Independent Contractors vs. Employees - The rules involving the classification of workers as either independent contractors or employees. Both federal and California law are discussed and there's a interactive flowchart to guide you through the federal rules.
Estate Planning - A collection of basic, intermediate and advanced articles covering estate and gift taxation, and general estate planning terminology and concepts. Estate Planning has been moved to an independent section and is no longer part of the Tax Class section.
Off-shore and Domestic Asset
Protection: The Tax Prophet's analysis of off-shore schemes touted to protect
your assets. Do they really work? Also included, the rules regarding foreign trusts
and bank accounts. What about domestic asset protection, does it work? Is it better
than going off-shore (Yes!)?
Foreign Taxpayers - Income, Gift and Estate Taxation Study the rules affecting non-U.S. citizens and residents who invest in the U.S., transfer assets to U.S. citizens or residents or operate businesses connected with the U.S.
Tax Planning for Expatriates (U. S. Taxpayers Working Overseas) - Articles dealing with the earned income credit and other issues facing U.S. taxpayers working abroad.
Real Estate Taxation - The changing law regarding the taxation of the sale of a principal residence, the home office deduction and what happens if the bank forecloses on your residence.
Internet Taxation Issues - The dynamics of traditional taxation principles as applied to the Internet.
Taxation of Small Business - A primer on the issues facing small businesses, from formation, through operation and liquidation or sale.
Stocks, Bonds and Investment Assets - The taxation of securities and other intangible investment transactions.
Taxation of Day Traders - A section involving short-term
stock trading.
In general, foreign individuals and entities are taxed on their U.S.-source income. Foreign individuals also face a steep estate tax on property located in the U.S. The following articles focus on the income and estate tax consequences of non-U.S. citizens and residents. The gift tax rules can be found at Gifts by Non-U.S. Citizens or Residents.
Foreign Investors: Plan Carefully - basic
A newspaper article describing the rules for foreign investors.
When Does a Foreign Citizen Become a U.S. Resident for Income
Tax Purposes? - basic
The U.S. residency rules are critical to the determination of when a foreign person becomes subject to U.S. income taxation. Do you meet the "physical presence" test? Use the Tax Prophet's Physical Presence Calculator.
Tax Consequences of Foreign Investments in U.S. Real Property
- basic
An understanding of these rules is critical to every foreign individual or company investing in real estate located in the U.S.
Advantages of Forming a Foreign Trust - basic
Foreign individuals should consider using a foreign trust for their U.S. investments. This article explains the advantages of using a foreign trust.
U.S. Residency Rules - basicJanuary 2002 FAQ dealing with foreign taxpayers who become U.S. residents for tax purposes.
Foreign Stock Purchase - basic
An FAQ as to the tax rules when a Non-resident alien purchases and sells stock in a U.S. company over the Internet.
Taxation of U.S. Residents with Foreign Investments -
intermediate
FAQ (5/02) discussing foreign investments by a foreigner who later becomes a U. S. resident..
Foreign Dependency Exemption - basic
The rules concerning when a foreign dependent can be claimed on a U.S. tax return.
Temporary
residents; Foreign Students and Teachers - intermediate
An FAQ dealing with the residency status of of temporary residents, teachers and students.
Residence Purchase by a Foreign Person
- intermediate
Allocating the interest deduction when a foreign individual owns part of a residence.
F-1 Visa rules - intermediate
An FAQ dealing with the tax consequences of holding an F-1 Visa.
Foreign Student with Capital Gains - intermediate
An FAQ dealing with capital gains incurred by foreign students.
1996 Tax Law Changes Affecting Foreign Trusts - advanced
There have been extensive changes in the foreign trust rules and reporting requirements. This article explains the new rules and offers planning advice.
Expatriation Taxation -- Not Just for Rich Tax Dodgers! -
advanced
Long-term residents could run afoul of the new expatriation tax regime. These rules now apply to foreign citizens who have lived in the U.S. 8 of the last 15 years.
