul></ul></ul>Rowbotham   &   c  o  m  p  a  n  y  l l p First Dea...
First Death Second Death Beneficiary Beneficiary Beneficiary <ul><li>No estate tax due   to $5M exemption. </li></ul><ul><...
<ul><ul><ul><ul><li>Rowbotham & Company LLP </li></ul></ul></ul></ul>Rowbotham   &   c  o  m  p  a  n  y  l l p Harriet Le...
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Changes in the New Tax Act & International Tax Questions Answered

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Changes in the New Tax Act & International Tax Questions Answered

  1. 1. <ul><ul><ul><ul><li>International Tax </li></ul></ul></ul></ul>“ Changes in the New Tax Act & International Tax Questions Answered” Citibank San Francisco, California February 24, 2011 Rowbotham & Company Accountants & International Tax Consultants (415) 433-1177 [email_address] [email_address] [email_address] Harriet Leung Brian Rowbotham Peter Trieu
  2. 2. <ul><ul><ul><ul><li>Tax Relief Bill of 2010 </li></ul></ul></ul></ul>Rowbotham & c o m p a n y l l p <ul><li>Extension of existing federal income tax brackets (topping out at 35% will continue through 2012 </li></ul><ul><ul><li>- highest two brackets scheduled to increase to 39.6% and 36%, respectively, in 2013 </li></ul></ul><ul><li>Extension of existing 15% capital gain and “qualified” dividend rate through 2012 </li></ul><ul><ul><li>- capital gain rate scheduled to increase to 20% and dividend rate to 39.6% in 2013. </li></ul></ul><ul><li>Continuation of no personal exemption phase-out and no itemized deduction limitation </li></ul><ul><li>Alternative minimum tax “patch” </li></ul><ul><ul><li>- increase in AMT exemption </li></ul></ul><ul><ul><li>- allowance of personal tax credits to be applied to the AMT </li></ul></ul>
  3. 3. <ul><ul><ul><ul><li>Tax Relief Bill of 2010 (Cont’d) </li></ul></ul></ul></ul>Rowbotham & c o m p a n y l l p <ul><li>Extension of 179 expense </li></ul><ul><ul><li>- $500K maximum expense for 2011; </li></ul></ul><ul><ul><li>$125K maximum expense for 2012 </li></ul></ul><ul><ul><li>- $2M investment limitation for 2011; </li></ul></ul><ul><ul><li>$500k investment limitation for 2012 </li></ul></ul><ul><li>Extension of bonus depreciation </li></ul><ul><ul><li>- 100% bonus depreciation for 2011; </li></ul></ul><ul><ul><li>50% for 2012 </li></ul></ul><ul><li>Extension of research credit through 2011 </li></ul><ul><li>Increase of exclusion to 100% of QSBS issued between September 28, 2010 to December 31, 2010 </li></ul>
  4. 4. <ul><ul><ul><ul><li>Tax Planning Checklist- April 18th </li></ul></ul></ul></ul>Rowbotham & c o m p a n y l l p <ul><li>Pay taxes due </li></ul><ul><ul><li>- Pay at least 90% of tax (including AMT) to avoid late payment penalty </li></ul></ul><ul><ul><li>- Interest continues to accrue </li></ul></ul><ul><li>File or extend returns </li></ul><ul><ul><li>- Increase risk of audit? </li></ul></ul><ul><ul><li>- Obtain proof of mailing / e-filing </li></ul></ul><ul><li>Estimated taxes </li></ul><ul><li>Contributions to IRA, SEP-IRA, 401k, HAS </li></ul><ul><li>IRS Form 6251 </li></ul>
  5. 5. <ul><ul><ul><ul><li>Reporting </li></ul></ul></ul></ul>Foreign Reporting U.S. Residents Filing “Activities” include ownership in: Rowbotham & c o m p a n y l l p (1) Foreign Corporation 5471 $10,000 / year per company (2) Foreign Partnership 8865 $10,000/ year per entity (3) Foreign Trust 3520 25% of distribution 3520A 5% per month up to 25% (4) Transfers of Assets to 926 25% of value, a foreign corporation maximum of $10,000 (*) Potential criminal prosecution can result for non-reporting. Potential Penalties IRS Form for Non-compliance (*)
  6. 6. <ul><ul><ul><ul><li>FBAR </li></ul></ul></ul></ul>Foreign Bank Account Reporting Rowbotham & c o m p a n y l l p Current Requirements TDF 90-22.1 Voluntary disclosure [March – October 2009] program 2011 voluntary [February 14, 2011 - disclosure program August 31, 2011] How to handle the problem today if (a) Your foreign accounts are in a Swiss Bank (b) Your foreign accounts are not in Swiss Banks FATCA Rules for 2011 (*) Potential criminal prosecution can result for non-reporting. Maximum Monetary Penalties IRS Form for Non-compliance (*) 50% of account balance 5% in limited circumstances 20% of account balance 5% in limited circumstances 12.5% for accounts up to $75,000 25% for accounts over $75,000
