Archive - September 2014
Here Comes FATCA “Phishing”
It did not take long for sophisticated scam artists to start exploiting FATCA. A few weeks ago we reported the first indictment that we know of whereby several individuals allegedly were selling to overly-entrepreneurial U.S. individuals a runaround FATCA scheme. Yesterday the IRS came out with a Phishing alert warning FFIs that there are scam artists out there who would call the institution pretending to be the IRS and asking for account information. Now, this IRS phishing scam has a long history here in the U.S. We would like to think that most U.S. residents and citizens know better...
September 25, 2014 read more
In Topsnik v. Commissioner the Tax Court Rejects Fiscal Avoidance Attempt in the Sale of Shares
Here is a case that came out yesterday where the taxpayer tried to have its cake and eat it too. While the case does not address expressly an investment fund or its LPs one can draw parallels to the fund industry. What was the issue? Many treaties have various mechanisms that are in a way designed to mitigate fiscal avoidance, i.e. situations where a particular person does not pay tax in any jurisdiction. This mechanism can take various forms but most generally it would manifest itself in some requirement affording treaty benefits only if the specific person pays income tax in one of the...
September 24, 2014 read more
FATCA, Sure! But Cheaters will be Cheaters
I have expressed my views about FATCA before. My belief is that while it is a well-intentioned law standing on a higher moral ground, its added complexity and international fallout overshadow its utility. In other words, I personally think that its benefits outweigh the burdens. There was a very thoughtful letter not long ago by Mr. A. Pelling addressed to the Treasury and published by TNT, asking Treasury to quantify the cost of implementing FATCA and its burden versus the expected benefit in revenues from its implementation. I’d be curious if Treasury responds. As it may be, the point...
September 11, 2014 read more
ILM 201436049: An Unknown Hedge Fund Gets a Self-Employment Tax Slap from the IRS
Apparently some investment funds continue to take the position that their 2% service fee income is exempt from the self-employment tax (“SET”) under the “limited partner” exception of Sec. 1402(a)(13). These positions are often based on advice by counsel that there is a material distinction among an LLC, LP and LLP when it comes to this issue. I have reasoned here that in light of the proposed regulations and the Renkemeyer decision, these arguments are rather aggressive. In the above-quoted ILM, the IRS tacitly seems to disagree with the view that the type of entity matters as...
September 08, 2014 read more