Foreign Trusts and Gifts - advanced
A seminar outline dealing the foreign trusts and gifts under the 1997 tax law changes - advanced
Hot Topics: Memorandum: Tax Planning Opportunities for Foreign
Consultants Working in the U.S. - advanced
Foreign consultants should review this memo before working in the U. S.
Sale
of Residence by Non-U. S. Resident or Citizen - intermediate
An FAQ dealing with the tax consequences when a foreign person sells a residence located in the U.S.
Tax Amnesty for Overseas Accounts -
intermediate
Hot Topics article (5/03) dealing with the IRS crackdown on overseas accounts.
Recent FAQs:
March, 2002: Taxation Involving the Transfer of Foreign Funds to U.S.
Taxation of Foreign Co-Owner of Bank Account
August, 2002: Stock Trading by Foreigner
Recent FAQs:
February, 2002: U.S. tax filing for U.S. Expatriate
May, 2002: Foreign Earned Income Credit
Tax Planning For U.S. Citizens and Residents Working Abroad -
advanced
Hot Topics article (11/01) dealing with the tax breaks available to U.S. taxpayers working overseas.
Foreign Earned Income Credit - intermediate
An FAQ discussing the tax credit for U.S. taxpayers working overseas.
Foreign
Income Tax Credit Rules
An FAQ dealing with the foreign earned income tax credit of $74,000 in 2001 ($76,000 in 2002).
U.S. Residents with Foreign Investments - intermediate
An FAQ about the taxation of investments when a person becomes a U.S. resident.
U.S.
Person Working in China - intermediate
An FAQ dealing with a U.S. person's tax obligations to the Chinese government when working in China.
Credit
for Swiss Taxes - intermediate
An FAQ dealing with the U.S. tax consequences of income taxes paid to the Swiss government.
U.S. tax filing for U.S. Expatriate - intermediate
An FAQ (2/02) involving the tax-filing requirements for U.S. expatriates - intermediate
Taxation Involving the Transfer of Foreign Funds to U.S. -
intermediate
An FAQ (3/02) discussing the rules regarding foreign bank transfers to U. S.
Taxation of Foreign Co-Owner of Bank Account - intermediate
An FAQ (3/02) involving a foreign bank account.
Foreign Earned Income Credit - intermediate
Another FAQ (5/02) dealing with the foreign earned income credit.
Foreign Trusts and Gifts - advanced
A seminar outline dealing the foreign trusts and gifts under the 1997 tax law changes - advanced
Hot Topics October, 2001 - Foreign Taxpayers Beware: U.S. Estate and
Gift-Tax Law Can Hit Wallet Hard
A Hot Topics article that discusses gifts by NRAs and the reporting requirements by U.S. taxpayers - intermediate.
FAQ, August 6, 2000, Inter-related gift transaction between a U.S.
taxpayer and an NRA - intermediate
An FAQ that discusses the step-transaction doctrine as it applies to a series of gift transfers.
FAQ, June 14, 1998, Gift of down payment by NRA - intermediate
The gift-tax consequences when a NRA (parent) transfers funds to escrow for the purchase of a residence by a U.S. taxpayer (child). The parent then becomes a joint tenant on the property.
Recent FAQs:
May, 2002: Foreign
Earned Income Credit Taxation of U.S. Residents with Foreign Investments
December, 2002 - Update on Asset Protection
Planning Part 2 of a 2-part series - advanced
An example of using a series of LLCs to achieve domestic asset protection.
November, 2002 - Update on Asset Protection
Planning Part 1 of a 2-part series - advanced
Hot Topics comparison between Off-Shore Asset Protection and Domestic Asset Protection.
August, 2000 - The Demise of the Off-Shore Tax Haven Industry
- advanced
Hot Topics discussion of the OCED's crackdown on foreign country tax havens, part 2 of a 2-part series.
