[an error occurred while processing this directive] [an error occurred while processing this directive][an error occurred while processing this directive] November 2002   [an error occurred while processing this directive] [an error occurred while processing this directive]   Foreign Corporation with U.S. Subsidiary
  Delinquent Payroll Taxes
  Payment to Abandon a Tenancy
  Estate Transfers without Probate
[an error occurred while processing this directive][an error occurred while processing this directive] [an error occurred while processing this directive] 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? [an error occurred while processing this directive] 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. [an error occurred while processing this directive] Tax Prophet's section on Foreign Taxpayers [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] 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? [an error occurred while processing this directive] 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. [an error occurred while processing this directive] Tax Prophet's articles on Tax Collection [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] I live in a rent-stabilized apartment. If the landlord pays me a substantial amount of money to move, what are the tax consequences? [an error occurred while processing this directive] 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. [an error occurred while processing this directive] Tax Prophet's Tax Class on Real Estate [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] 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? [an error occurred while processing this directive] 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. [an error occurred while processing this directive] Tax Prophet's Section on Estate Planning [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive]