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U.S. Tax on Australian Superannuation Funds

Contents1 U.S. Tax on Australian Superannuation Funds2 Classification of Australian supers for U.S. tax purposes3 Is the growth in a superannuation taxable in the U.S.?4 How are Australian supers taxed on distributions in the U.S.?5 Required international information reporting forms U.S. Tax on Australian Superannuation Funds An Australian superannuation fund is a partly compulsory pension … Read more

FBAR Compliance for U.S. Entities

FBAR Instruction Guide for U.S. Entities

U.S. Person

For FBAR compliance purposes, a “U.S. person” includes U.S. citizens, U.S. residents, and entities which include corporations, partnerships, limited liability companies, trusts, and estate formed under the laws of the United States. Such entities must file FBARs if they have financial interest in a bank, securities or other financial account located in a foreign country.

Financial Interest: Owner of record or holder of legal title

A domestic entity has a financial interest in a foreign financial account for which the entity is the owner of record or has legal title, regardless of whether that account is maintained for its benefit or the benefit of another.

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U.S. Shareholder and CFC Status

Contents1 U.S. Shareholder and Controlled Foreign Corporation Status2 What is a controlled foreign corporation?3 Is there constructive ownership?4 Why does this matter? U.S. Shareholder and Controlled Foreign Corporation Status It is often the case that a U.S. shareholder of a foreign corporation jointly owns the entity with other family members. The constructive ownership rules under … Read more

Streamlined Foreign Offshore Procedures

IRS Streamlined Foreign Offshore Procedures

The streamlined foreign offshore procedures (SFOP) are part of the streamlined filing compliance procedures.

Unlike the streamlined domestic offshore procedures, there is no 5% misc. offshore penalty assessed on a streamlined foreign offshore procedures filing.

U.S. taxpayers eligible to use these procedures will file delinquent or amended returns, together with all required international information returns (Forms 3520, 3520-A, 5471, 5472, 8938, 926, or 8621), for the past three years and will file delinquent Report Of Foreign Bank & Financial Accounts (FBAR) (FinCEN Form 114) for the past six years.

Qualified filers must submit the above along with a signed certification statement attesting that the failures above resulted from non-willful conduct.

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FIRPTA Non-foreign Seller’s Certification

FIRPTA Certification of Non-foreign Status

Previously, we discussed the general FIRPTA withholding requirements. Here we discuss the process where a seller is a U.S. tax resident and certifies his non-foreign status to the buyer.

FIRPTA: Non-U.S. Person

Withholding on a real estate transaction is required only if the seller is a non-U.S. person. IRC 7701 defines a “U.S. person” as one who meets any one of the following requirements:

  • Is a United States citizen;
  • Is a lawfully admitted permanent resident (“green card” holder); or
  • Meets the substantial presence test

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FIRPTA Withholding Requirements

FIRPTA Withholding Requirements

The disposition of a U.S. real property interest by a foreign seller (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. Persons purchasing U.S. real property from foreign sellers are required to withhold and remit 15% of the amount realized on the disposition (i.e., typically the sales price).

Below we’ll review the steps in determining whether a transaction is covered by FIRPTA.

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Closer Connection Exception

Closer connection exception & the substantial presence test

An individual is a U.S. tax resident if they meet either the below tests.

1. Lawful permanent resident test: An individual who holds a green card is considered a resident for tax purposes for the period of time that he was a lawful permanent resident

2. Substantial presence test: An individual that spends at least 31 days during the current calendar year; and the sum of the total number of US presence days in the current year, plus 1/3 of the total US presence days in the preceding year, plus 1/6 of the US days during the second preceding year equals or exceeds 183 days.

U.S. tax residents must pay income tax on worldwide income. There are exceptions available for individuals who otherwise be considered U.S. tax residents to be treated as non-residents. One such exception is the closer connection exception to the substantial presence test.

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