July, 2000 - The Demise of the Off-Shore Tax Haven Industry -
advanced
Hot Topics discussion of the OCED's crackdown on foreign country tax havens, part 2 of a 2-part series.
July 23, 2000 - Tax Havens Under Fire -intermediate
An FAQ dealing with recent development concerning foreign country tax havens.
Reporting Requirements of Foreign
Trust with a U.S. Grantor or Beneficiary
An FAQ (12/01) analyzing the U.. tax- reporting rules for U. S. beneficiaries of foreign trusts.
May 28, 2000 - Update on Trust Scams - intermediate
An FAQ highlighting the IRS's Criminal Investigation Division report to Congress regarding its on-going investigations of domestic and foreign trust scams.
Foreign Bank Accounts - basic
An FAQ regarding U.S. taxpayers holding foreign bank accounts.
September
19, 1999 Court applies "Reverse" Piercing of Business Trust - intermediate
An FAQ discussing a recent court case in which a trust was found liable for the taxes owed by its beneficiaries. The alter ego doctrine was applied in a reverse fashion.
Expatriation Taxation -- Not Just for Rich Tax Dodgers! -
advanced
Long-term residents could run afoul of the new expatriation tax regime. These rules now apply to foreign citizens who have lived in the U.S. 8 of the last 15 years.
Foreign Trusts After 1996 - advanced
An outline of the changes involving foreign trusts and U.S. settlors or beneficiaries.
Off-shore Asset Protection Trusts - part 1 - advanced
A discussion regarding the off-shore asset protection craze.
Off-shore Asset Protection Trusts - part 2 - advanced
A continuing discussion of off-shore asset protection trusts.
The Asset Protection Industry, an Expensive and Wasteful Exercise in
Wishful Thinking - part 1 - advanced
August, 1999 Hot Topics analyzing the state of off-shore asset protection in general, and a discussion of the Anderson case that upheld a District Court's judge contempt citation against the settlor (creator) of an offshore trust designed to impede the court's jurisdiction over those assets.
The Asset Protection Industry, an Expensive and Wasteful Exercise
in Wishful Thinking - part 2 - advanced
September, 1999 Hot Topics discussion of the Anderson Case and the Asset Protection industry's reaction to it.
The
Demise of Off-Shore Asset Protection Trusts - intermediate
August, 1999 FAQ discussing the Anderson Case.
Isle
of Man Tax Haven Company - intermediate
An FAQ dealing with the U.S. tax consequences of using an Isle of Man company to avoid taxes.
Deferred Like-Kind Exchanges Under Section 1031(a)(3) After Starker,
Journal of Taxation. - advanced
Like-Kind Prop. Regs Create New Safe Harbors While Adding
Complexities, Journal of Taxation for Accountants. -advanced
Taxation on Foreclosure - Basic
Computation of Adjusted Basis for Real Estate - intermediate
An FAQ (12/01) involving the computation of adjusted basis in real estate.
Tax-Free
Exchange vs. Residence Exclusion
An FAQ dated August 8, 2000 discussing how the residency exclusion and tax-free exchange rules relate.
Foreclosures revisited - intermediate
A follow-up FAQ to the to following discussion on foreclosure.
September 19, 1999 Conversion of a Residence to Rental Property and
Vice-Versa - intermediate
An FAQ dealing with the new rules for the residency exclusion and their impact on conversions of residential property to rental real estate and vice-verse.
Real Estate Investor and Schedule C - intermediate
An FAQ (4/02) discussing when real estate activities rise to the level of a business.
The rules regarding the taxation of a principal residence have changed. Effective May 5, 1997, taxpayer can no longer use the residency rollover rules of IRC Sec. 1034 and the once-in-a-lifetime exclusion of $125,000 for taxpayers over age 55. Instead, taxpayers who have owned and lived in a principal residence for 2 of the 5 years are entitled to exclude from federal taxation $250,000 if they file as an individual and $500,000 if they file jointly.
