User talk:LH2004

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Corporation move

How exactly do I "merge" the companies? The client doesnt want to go to an attorney!

Thanks for your help.

taxlaw 08:51, 19 January 2007 (CST)

Thank you

Lionel, thank you for your post to my question about the Roth IRA. Yours was the best reply to my highjacked thread. --PVVCPA 14:46, 23 January 2008 (CST)

Loan to Shareholder Thread

Thanks Taxworld and LH. To clarify: there is no new ownership. The company ceased operations last year and the owner plans to dissolve the corporation. All fixed assets were repossessed by creditors. The only other asset is the loan to shareholder, which the owner has never been taxed on. It was not distributed to the corp's creditors; it is still owed to the corp. What happens upon dissolution? Forgiven debt to shareholder taxable depending on insolvency of the shareholder, or capital gains to the shareholder, or maybe the corp is not dissolved and the loan stays in the inactive corp indefinitely? Thanks for the input!

CPA

I need a referral to a good New York (Manhattan) CPA(s) to service a client in the Hippodrome.

Do you know any?

NRA to NRA query

LH2004,

Would your answer be different if Donor-spouse was US citizen and Donee was non-US Citizen spouse ?

TIPRA = PL 222?

Hi, Lionel -

I just added a link to the TaxAlmanac article on TIPRA legislation, on a discussion you posted to today about Roth conversions, and in so doing I found (I think) you might have left out a "2" in the Public Law number. Can you check me, please - I changed it to PL 109-222 rather than PL 109-22; that's correct, right?

Thanks,

Trillium 12:24, 16 June 2009 (CDT)

It seems you are familiar with the filing requirements of a New Zealand resident that ownes a single member Florida LLC. My main questions are 1) what are the specific filling requirments (Forms 1040NR, etc.) and 2) how is the individual taxed on ordinary income, interest/dividend income and capital gains. Thanks in advance. -Alex

Firefox

Hi, Lionel -

Did you happen to notice Tim Doyle's response to you in the 1035 exchange of life insurance contract discussion, where you found that you couldn't see Kevin's embedded links?

I'd be interested to know if either of the suggestions he gave make a difference for you.

Thanks,

Trillium 14:36, 22 October 2009 (CDT)

Foundation thread

Lionel, Thank you for your postings on that thread. You have helped me ask some specific questions to my client. They have forwarded these questions to their attorney. I will update the thread once the details become more clear.

--Wiles 12:45, 17 November 2009 (CST)

Lionel,

1.Wanted to thank you for your support in the last few months.Your answers have been consistant, very accurate and to the point. I have learnt a lot from you and make it a point to follow your contributions .

2.Just about to wrap up my Nonresident Non-Citizen (NRNC) case and would like to recap my understanding :.

a)Wire transfers by an NRNC from his US bank account to another Donee's bank account (US Bank or Non US Bank ) are Intangible Personal Property and are exempt from US gift Tax.

b)Creation and/or contributions by an NRNC to his US joint bank account in a U.S State where the gift occurs at the time of funding (e.g New york ) ,is also a gift of Intangible Personal Property and is exempt from US gift tax . This also includes contributions to the joint U.S bank account such as the NRNCs employment income.

c)Wire transfers and/or a cheque by a NRNC from a Non US bank to a US bank are Non-U.S Situs and hence exempt from US gift tax .

d)A cheque given from an NRNC US Bank account is Tangible Personal Property.

e)The NRNC has an annual exemption of $133K (in 2009) should he want to gift his Non US Citizen spouse Real or Personal Personal Property.

Just out of curiousity,why is a cheque tangible property and a wire transfer intangible property.

Isn't the definition of "tangible" something which is physical (like notes,coins) and if destroyed loses the value of the property?

Thank you. Paris.

Thank you and Summary of discusion

Lionel,

1.Wanted to thank you for your support in the last few months.Your answers have been consistant, very accurate and to the point. I have learnt a lot from you and make it a point to follow your contributions .

2.Just about to wrap up my Nonresident Non-Citizen (NRNC) case and would like to recap my understanding :.

a)Wire transfers by an NRNC from his US bank account to another Donee's bank account (US Bank or Non US Bank ) are Intangible Personal Property and are exempt from US gift Tax.

b)Creation and/or contributions by an NRNC to his US joint bank account in a U.S State where the gift occurs at the time of funding (e.g New york ) ,is also a gift of Intangible Personal Property and is exempt from US gift tax . This also includes contributions to the joint U.S bank account such as the NRNCs employment income.

c)Wire transfers and/or a cheque by a NRNC from a Non US bank to a US bank are Non-U.S Situs and hence exempt from US gift tax .

d)A cheque given from an NRNC US Bank account is Tangible Personal Property.

e)The NRNC has an annual exemption of $133K (in 2009) should he want to gift his Non US Citizen spouse Real or Personal Personal Property.

