Author: Praestans Global Advisors

Profile picture of Praestans Global Advisors
Website
https://praestansglobal.com/

Posts by Praestans Global Advisors

Follow the Cash Flows of the Acquisition to Understand the True Return to the Sellers

Posted on

Tax implications often determine how certain types of investors will invest in a fund.  There are various categories of investors that have competing tax implications so it is important that the fund can accommodate the competing tax interests of the investors.  One category of investors are tax-exempt investors and planning for unrelated business income tax (“UBIT”). 

A common planning strategy for tax-exempt investors to avoid UBIT is having a blocking corporation between the fund and the tax-exempt investors.  The blocker corporation is not tax-exempt and the income that flows through to the blocker corporation will be subject to corporate income tax reducing the return to the tax-exempt investors by the amount of the corporate income tax. […]

Read More… from Follow the Cash Flows of the Acquisition to Understand the True Return to the Sellers

Structuring for Tax-Exempt Investors

Posted on

Tax implications often determine how certain types of investors will invest in a fund.  There are various categories of investors that have competing tax implications so it is important that the fund can accommodate the competing tax interests of the investors.  One category of investors are tax-exempt investors and planning for unrelated business income tax (“UBIT”). 

A common planning strategy for tax-exempt investors to avoid UBIT is having a blocking corporation between the fund and the tax-exempt investors.  The blocker corporation is not tax-exempt and the income that flows through to the blocker corporation will be subject to corporate income tax reducing the return to the tax-exempt investors by the amount of the corporate income tax. […]

Read More… from Structuring for Tax-Exempt Investors

U.S. Taxation of U.S. Citizens and U.S. Tax Residents Residing Overseas – Mitigation of Double Taxation

Posted on

There are two methods that a U.S. Person living abroad can use to reduce their U.S. tax liability.  The two methods are the Foreign Earned Income Exclusion (“FEIE”) and the Foreign Tax Credit (“FTC”).  Even if one of these methods were to eliminate the U.S. Person’s U.S. tax liability, the U.S. Person is still required to file their U.S. tax return if their income exceeds the filing thresholds for the tax year.  […]

Read More… from U.S. Taxation of U.S. Citizens and U.S. Tax Residents Residing Overseas – Mitigation of Double Taxation

PFIC Testing for Foreign Portfolio Companies

Posted on

Funds with U.S. investors, U.S. family offices, and individual U.S. investors (collectively, “U.S. Investors”) must be cognizant of whether their foreign investment in private companies is an investment in a passive foreign investment company (“PFIC”). Typically, a foreign portfolio company would be classified as a corporation for U.S. income tax purposes unless an election was made to have it taxed otherwise. The issue with PFICs is that unless certain elections are made, distributions from a PFIC may be subject to an excess distribution regime resulting in a punitive tax and interest charge. In certain bad circumstances, the punitive tax and interest charge can be the amount of the distribution. […]

Read More… from PFIC Testing for Foreign Portfolio Companies

Importance of Semiannual and Annual OZ Testing

Posted on

Fund managers must ensure their qualified opportunity funds (“QOF”) meet the requirement that 90 percent of the QOF’s assets are held in qualified opportunity zone (“QOZ”) property. Failure to meet the test can result in significant penalties to the QOF that can have a significant impact on the investment return to its investors. […]

Read More… from Importance of Semiannual and Annual OZ Testing

FATCA Compliance for Offshore Funds

Posted on

It is important that fund managers understand their responsibilities under the Foreign Account Tax Compliance Act (“FATCA”). FATCA imposes a 30% withholding tax on U.S. source payments to foreign financial institutions (“FFI”) that do not comply with requirements to identify their U.S. account holders, as well as to non-financial foreign entities that do not identify their substantial U.S. owners, unless an exception applies. For offshore funds, understanding their FATCA reporting requirements is of the utmost importance to avoid withholding tax. […]

Read More… from FATCA Compliance for Offshore Funds

Streamlined Coordinated Services – Immigration and Tax

Posted on

Transitioning key talent from one country to another presents complex issues for the multinational corporation. Global mobility requires coordination of services between in-house legal, human resources, and other divisions in multiple countries. The typical approach is to hire one of the large immigration firms and the big accounting firms to handle the immigration and tax work, believing this is the best way forward. We have seen too often under this model that the services are not customized and collaborative to the multinational corporation or the employee transitioning to work in a new country. […]

Read More… from Streamlined Coordinated Services – Immigration and Tax

Not Over Taxing Gains on QSBS (Qualified Small Business Stock)

Posted on

The exclusion from gain applicable to the sale of qualified small business stock (“QSBS”) is a key benefit in selecting C corporation status for startups and other businesses. QSBS stock allows the noncorporate taxpayer to exclude from gain the greater of $10 million or ten times the taxpayer’s basis in the stock (“QSBS Eligible Exclusion Amount”). Properly excluding this gain from tax is an important tax savings opportunity and significantly increases the noncorporate taxpayer’s return on investment. […]

Read More… from Not Over Taxing Gains on QSBS (Qualified Small Business Stock)

Power of the CRUT and Importance of Correct Tax Reporting to Receive the Desired Benefits

Posted on

Family offices and private clients (“Clients”) have complicated investment and estate planning structures that require professionals to understand how to handle the needs from legal, accounting, and tax reporting. One of the planning tools frequently implemented for these Clients is a charitable remainder unitrust (“CRUT”). The CRUT allows for the tax-free liquidation of a highly appreciated asset, the tax-free growth of the assets inside the CRUT, with the income building inside the CRUT only being taxed to the extent of distributions to the lifetime beneficiary. This is a powerful tool if the tax reporting occurs correctly. We have noticed a gap between the estate planning and the tax reporting often resulting in phantom income being taxed to the detriment of the beneficiaries. […]

Read More… from Power of the CRUT and Importance of Correct Tax Reporting to Receive the Desired Benefits

Tax Preparation for Clients with International Assets and Businesses 

Posted on

U.S. tax reporting for U.S. persons with businesses or assets outside the U.S. is complex, legal intensive, and there are many traps for the unwary that can carry serious penalties. The tax preparer must understand the forms to prepare, understand the rules as the tax preparation software has not caught up to the complexity of the reporting, and be prepared to take legal positions to obtain the best result for the client. Too often, tax preparers do not have the necessary background to handle the tax reporting for international clients. […]

Read More… from Tax Preparation for Clients with International Assets and Businesses