The Sale of a Principal Residence - basic
January, 1998, Hot Topic: A detailed explanation of the new $250,000/$500,000 exclusion, with examples.
Tax-Free
Exchange vs. Residence Exclusion
An FAQ dated August 8, 2000 discussing how the residency exclusion and tax-free exchange rules relate.
Navigating the Sale of Residence Labyrinth - basic
An FAQ discussing the basics of the new residency exclusion.
Deductions for a Third Home - Basic
Home Improvements - Basic
Rental Real Estate Sale or Exchanges - Basic
Planning for Residence Sales - intermediate
An FAQ discussing several specific aspects of the new residency exclusion.
Sale of Residence- intermediate
An FAQ (2/02) on the sale of a residence.
June, 2002 - Changing the Way
Married Couples Hold Title in California
A Hot Topics article discussing California's new community property with rights of survival tenancy.
Deductions for rental of a room in your house - intermediate
A specific FAQ dealing with a recent Tax Court case.
Home
improvements; rental real estate sales or exchanges - intermediate
Several FAQ's dealing with home improvement expenses, sales of foreign real estate; sale of a rental property and the sale of a residence which has two rental units as part of the dwelling.
Sales of a vacation home, rental property, tax on lease
cancellation payments - intermediate.
Several FAQ's dealing with second residence and rental property issues.
Residency Exclusion Time Periods; Documenting Residency Improvements
- intermediate
September 5, 1999 FAQ discussing the time periods for converting a residence to investment property then selling it; the rules one residence owned by a man and woman prior to marriage; and how to document improvements to your residence if you do not have cancelled checks.
Renting a Residence and the Impact on the Residence Exclusion
- intermediate
An FAQ (11/01) involving the impact of renting a residence on the residency exclusion.
September 19, 1999 Conversion of a Residence to Rental Property and
Vice-Versa - intermediate
An FAQ dealing with the new rules for the residency exclusion and their impact on conversions of residential property to rental real estate and vice-verse.
Mortgage Interest Deductions - intermediate
June 6, 1999 FAQ discussing the rules for deducting interest on your mortgage.
February 20, 2000 Mortgage Interest Deduction -
intermediate
Another FAQ discussing aspects of the mortgage interest deduction.
Mortgage Foreclosure Tax Scheme - intermediate
An FAQ discussing a tax scam pulled on those facing foreclosure of their residence.
Home-Office
Deduction (note: some of these rules have been changed in the 1997 Taxpayer's Relief
Act) - intermediate
An FAQ discussing the rules of this popular deduction.
Avoiding Sales Tax on Mobile Homes
An FAQ concerning the sales tax on a mobile home (often used as a residence) - intermediate
Tax consequences of foreclosure - intermediate
An FAQ discussing what happens when there is a foreclosure on your principal residence.
Documenting
the Mortgage Interest Deduction - intermediate
An FAQ explaining how to document your right to a mortgage interest deduction when the leader refuses to provide the proper documentation.
Sale
of a Principal Residence - intermediate
Another FAQ dealing with the sale of a principal residence.
Pro-Rating the Residency Exclusion- intermediate
An FAQ calculating the residency exclusion percentage when a residence is sold less than two years after purchase.
Refinancing
a Residence - intermediate
An FAQ discussing the mortgage interest deduction when a residence is refinanced.
Elevator in Home - intermediate
An FAQ (2/02) on the deductibility of an elevator in the home.
Placing
a Residence in an Irrevocable Trust, then selling the residence - intermediate
An FAQ outlining the issues surrounding the placement of a principal residence into an irrevocable trust, then selling the residence on an installment sale.
Joint tenancy - Reporting Gain on Residence - intermediate
Sale of residence by non-married couple.
Investing in a Second Residence - intermediate
The rules involving a second residence. This newsletter has not been updated to reflect any changes in the 1997 legislation.
Reporting a Second Residence Loss - intermediate
An FAQ (3/02) discussing the tax-loss rules for a second residence.
