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Timestamp: 2019-07-16 08:41:05
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Form 8938 lawyers
January 17, 2018 /0 Comments/in Form 8938 lawyers, Legal Notes /by Manager
We are continuing our series of articles on the Specified Domestic Entity definition. In previous articles, I already explained what entities are considered to be domestic and what kind of foreign assets are included in the Specified Foreign Financial Assets. In this article, I would like to introduce the key part of the definition of a Specified Domestic Entity: formed or availed of.
Due to the fact that there is a significant difference in treatment of trusts versus business entities (partnerships and corporations), I will analyze these two types of entities separately. In this article, I will focus solely on introducing the concept of Formed or Availed Of as it applies to partnerships and corporations.
Formed or Availed Of: Context
It is first useful the remember the context in which the clause “Formed or Availed Of” arises. Treas. Reg. §1.6038D-6(a) defines a Specified Domestic Entity as “a domestic corporation, a domestic partnership, or a trust described in 26 U.S.C. §7701(a)(30)(E), if such corporation, partnership, or trust is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets” (italics added).
Thus, the concept of “formed or availed of” is the key part to the definition of a Specified Domestic Entity.
Formed or Availed Of: Main Legal Test
It may seem to a person unfamiliar with Form 8938 that Formed or Availed Of concept implies some sort of a factual finding of intent. This first impression is not correct.
On the contrary, Formed or Availed Of concept has nothing in common with the actual intent of the parties who formed the business entity. Rather, the IRS established a very specific legal test to determine if a business entity is formed or availed of for purposes holding specified foreign financial assets.
The Formed or Availed Of Test is in reality a combination of two legal tests found in Treas. Reg. §1.6038D-6(b). An entity is considered to be formed or availed of for purposes of holding specified foreign financial assets if: (1) the corporation or the partnership is closely held (the “Closely-Held Test”), AND (2) the corporation or the partnership meets the Passive Income or Passive Assets threshold requirement (the “Passive Test”). See Treas. Reg. §1.6038D-6(b). Please, note that both tests needs to be satisfied in order for a business entity to be considered as formed or availed of for purposes of holding specified foreign financial assets.
In future articles, I will explore the Closely-Held Test and the Passive Test in more detail.
Contact Sherayzen Law Office for Professional Help Concerning US International Tax Compliance Requirements for Owners of US and Foreign Businesses
If you are an owner of a foreign business or a US domestic business which owns assets overseas, you should contact Sherayzen Law Office for professional help concerning relevant US tax compliance requirements. We have helped US business owners around the world, and We can Help You!
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January 16, 2018 /0 Comments/in Form 8938 lawyers, Legal Notes /by Manager
Specified Individual is a key tax term that must be correctly understood in order to properly identify the persons who are required to file FATCA Form 8938. In this brief article, I will describe the general definition of a Specified Individual for Form 8938 purposes.
Specified Individual: FATCA Form 8938 Background
In 2010, one of the most important events in modern history of US taxation happened – the passage and signing of the Foreign Account Tax Compliance Act or FATCA. FATCA completely revolutionized the entire landscape of international tax law, elevating the international exchange of tax-related and account-related information to an unprecedented level. FATCA also created a brand-new requirement called Form 8938.
Form 8938 requires US taxpayers to report to the IRS their Specified Foreign Financial Assets (“SFFA”) together with the taxpayers’ US tax returns. Prior to tax year 2016, only a Specified Individual was required to report his SFFA to the IRS. Starting tax year 2016, a Specified Domestic Entity is also required to disclose its SFFA on Form 8938.
Specified Individual Definition
Treas. Reg. §1.6038D-1(a)(2) defines a “specified individual” as anyone who is: (I) US citizen; (ii) resident alien of the United States for any portion of the taxable year; (iii) nonresident alien for whom an election under 26 U.S.C. §6013(g) or (h) is in effect (i.e. nonresident alien who makes an election to be treated as a resident alien in order to file a joint US tax return); or (iv) nonresident alien who is a bona fide resident of Puerto Rico or a section 931 possession (as defined in Treas. Reg. §1.931-1(c)(1) – i.e. Guam, American Samoa and Northern Mariana Islands).
Resident alien includes anyone who is a US permanent resident or meets the substantial presence test.
Contact Sherayzen Law Office for Help With Form 8938 If You Are a Specified Individual
If you are a specified individual who has undisclosed foreign accounts or any other SFFA, you should contact Sherayzen Law Office as soon as possible to explore your offshore voluntary disclosure options. Sherayzen Law Office is a highly experienced international tax law firm that specializes in offshore voluntary disclosures, including Streamlined Compliance Procedures (both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause (so-called Noisy) Disclosures.
We have helped hundreds of US taxpayers all around the globe to bring their US tax affairs into full compliance with US tax laws, and We can Help You! Contact Us Today to Schedule Your Confidential Consultation!
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