Just out of curiousity,why is a cheque tangible property and a wire transfer intangible property.

Isn't the definition of "tangible" something which is physical (like notes,coins) and if destroyed loses the value of the property?

Thank you. Paris.

There are several issues here that are more complicated than they may look.

First, I don't think we should make too much of the distinction between checks and wires. There is a history of PLR's and internal IRS documents taking the position that checks are tangible; see, for example, GCM 36860 (September 24, 1976). None of this is authoritative, and none is very recent. The reasoning essentially is this:

1. Currency is tangible because it's excluded from the rules on "debt obligations" in Reg. sec. 25.2511-3(b)(4)(iv) (i.e., it's not automatically deemed to be located in the U.S. if it's U.S. currency and outside the U.S. if it's foreign currency). This is already highly dubious, IMHO. I think the gift tax on NRNC's was meant to apply to real, weighty stuff: furniture, vehicles, machinery, business inventories, things like that; it seems silly to try to impose a tax on lifetime transfers that can be so easily avoided, even in deathbed situations. So, anyway, the IRS thinks, or used to think, that currency is tangible property.

2. Checks are not gifts at all, but merely promises that you will make a gift when the check is presented. I again don't fully agree with this reasoning, but this has been accepted by courts in other contexts.

3. Therefore, when a check, given as a gift, is cashed, it results in a gift of currency, which is tangible property. I have serious doubts about this reasoning; it still seems like the check transfers an interest in the intangible property of the bank account, rather than the hypothetical currency "underlying" the account.

So, I don't think that a check should be treated as a gift of tangible property, but the IRS does (or did). Writing a check on a U.S. bank account (which, arguably, should be determined by the jurisdiction of organization of the bank -- i.e., maybe including an account in a foreign branch, but not a foreign subsidiary, of a U.S. bank) is something the IRS has said they think is taxable, so it should be avoided if possible.

It's not all that clear that wire transfers should be treated any differently. They don't have the feature of being conditional until some future date of presentment; if the wire happens, that means (at least in general) that money was there and moved successfully. It's maybe slightly more obvious that it's a transfer of an intangible interest in an intangible deposit, rather than in hypothetical currency, but not much. But, it's at least a bit removed from positions the IRS has taken in the past.

I would feel more comfortable with a transfer (by check or otherwise) from the donor's foreign bank account, but a wire from a U.S. bank does seem at least somewhat safer than a check from a U.S. bank. I would take the position that a wire transfer by a NRNC is not subject to gift tax.

It's also possible that a transfer tax treaty will change the result (if it would otherwise be that U.S. tax results).

Secondly, for joint accounts, I believe that, both in NY and elsewhere in the U.S. (and probably in other countries too), the rights to a joint account are a question of the intent (or expressed intent) of the parties. The difference between NY law and the law of other states is just a different presumption; in either case, if we agree that a joint titling is just for convenience, it's just for convenience, and if we agree it's real joint ownership, it's real joint ownership. But the presumption will make a difference when everybody has been very vague about what they intended to do.

If the outcome under governing non-tax law is that the money in the account is owned 50/50 (either by agreement of the parties or by application of the NY presumption), then each deposit of money that previously belonged 100% to the depositor should be a completed gift of 50% of the deposit. If the deposits are electronic transfers of money owed to one joint owner by a third party, I think there is plenty of room to take the position that they are gifts of intangibles. But there are the same risks as before that it could somehow be seen as an indirect gift of currency.

Yes, a gift of property subject to tax by a NRNC (i.e., U.S. real or tangible personal property) to his noncitizen spouse would be entitled to an annual exclusion of $100,000 as adjusted for inflation; $133,000 sounds like the right number.

LH2004 10:59, 23 November 2009 (CST)

Continued-message from Paris

Hi Lionel,

Once again, my sincere gratitude for your input and time .This is tremendously helpful and educating.

I have reached similar conclusions to yourself, with additional reasoning as follows :

1)Looking at GCM 36860 it would seem that the IRS, by its own admission, did not necessarily think that Treas. Reg. § 25.2511-3(b)(4)(iv),“implies one way or the other that currency is classified as either intangible or tangible personal property”.

2)GCM 34865 used the phrase “money” and determined it was “tangible” just because Congress failed to mention the word “money” but did mention stocks or bonds as intangibles. Arguably,if Congress had intended to limit intangibles to stocks and bonds , it would have specifically limited them in the law & regulations ,yet it still kept "intangibles" . I believe GCM 34865 failed to distinct between physical tangible money (coins,notes) and “electronic” intangible money .

3)Gift tax legislation was designed to limit “slippage” from Estate Tax . Why go a long way to exempt NRNCs from Estate Tax on U.S bank accounts/deposits and tax them on gifts of money,especially from those bank accounts/deposits? The legislator’s motivation has always been to encourage NRNCs bank deposits in the U.S.

