Monthly Archives: August 2021

It is becoming easier for people and money to move across international borders. Most of the time, this movement will not have an impact on a person’s tax situation, and a nonresident of the United States would have few, if any, interactions with the Internal Revenue Service (“IRS”). But upon becoming a “resident” of the U.S. for tax purposes, the rules change dramatically, and if not planned for, the tax consequences can be severe. 

In our Pre-Immigration Tax Planning Guide we discussed two tax systems that an individual considering spending more time in the United States should plan for: The Federal Income Tax and the federal “Wealth Transfer” taxes, comprised of the Estate & Gift taxes and the Generation-Skipping Transfer tax. 

We also discuss Pre-Immigration Planning including:

Residency Starting Date. Pre-immigration tax planning and restructuring is usually done with the understanding that the individual is not yet subject to U.S. federal income tax in connection with such planning and restructuring. Accordingly, a clear understanding of the residency starting date of an individual that qualifies as a U.S. person in a particular year is crucial. If an alien is classified as a resident alien for the year and was not a resident alien at any time in the previous year, Code § 7701(b)(2)(A) provides “residency starting date” rules to determine on which day in the year the alien’s residency begins. 

Gift and Estate Tax Purposes. Pre-immigration tax planning also requires an understanding of whether (and if so, when) the individual who is seeking to immigrate into the United States will become a resident of the United States for U.S. estate and gift tax purposes. 

Residence/Domicile. For U.S. estate and gift tax purposes, the term “residency” means “domicile.” Although the U.S. income tax concept of residency relates only to physical presence in a place for more than a transitory period of time, domicile relates to a permanent place of abode. For U.S. estate and gift tax purposes a person can have (and must have) only one place of domicile, while for U.S. income tax purposes a person may have more than one place of residence, or none. 

Although an alien may be classified as a resident alien for U.S. income tax purposes, such classification is not determinative of the alien’s domicile for U.S. estate and gift tax purposes.

The concept of domicile is subjective, focusing on the intentions of the alien as manifested through certain lifestyle-related facts. Treas. Regs. §§ 20.0-1(b)(1) and 25.2501-1(b) offer only limited guidance, stating: “A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of later removing therefrom. Residence without the requisite intention to remain indefinitely will not suffice to constitute domicile, nor will intention to change domicile effect such a change unless accompanied by actual removal.”

 Accordingly, to be domiciled in the United States physical presence must be coupled with the requisite intent to remain indefinitely.

 Pre-Immigration Planning Strategies. Prior to an alien becoming a U.S. person for U.S. income and/or estate and gift tax purposes, various strategies can be implemented to minimize or even eliminate various U.S. tax consequences. Below is a summary of some techniques to be considered by practitioners in the pre-immigration tax planning context. 

• Step up cost basis in appreciated assets
• Transfer assets to US estate tax exempt trusts
• Make advance, completed lifetime gifts
• Accelerate gain recognition on appreciated assets
• Defer recognition of losses on depreciated assets
• Dispose of PFICs (passive foreign investment companies)
• Plan for future foreign tax credits from foreign activities
• Convert and/or check the box on foreign eligible entities, if recommended.
• Maintaining Non-domiciliary Status.
•  U.S. Estate and Gift Tax Pre-Immigration Planning. 

Even this brief introduction to the U.S. income tax and the wealth transfer taxes shows the varied rules, exceptions, requirements, and exemptions that apply to both U.S. residents and nonresidents. These rules are complicated and present many traps for the unwary. 

Pre-Immigration Tax Planning Is Needed
To Avoid These US Tax Traps For The Unwary!

   Contact the Tax Lawyers at

Read more at: Tax Times blog

In U.S. v. Vettel, case number 4:21-cv-03099, in the U.S. District Court for the District of Nebraska, a Nebraska resident denied the U.S. government's claims that his failure to report holdings in a Swiss bank account that received money from a sham corporation in Belize constituted willful failure to file, according to filing in Nebraska federal court.

David L. Vettel's attorney admitted his client did not file a report of foreign bank and financial accounts for 2006 through 2011, but he should not be liable for almost $637,000 in penalties, interest and fees resulting from the maximum penalty being assessed, the attorney told the court.

Vettel also denied the allegations that he set up a corporation in Belize for the sole purpose of holding his account at the Swiss bank BSI SA, which U.S. attorneys in their complaint claim received deposits totaling more than $1.6 million from 2006 through 2010.

During the years in question, Vettel employed a certified public accountant to prepare his federal income tax returns but didn't disclose the bank account to the CPA, nor any of the money deposited into the account on his federal returns for those years, according to the government.  LOTS OF LUCK with this defense!!!

Have IRS Tax Problems?

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The Treasury Inspector General for Tax Administration (TIGTA) has completed its annual review of IRS compliance with requirements of the Code when taxpayers exercise their rights to appeal the filing of a Notice of Federal Tax Lien or the issuance of a Notice of Intent to Levy. (Audit Report No. 2021-10-049)

The IRS Independent Office of Appeals (Appeals) properly provided taxpayers with only one hearing for the tax period(s) related to the unpaid tax and an impartial hearing officer for Collection Due Process and Equivalent Hearings. Appeals hearing officers verified applicable law or administrative procedures were met and allowed taxpayers to raise issues at the hearing related to the unpaid tax. They also made a determination on the proposed levy and/or filing of the Notice of Federal Tax Lien after considering whether the action(s) balanced efficient tax collection against the taxpayer’s concern that the action(s) be no more intrusive than necessary.

Similar To Prior Audits, TIGTA Identified Processing Errors
In 16 (20 Percent) of 81 Sampled Taxpayer Cases.

Processing errors related to proper classification of hearing requests and incorrect Collection Statute Expiration Dates (CSED) on the taxpayer’s accounts. For example, taxpayer accounts had CSED errors due to incorrectly input CSED suspension start and stop dates. 

• In some cases, the IRS incorrectly extended the time period, allowing the IRS additional time to collect delinquent taxes. 
• In other cases, the IRS incorrectly decreased the time to collect delinquent taxes. 

Based on our sample results, TIGTA estimates that Appeals misclassified 302 Collection Due Process or Equivalent Hearing cases, and 3,623 and 1,510 taxpayer accounts had their CSED overstated and understated, respectively, during Fiscal Year 2020. 

Read more at: Tax Times blog

According to Procedurally Taxing on August 27, 2021, the Tax Court issued a press released stating that it anticipates returning to in-person proceedings starting with the winter trial sessions for 2022.  In the announcement, the Tax Court also states that it will continue to hold trials remotely where appropriate.

All of the Tax Court calendars scheduled for the Fall 2021 calendars are remote. 

Until the August 27 announcement it was unknown when Tax Court judges would begin holding in-person trials again.  

It was also unknown if the Tax Court would continue to offer remote proceedings as an option.  In issuing Administrative Order 2021-1 the Tax Court terminated Administrative Order 2020-2 which replaced in-person proceedings with remote proceedings and set a path forward for post-pandemic trials at the Tax Court.  

By adopting a rule that allows for both in-person and remote proceedings, the Tax Court follows another Article 1 court, the Court of Veterans Appeals, and provides maximum flexibility for the parties and itself to conduct future proceedings.

Have IRS Tax Problems?

     Contact the Tax Lawyers at

Read more at: Tax Times blog