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A Turkish corporation providing domain name registration for web sites
has a subsidiary in Delaware. If the corporation operates entirely from Turkey, will it be
liable for U.S. taxes?
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 The answer involves an analysis of the particular facts and
circumstances, but in general, if you maintain your business operations and personnel
outside the U.S. and do not have a fixed place of business in the U.S. (as interpreted by
the courts and IRS), then you do not owe U.S. taxes on your "foreign source"
income. If the Delaware subsidiary engages in business, then its income will be subject to
U.S. taxes. In addition, under IRC Sec. 482, IRS has the right to allocate income and
expenses between related foreign and U.S. corporations to "accurately reflect income.
" Thus, you cannot generate income through your U.S. corporation and then avoid U. S.
taxes by claiming the income was earned by the Turkish corporation or claiming excess
deductions for the U.S. corporation.
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I have fallen behind in my payroll taxes. I am in a
"Catch 22" because if I pay the taxes, I will have to let the employees go, and
without employees of course there is no business. Is there anything we can do to resolve
this with the IRS?
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It is not clear whether the business is operating as a "C"
corporation (a separate taxpaying entity) or as a sole proprietorship. In either event,
you are personally responsible for paying the payroll taxes (you hold the funds in trust
for the government) and you cannot discharge this debt in bankruptcy. If you are operating
as a "C" corporation, then you are personally responsible for the trust-fund
portion of the taxes, approximately 60% of the total; otherwise, you are personally
responsible for the full amount. In short, you need to pay your payroll taxes or risk
personal financial ruin. You may be able to negotiate with IRS to stay current with your
payroll taxes and work off the past due amounts, but if you cannot keep your payroll taxes
current, IRS will shut you down.
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I live in a rent-stabilized apartment. If the
landlord pays me a substantial amount of money to move, what are the tax consequences?
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You could attempt to characterize the payment as a refund of rent - that way, it would not
be income to you. However, this transaction sounds like a cancellation of a lease, in
which case you will pay capital gains taxes on the payment, provided you comply with the
requirements of IRC Sec. 1241; otherwise, the payment will constitute ordinary income to
you. Unfortunately, you do not "own" a residence so you will not qualify for the
residency exclusion.
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I am
helping an elderly relative with estate planning. He has never been married, has no
children, & wishes to leave his entire estate to one person. The estate consists of a
house, stocks, bonds, annuities, & bank accounts. We'd like to know the tax
consequences for his estate if he uses a will vs. transferring his assets on death to the
beneficiary. Can TOD ("transfer on death") designation be used for a house?
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Read my website section on estate planning or purchase Nolo Press's book on estate
planning (www.nolo.com). You cannot transfer a home through a transfer on death
designation; however, the home could be placed in joint tenancy, although there could be
ownership drawbacks to this approach. A revocable living trust will help avoid probate
without interfering with the current ownership of assets. There is no federal estate tax
difference between using a will and TOD accounts - currently, your relative (and everyone
else for that matter) has a $1 million estate-tax exemption.
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Foreign Corporation with U.S. Subsidiary