Transfer of Residence to Revocable Trust - intermediate
An FAQ (4/02) involving the transfer of a residence into a living trust.
Trading Down a Principal Residence Need Not Be Taxable -
advanced
A lengthy 1990 Journal of Taxation article dealing with combining the residency rules with Section 1031 to minimize taxes when down-sizing a principal residence. The principles discussed still have application to principal residency gains that exceed the new exclusion ceilings.
Recent FAQs:
March, 2002: Reporting a Second Residence Loss
April, 2002: Real Estate Investor and Schedule C
May, 2002: Transfer of Residence to Revocable Trust
June, 2002: Gain From a Second Home Sale
July, 2002: Partial Sale
of Residence Sale of Residence Used Partly for Business
August, 2002:
Part-Gift, Part-Sale of Principal Residence Tax Liability of Surviving Joint-Tenant
September, 2002: Renting, Then Selling a Residence Sale of a Multiple Ownership
Residence
October, 2002: Adding Child's Name to Real Estate Title
Non-Public Worthless Stock IssuesJanuary 2002 FAQ regarding worthless stock.
Tax
Consequences of Abandoning Stock.January 2002 FAQ regarding abandoned stock
Calculating Stock Gains and Losses - basic
An FAQ discussing the basics for determining gain or loss.
Computing Stock Basis When Company Merges - basic
An FAQ (3/02) involving the stock basis when a company merges.
Valuing a Bond When Company is Bankrupt - intermediate
An FAQ (4/02) outlining the process for valuing a bond in a bankrupt company.
October
3, 1999 Taxation of Stock Profits and State Taxation of Pensions - intermediate
An FAQ describing the taxation of stock profits and whether your state can tax your pension.
May
14, 2000 - Margin Account Interest - intermediate
An FAQ discussing whether you can deduct the interest paid on a stock margin account.
March
19, 2000 - Deduction for Broker's Fees - intermediate
August 20, 2000 - Wash Sales Rules and Potential Merger -
intermediate
An FAQ involving the Time-Warner and AOL merger and whether the wash sales rules would apply.
Non-Public Worthless Stock Issues - Intermediate
Two FAQs (1/02) dealing with the purchase of non-public stock which subsequently becomes worthless. Tax consequences of abandoning the stock.
Early
Exercise then Sale of IPO Stock- intermediate
An FAQ discussing the rules involving an early exercise and then a sale of IPO stock after 12 months.
Taxation of U.S. Residents with Foreign Investments -
intermediate
FAQ (5/02) discussing foreign investments by a foreigner who later becomes a U. S. resident.
Taxation of Day-Traders - advanced
Hot Topics (12/01) detailing the tax treatment for day traders and tax-planning alternatives.
April
25, 1999 - Taxation of Day Traders - intermediate
An FAQ describing the tax issues for Day Traders and a discussion of mark-to-market accounting.
September
19, 1999 - Revoking a Mark-to-Market election - intermediate
How a trader in securities may revoke a mark-to-market accounting election.
April
30, 2000 - Day Trading - intermediate
An FAQ about the concepts of Day Trading: Off-setting Capital Losses and Gains; Electing Mark-to-Market Accounting.
Electing
Mark-to-Market Accounting - intermediate
Another FAQ dealing with the mark-to-market accounting election available to short-term stock traders.
Recent FAQs:
March,
2002: Computing Stock Basis When Company Merges Taxation of Foreign Co-Owner of Bank Account.
April, 2002: Valuing a Bond When Company is Bankrupt
July, 2002: Tax Consequences of "high-yield" Internet Investment
Avoiding the Independent
Contractor vs. Employee Quagmire - intermediate
September, 2003 Hot Topics article on how to avoid independent contractor status by contracting with an entity rather than an individual
Nannygate Revisited: Do You Really Owe Taxes On Your
Baby-Sitter? - basic
A short article discussing domestic workers and the Federal Section 530 exception as it applies to these workers.