  7. 7. <ul><ul><ul><ul><li>FBAR </li></ul></ul></ul></ul>Offshore Voluntary Disclosure Initiative Rowbotham & c o m p a n y l l p <ul><li>New program announced February 2011 </li></ul><ul><li>Deadline to file August 31, 2011 </li></ul><ul><li>Avoid potential criminal sanctions and 50% penalty </li></ul><ul><li>Qualifications: </li></ul><ul><ul><li>- File all original and amended tax returns for 2003-2011 period </li></ul></ul><ul><ul><li>- Pay all taxes and interest due </li></ul></ul><ul><ul><li>- Pay all accuracy and delinquent payment penalties </li></ul></ul><ul><ul><li>- Pay penalty equal to 25% of highest aggregate account balance </li></ul></ul><ul><ul><ul><li>Reduced penalty of 12.5% for accounts not exceeding $75K in any calendar year </li></ul></ul></ul>
  8. 8. <ul><ul><ul><ul><li>Expatriation </li></ul></ul></ul></ul><ul><li>When do these rules apply? </li></ul><ul><li>Applies when: </li></ul><ul><ul><li>(1) Annual income tax over prior 5 years averages > $124k </li></ul></ul><ul><ul><li>(2) Fair market value of assets > $2 million </li></ul></ul><ul><ul><li>(3) Person is giving up: U.S. citizenship, long term residency </li></ul></ul><ul><ul><li>(4) Residence will resume for any year that presence in the U.S. exceeds 30 days </li></ul></ul>Rowbotham & c o m p a n y l l p <ul><li>U.S. Citizenship </li></ul><ul><li>Resident green card if person was resident for 8 of prior 15 years </li></ul><ul><li>Filing as a nonresident can be a deemed disposition after 7 years </li></ul>
  9. 9. <ul><ul><ul><ul><li>Expatriation </li></ul></ul></ul></ul>Outcome of Expatriation Income Tax: IRS: Rowbotham & c o m p a n y l l p <ul><li>There is a deemed disposition of assets </li></ul><ul><li>Gain is taxable at normal U.S. tax rates </li></ul><ul><li>Notification is required in order to expatriate: </li></ul><ul><li>Tax can de deferred until assets are sold </li></ul><ul><li>Tax applies to appreciation on worldwide assets </li></ul><ul><li>Appreciation occurring prior to U.S. residence is excluded </li></ul><ul><li>IRS Form 8854 must be filed </li></ul><ul><li>Prior five years tax returns must be filed </li></ul>
  10. 10. <ul><ul><ul><ul><li>Estate Tax Rates and Exemption Amounts </li></ul></ul></ul></ul>Rowbotham & c o m p a n y l l p * Executor may elect estate tax with increased exemption and step up basis of assets, or elect no estate tax with modified carry-over basis in assets. ** Exemption equivalent amount for nonresidents is limited to $60,000 for all years. $3,500,000 45% 2009 $5,000,000 35% (optional)* 2010 $5,000,000 35% 2011 $1,000,000 55% 2013 $5,000,000 35% 2012 Exemption Equivalent ** Top Estate Tax Rate For Decedents Dying During
  11. 11. <ul><ul><ul><ul><li>Gift Tax Exclusions and Unified Exemption </li></ul></ul></ul></ul>Rowbotham & c o m p a n y l l p <ul><li>Annual exclusion – $13,000 </li></ul><ul><li>Gifts using exemption reduce estate tax exemption dollar for dollar </li></ul><ul><li>No exemption allowed for nonresidents </li></ul>$1,000,000 2010 $5,000,000 2011 $1,000,000 2013 $5,000,000 2012 Exemption Equivalent For Gifts During
  12. 12. <ul><ul><ul><ul><li>Exemption Portability </li></ul></ul></ul></ul>Rowbotham & c o m p a n y l l p <ul><li>Unused estate tax exemption amounts remaining after the death of a spouse may be used by the estate of the surviving spouse </li></ul><ul><li>Traditionally, “portability” achieved through use of AB Trust. </li></ul><ul><li>AB Trust still viable: </li></ul><ul><ul><li>Allows for exemption from tax on appreciation in assets post first death </li></ul></ul><ul><ul><li>Allows for “portability” of GST exemption </li></ul></ul><ul><ul><li>Protects dispositive desires of first spouse to die </li></ul></ul><ul><ul><li>Provides creditor protection </li></ul></ul><ul><ul><li>Allows for “portability” beyond 2011, 2012. </li></ul></ul>
  13. 13. <ul><ul><ul><ul><li>Continuing Couples Trust </li></ul></ul></ul></ul>Rowbotham & c o m p a n y l l p First Death Second Death Beneficiary Beneficiary Beneficiary <ul><li>No estate tax due to $10M portable exemption </li></ul><ul><li>No GST tax on $5M only since no portability. </li></ul>No estate tax due to unlimited marital deduction. No exemption amount used. Revocable Living Trust $10,000,000 Revocable Living Trust (Continuing) $10,000,000