4)As a complement to the above, the legislation gives NRAs Income tax exemptions from interest on Bank deposits ,in addition to Capital Gains tax exemptions in some instances.

5)Bank deposits are intangibles as defined by the regulations. Bank deposits are essentially cash/money in the bank account . How else does one “gift” a deposit in practise?

6)Looking at the New York State constitution ,money,credits ,bank accounts etc. are defined as “intangibles”. My understanding is that local law determines the asset characterization and ownership. Federal law determines the tax treatment.

7)Case laws-Typically determine that bank deposits are intangibles and “Coins and Notes” are tangible (physical things that are separated from the individual). I have not seen any case where an electronic wire transfer is “tangible”.

8)Black’s Law dictionary defines “tangible” property as property with physical form and substance that may be felt or touched and Intangibles are merely a representative or evidence of value .

Would you agree with the above ?

Re the joint bank account -One unanswered question is how does one rebut the 50/50 presumption in practice ? Is it sufficient to say “ I had no intent” or must there be a set of criteria/requisites (I’m assuming no incapacitation and account not marked as “convenience”)

As always, any thoughts are very much appreciated .

Thank you,

Paris

P.S Would you also agree that Reg 25.2511-1(h)(4) overides IRC 2523(i)(3) which refers to repealed IRC 2515. If so,why does 2523(i)(3) still exist ?

IRA to Roth Deferral

LH - thanks for your help...how did you figure 18month of deferral...wouldn't it be January 1, 2010 to April 15, 2011?

Big help!

Weary Roth

LH - Will you look at my last question posed on the Weary Roth conversion topic....last question has stumped me!!

You're great, thanks.

Goodwill worthless

LOL! OK, here goes: How can Goodwill be substantiated as worthless to the IRS?

Have you ever come across this in M&A?

Thanks for the laugh, Bill

LOL! Thanks for the laugh. OK, one more time: How can Goodwill be substantiated as worthless to the IRS?

Joint account discussion (2523,2515A,2511)

Hi Lionel,

I happened to find the following link on our discussion about joint accounts. Would appreciate your thoughts. Thank you, Paris

http://mail.abanet.org/scripts/wa.exe?A2=ind0608&L=aba-tax&O=A&P=851

I saved when I shoulda previewed. Sorry.

Lionel: With your concurrence, I'ld like to purge our three inane posts in the recent... No, I don't. I just had a better idea...!!!!

Harry Boscoe

A Chuckle!

I had to chuckle out loud! Right in the middle of our (pseudo-weighty?) discussion of whether the different flavors of interest in Section 163(h) are mutually exclusive, you describe some of the folks in this forum as "people who interpret ... the Code for a living (or for fun)" and the thought occurred to me, do those two things, "for a living" and "for fun" have to be mutually exclusive?

How 'bout let's interpret the Code "for a living *and* for fun"? That's cool by me!!

Harry Boscoe

Roth

Thanks Lionel,

Excellent answer.

Much appreciated!

ZL28

US-India Treaty

Hi LH2004, I am trying to piece together your last post on the Discussion:US-India_Treaty_-_US_Tax_on_Interest_&_Dividends thread with Lizzit's prior post. Would you be so kind as to reply and let me know if my understanding is correct? Thank you!

--Wiles 23:04, 3 December 2010 (UTC)

Dear LH2004 (I apologize for addressing you by your nickname)

Thank you for you attention to this matter. My father, non US resident has passed away and there is an estate issue related to the investment account, titled jointly to him and myself. To the best of my understanding, as a first and most important step, I need a professional and official opinion as per the domicile of the assets and final value of the US based asset size. More precisely, I need a detailed analysis of each security with determination of its Foreign or US source, which would include all relevant securities domicile and composition information (specifically for mutual funds) and substantiated by the relevant IRS codes. Additionally, there was a loan collateralized by the assets in the account and I would need a legal opinion as per status of the loan, also with a referral to the relevant IRS code. I was wondering if there is someone really good and not too expensive whose services I can retain? My email azev100@hotmail.com Thank you very much.

Thanks, Lionel

He was just going to bump every wash sale discussion we have, wasn't he! I've got him blocked now, which should limit his activity, and have moved those old discussions out of the current index.

Thanks for getting rid of the spam so fast.

Trillium 15:22, 13 March 2011 (UTC)

S Corp and LLC

LH2004:

As a follow-up to your previous post, I was wondering whether you had a couple minutes to answer a few questions. While I've been a member of the TaxAlmanac community for a couple years, I use it very infrequently and don't know the proper protocol for such a request. Let me know. Thanks.

Andy

Thanks

Thanks for your input on my post about the scope of corporate activity, you completely addressed my question.

Mld123 17:23, 18 May 2011 (UTC)

RIP

RIP LH2004. I very much enjoyed reading your posts on TA and several other forums.