Viewpoints

U.S. Foreign Investment in Real Property Tax Act (FIRPTA) Introduction   The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests.   A disposition means “disposition” for any purpose of the Internal Revenue Code. This includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc. Persons purchasing U.S. real property interests (transferees) from foreign persons, certain purchasers’ agents, and settlement officers are required to withhold 15% (10% for dispositions before February 17, 2016) of the amount realized on the disposition (special rules for foreign corporations).   In most cases, the transferee/buyer is the withholding agent. If you are the transferee/buyer, you must find out if the transferor is […]

U.S. Individual Capital Loss Deduction   When a person sells a capital asset, the sale normally results in a capital gain or loss. Is capital loss deductible in taxpayer’s income tax return? The following will give you a brief introduction to capital loss deductions rule.   Firstly, we should figure out some basic concepts. A capital asset includes inherited property or property someone owns for personal use (e.g. cars and home) or as an investment (e.g. stocks and bonds). A capital gain or loss is the difference between the basis and the amount the seller gets when they sell an asset. The basis is usually what the seller paid for the asset. But please note that taxpayers can only deduct capital losses on the sale of investment property but cannot deduct losses on the sale of property they hold for their personal use.   Capital gains and losses are classified […]

U.S. Individual Income Tax Part 7 When, How, and Where to File   After the previous introductions, you must have a better understanding of U.S. individual income tax. This article will answer the next key question–when, how, and where to file the tax return.   When to File   If you are a calendar year filer and your tax year ends on December 31, the due date for filing your federal individual income tax return is generally April 15 of each year. If you use a fiscal year (tax year ending on the last day of any month other than December), your return is due on or before the 15th day of the fourth month after the close of your fiscal year. If your due date falls on a Saturday, Sunday, or legal holiday, the due date is moved to the next business day. For the 2019 tax return, the […]

U.S. Individual Income Tax Part 6 Tax Liability or Refund   After subtracting your adjustments and deductions from your gross income, you have your taxable income. Now you can use the IRS’s tax table to calculate your preliminary tax liability for the year.   The individual income tax rate (2019) structure is a progressive tax rate structure.   2019 Tax Rate Single Head of Household Married Filing Jointly Married Filing Separately 10% $0–$9,700 $0–$13,850 $0–$19,400 $0–$9,700 12% $9,701–$39,475 $13,851–$52,850 $19,401–$78,950 $9,701–$39,475 22% $39,476–$84,200 $52,851–$84,200 $78,951–$168,400 $39,476–$84,200 24% $84,201–$160,725 $84,201–$160,700 $168,401–$321,450 $84,201–$160,725 32% $160,726–$204,100 $160,701–$204,100 $321,451–$408,200 $160,726–$204,100 35% $204,101–$510,300 $204,101–$510,300 $408,201–$612,350 $204,101–$306,175 37% Over $510,300 Over $510,300 Over $612,350 Over $306,175   For example, if: a taxpayer with a single filing status has $92,000 of taxable income. The income tax liability in 2019 is calculated as the below: ($9,700 − $0) × 10% = $970 ($39,475 − $9,700) × 12% = […]

U.S. Federal Estate Tax   U.S. Federal estate tax may apply to the decedent’s taxable estate at death and not just on the share received by a particular beneficiary. The taxable estate is the gross estate less allowable deductions.   The gross estate includes the value of all property the decedent owns partially or in full at the time of death (including real property outside the United States). The gross estate also includes the following:   Life insurance proceeds payable to the estate or, if the decedent owned the policy, to his or her heirs. The value of certain annuities payable to the estate or the decedent’s heirs. The value of certain property the decedent transferred within 3 years before death. Certain transfers made during the decedent’s life without an adequate and full consideration in money or money’s worth. Property over which the decedent possessed a general power of appointment. […]

Gift Tax The gift tax applies to lifetime transfers of property from one person (the donor) to another person (the donee). A gift is made if tangible or intangible property (including money), the use of property, or the right to receive income from property is given without expecting to receive something of at least equal value in return. If something is sold for less than its full value or if a loan is made without interest or with reduced (less than market rate) interest, a gift may have been made. The donor is generally responsible for paying the gift tax.   The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts aren’t taxable gifts.   Gifts, excluding gifts of future interests, that aren’t more than the annual exclusion for the calendar year. Tuition or medical expenses paid […]