Paying Taxes on Household Workers
(part of the 4/6/97 FAQ on 10 Ways to Save on Taxes) - basic
This FAQ describes the rules regarding tax payments for household workers who are employees, rather than independent contractors.
Independent Contractors vs Employees - basic
An FAQ dealing with the independent contractor issue.
Nannygate Reconsidered: Do You Really Owe Taxes On Your
Baby-Sitter? - intermediate
A longer version of the Nannygate Revisited article. Note: The federal exception Section 530 applies to both domestic workers and workers for a company.
Independent Contractor vs. Employee
Flowchart - intermediate
A flowchart to guide you through the federal rules for classifying workers as either independent contractors or employees.
Independent
Contractors: A Comparison Between Federal and California Law - intermediate
California does not recognize the federal exception Section 530 to the also. Also, California defines independent contractors much more narrowly and takes a paternalistic view of worker relations. It regularly reclassifies independent contractors as employees.
Offers-in-Compromise - basic
This FAQ describes the basics of the Offer-in-Compromise process for back taxes.
Taxpayer's Assistance Order - basic
An FAQ describing how to obtain emergency assistance from the Taxpayer's Advocate.
When the Taxman Cometh - intermediate
A newletter discussing audit and collection strategies.
New
Offer-in-Compromise Policy - intermediate
IRS has revamped its Offer-in-Compromise policies for those who cannot pay their tax liabilities. This Hot Topic article describes the changes in detail.
February, 2000 - Taxation of E-Commerce - advanced
Hot Topics - part 2 of a 2-part article on E-commerce.
January, 2000 - Taxation of E-Commerce, part 1
Hot Topics - part 1 of a 2-part article on E-commerce.
November
14, 1999 The Future of Internet Taxation - intermediate
An FAQ - part 3 of a 3-part series on taxation of the Internet.
October
31, 1999 Difficulties in Taxing E-Commerce - intermediate
An FAQ - part 2 of a 3-part series on taxation of the Internet.
October
17, 1999 A Moratorium on Internet Taxes - intermediate
An FAQ - part 1 of a 3-part series on taxation of the Internet.
March
7, 2000 - Tax Shopping On-Line - intermediate
An FAQ listing tax websites for 1999 tax preparation.
August, 2003 - Corporate
Inversions - advanced
Hot Topic - dealing with corporations moving offshore to save on taxes.
April, 2003: President Bush's
Dividend Exclusion Proposal - intermediate
Hot Topic - regarding dividends paid by a C corporation
February, 2003 - Issues to
Consider When Merging Two S Corporations or Other Closely-Held Entities (Part 2 of 2) -
advanced
Hot Topics - merging small companies.
January, 2003 - Issues to
Consider When Merging Two S Corporations or Other Closely-Held Entities (Part 1 of 2) -
advanced
Hot Topics - merging small companies.
June, 2000 - Tax Issues Concerning Small Businesses - advanced
Hot Topics - part 2 of a 2-part series.
May, 2000 - Tax Issues Concerning Small Businesses - advanced
Hot Topics - part 1 of a 2-part series.
February
20, 2000 - Medical Expenses as Business Deductions - intermediate
An FAQ dealing with the issue of medical expenses as a business deduction rather than as an itemized deduction.
August
20, 2000 - "Sweat Equity" Issues - intermediate
An FAQ discussing the concept of receiving equity in a company for services and the tax consequences arising from such a transaction.
Conversion
from an C to a S corporation - intermediate
An FAQ dealing with the conversion from an C corporation to a S corporation.
Employer-Assisted Tuition Program and excess expenses-
intermediate
An FAQ (9/01) dealing with company tuition- plan rules and excess educational expenses.
Medical Insurance Deduction for Small Businesses - intermediate
[an error occurred while processing this directive]FAQ (5/02) discussing the deduction for medical insurance by sole Proprietors, partnerships and "S" corporations.