Cross Border Tax Planning

[object Object], Cross Border Tax Planning Swiss American Chamber of Commerce Borel Private Bank & Trust San Mateo, California February 17, 2011 Brian Rowbotham Rowbotham & Company Accountants & International Tax Consultants (415) 433-1177 [email_address]

[object Object],U.S. Domestic Tax Rules Bilateral Tax Treaty U.S. International Tax Rules Foreign Country Domestic Tax Rules Foreign Country International Tax Rules Rowbotham & c o m p a n y l l p

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1 ,[object Object],[object Object],2009 2010 2011 Arrival in U. S. Exercise Options August November Early exercise avoids taxation of “in the money options” Rowbotham & c o m p a n y l l p May Options awarded in 2008 Alternative 1 Exercise Options June Alternative 2 Worldwide Taxation 2 ,[object Object],[object Object]

[object Object],Rowbotham & c o m p a n y l l p LLC Indian Citizen will move to U.S. in 2011 - Transfer: Low Basis Assets into a non-U.S. LLC - Indian tax can be avoided Pre-Arrival U.S. Tax Election Pre-Arrival or Post Arrival Elect to treat LLC as Corporation (10) File IRS Form 8832 Distribute assets or Liquidate company - No U.S. Impact due to nonresident status ,[object Object],[object Object],[object Object],Foreign Transactions Recognized Biddle v. Commr, 302 U.S. 573, Supreme Court held that U.S. tax concepts control for foreign persons. Year 2011 2011 2012 1 1 Exchange control to consider 2 2 2

Pre-Arrival Formation of Trusts Trust settled prior to arrival U.S. beneficiaries Foreign beneficiaries (1) Income taxed to settlor if trust established within 5 years of establishing U.S. residence (10) (2) Income not taxed to any U.S. beneficiary Rowbotham & c o m p a n y l l p Foreign Trust 1 2

[object Object],[object Object],[object Object],Rowbotham & c o m p a n y l l p ,[object Object],[object Object],[object Object],Portfolio Assets Nonresident U.S. Resident Foreign Corporation

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[object Object],Outcome of Expatriation Income Tax: IRS: Rowbotham & c o m p a n y l l p ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],Rowbotham & c o m p a n y l l p $5mm U.S. Citizen or U.S. Resident Remainder of Assets Taxed at 35% (1) Exemption goes to $1 million in 2013 (2) Unlimited marital deduction available for U.S. spouse. Deferral is permitted until non-U.S. spouse dies if a qualified domestic trust is formed. Worldwide Assets To U.S. or Foreign Relatives exemption 1 2

[object Object],Foreign Reporting U.S. Residents Filing “Activities” include ownership in: Rowbotham & c o m p a n y l l p (1) Foreign Corporation 5471 $10,000 / year per company (2) Foreign Partnership 8865 $10,000/ year per entity (3) Foreign Trust 3520 25% of distribution 3520A 5% per month up to 25% (4) Transfers of Assets to 926 25% of value, a foreign corporation maximum of $10,000 (*) Potential criminal prosecution can result for non-reporting. Potential Penalties IRS Form for Non-compliance (*)

[object Object],Foreign Bank Account Reporting Rowbotham & c o m p a n y l l p Current Requirements TDF 90-22.1 Voluntary disclosure [March – October 2009] program 2011 voluntary [February 14, 2011 - disclosure program August 31, 2011] How to handle the problem today if (a) Your foreign accounts are in a Swiss Bank (b) Your foreign accounts are not in Swiss Banks FATCA Rules for 2011 (*) Potential criminal prosecution can result for non-reporting. Maximum Monetary Penalties IRS Form for Non-compliance (*) 50% of account balance 5% in limited circumstances 20% of account balance 5% in limited circumstances 12% for accounts up to $75,000 25% for accounts over $75,000

[object Object],Rowbotham & c o m p a n y l l p Foreign Citizen and Resident (1) Future generations subject to estate tax (2) Assets avoid U.S. estate tax (3) Assets avoid U.S. generation skipping tax (4) Exemption amount limited to $60,000 for nonresidents Distribution 1 2 U.S. Assets Foreign Assets U.S. Person Foreign Trust U.S. Person 1 U.S. Person U.S. Dynasty Trust Distributions to U.S. Person 2 Foreign Trust Foreign Corporation U.S. Assets 3 4

[object Object],Rowbotham & c o m p a n y l l p * Executor may elect estate tax with increased exemption and step up basis of assets, or elect no estate tax with modified carry-over basis in assets. ** Exemption equivalent amount for nonresidents is limited to $60,000 for all years. $3,500,000 45% 2009 $5,000,000 35% (optional)* 2010 $5,000,000 35% 2011 $1,000,000 55% 2013 $5,000,000 35% 2012 Exemption Equivalent ** Top Estate Tax Rate For Decedents Dying During

[object Object],Rowbotham & c o m p a n y l l p ,[object Object],[object Object],[object Object],$1,000,000 2010 $5,000,000 2011 $1,000,000 2013 $5,000,000 2012 Exemption Equivalent For Gifts During

[object Object],Rowbotham & c o m p a n y l l p ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],Rowbotham & c o m p a n y l l p Brian Rowbotham is a CPA with 33 years of experience advising businesses and individuals on complex domestic and international income and estate tax planning. He is the founding partner of Rowbotham & Company LLP which is almost exclusively dedicated to businesses and investors needing both domestic and international tax and accounting services. His clients include private and public companies around the globe which consist of: U.S. and foreign institutional investors, multinational families and executives and non-U.S. investors doing business in the U.S. Mr. Rowbotham has advised clients in major domestic and international litigation and has also served on the boards of both privately held and publicly traded companies. From 1992 to 2006, he directly supervised his firm’s engagement by trustees in Europe to assist with the recoveries of funds from one of the largest frauds in U.K. history. Over the past 20 years, he has represented large European and Middle Eastern institutional investors and numerous Asian families investing in U.S. Real Estate transactions. Mr. Rowbotham has been a frequent guest lecturer at the Haas School of Business, University of California Berkeley, and at the University of San Francisco. He taught graduate courses on corporate and partnership taxation at the University of California Extension. He has been a speaker for several U.S. and international tax planning organizations, including the ITPA and STEP, in Europe, Asia and the U.S. He presented in-house training lectures on investment structures for acquisitions of U.S. property at major European trust companies and banking institutions. Mr. Rowbotham is a frequent commentator on international tax topics of interest. He submitted proposed legislation to the U.S. Treasury in the FIRPTA arena which resulted in changes to final regulations on withholding tax on foreign partnerships with investments in U.S. Real Property. This past year he issued several commentaries that were critical of IRS procedures and policies in the FBAR amnesty program. He is member of the Tax Division of the AICPA and a past president of the San Francisco Tax Club. Mr. Rowbotham is a former featured columnist for Outlook, the official journal for the California Society of CPAs. He has been a contributor to the Journal of Accountancy and several international tax and investment journals. In 2005, he was profiled in the San Francisco Business Times as an entrepreneur of the accounting profession. In April 2009, his article “Doing Business in China” was featured on the cover of the California CPA Journal. Mr. Rowbotham began his career in national accounting firms in San Francisco and London, specializing in international tax, before founding Rowbotham & Company in 1991. He was born in Buenos Aires with British citizenship, and became a naturalized U.S. citizen in 1969. He earned his bachelors degree and MBA, with honors, from the University of California, Berkeley.

Cross Border Tax Planning

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Cross Border Tax Planning