  14. 14. First Death Second Death Beneficiary Beneficiary Beneficiary <ul><li>No estate tax due to $5M exemption. </li></ul><ul><li>No GST tax due to $5M exemption. </li></ul><ul><li>No estate or GST tax even if appreciated, since not included in estate. </li></ul><ul><li>No estate tax: surviving spouse’s property. </li></ul><ul><li>No estate tax due to $5M exemption. </li></ul><ul><li>No GST tax due to $5M exemption. </li></ul>Survivor’s Trust (Trust A) $5,000,000 - Revocable - Subject to estate tax Revocable Living Trust $10,000,000 Rowbotham & c o m p a n y l l p <ul><ul><ul><ul><li>AB Trust </li></ul></ul></ul></ul><ul><li>Exemption Trust </li></ul><ul><li>(Trust B) </li></ul><ul><li>$5,000,000 - Irrevocable </li></ul><ul><ul><li>- Not subject to estate tax </li></ul></ul>Mandatory income distribution Principal distribution as needed
  15. 15. <ul><ul><ul><ul><li>Rowbotham & Company LLP </li></ul></ul></ul></ul>Rowbotham & c o m p a n y l l p Harriet Leung is a California CPA heads up the firm's Asian business practice engagements for private and public companies.   Harriet is active advising companies with M&A transactions and international clients in the financial due diligences, audit and business advisory areas. She has substantial experience servicing companies that were seeking listings on both foreign and U.S. stock exchange markets.  She has represented and worked with companies in Asia completing reverse mergers into the U.S. public companies.  Harriet also has extensive experience working in restructuring international investment funds with operations in the U.S., but owned and controlled in Asia.   Her client base includes companies in real estate (including domestic and foreign), international investments, science, distribution, high-tech and software.  Harriet is fluent in both Cantonese and Mandarin. Brian Rowbotham is a CPA with 33 years of experience advising businesses and individuals on complex domestic and international income and estate tax planning. He is the founding partner of Rowbotham & Company LLP which is almost exclusively dedicated to businesses and investors needing both domestic and international tax and accounting services. His clients include private and public companies around the globe which consist of: U.S. and foreign institutional investors, multinational families and executives and non-U.S. investors doing business in the U.S. Mr. Rowbotham has advised clients in major domestic and international litigation and has also served on the boards of both privately held and publicly traded companies. From 1992 to 2006, he directly supervised his firm’s engagement by trustees in Europe to assist with the recoveries of funds from one of the largest frauds in U.K. history. Over the past 20 years, he has represented large European and Middle Eastern institutional investors and numerous Asian families investing in U.S. Real Estate transactions. Peter Trieu is a Tax Director at Rowbotham & Company. His practice focuses on advising clients regarding domestic and international tax planning and compliance. He also assists clients with their estate plans. His clients include private and public companies around the globe, U.S. and foreign institutional investors, multinational families and executives and non-U.S. investors doing business in the U.S. Mr. Trieu co-authored “Doing Business in India” published in the May/June 2009 issue of CalCPA magazine. Rowbotham & Company is a full service Certified Public Accounting firm that provides audit, accounting, and domestic and international tax services to individuals and businesses, both public and private.  Rowbotham & Company has offices in San Francisco and Silicon Valley and is a member of Polaris International, a worldwide network of accounting and consulting firms.  The firm is  a member of the American Institute of Certified Public Accountants and is registered with the Public Company Accounting Oversight Board.

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