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HSBC India Client Indicted by U.S. Over $8.7 Million Account

September 29, 2011

Sept. 28 (Bloomberg) --  A Wisconsin neurosurgeon was re- indicted by a U.S. grand jury on new charges that he failed to declare an HSBC Holdings Plc account in India valued in 2009 at $8.7 million.

Arvind Ahuja was indicted again by a federal grand jury in Milwaukee, where he was initially charged June 28 with concealing accounts from the Internal Revenue Service. The nine- count indictment added a charge that Ahuja conspired with two HSBC India bankers to defraud the IRS from 2006 to 2009.

The charges against Ahuja come amid a widening U.S. crackdown on offshore tax evasion that includes grand jury investigations of eight foreign banks. Prosecutors have filed criminal tax charges against more than three dozen former U.S. clients of UBS AG and Credit Suisse Group AG, Switzerland’s two biggest banks, and London-based HSBC, Europe’s biggest bank.

Ahuja took steps to hide his offshore accounts, according to the indictment made public today. In 2007, an HSBC India banker told a colleague that Ahuja “has requested that he does not want any kind of mail at his US or India address,” according to the indictment. “He wants a HOLD on all his accounts.”

Prosecutors said Ahuja failed to report more than $1.2 million in interest income, pay taxes due or file Reports of Foreign Bank and Financial Accounts, or FBARs.

In New Jersey a businessman Vaibhav Dahake pleaded guilty in April to conspiring with five HBSC bankers to hide his Indian accounts from the IRS. His plea came four days after a U.S. judge in California gave permission to the IRS to serve a so- called John Doe summons on HSBC for information about Americans who may have banked in India to hide accounts from U.S. tax authorities.

In both the Dahake and Ahuja cases, prosecutors said HSBC ran a U.S. division called NRI Services that marketed offshore banking services to U.S. citizens of Indian descent. Through NRI, HSBC India “encouraged U.S. citizens to open undeclared bank accounts in India,” according to the Ahuja indictment.

If convicted, Ahuja, who lives in Greendale, Wisconsin, faces as long as 10 years in prison on the FBAR charges, five years on conspiracy and three years on charges of filing false tax returns.

Read more at: Tax Times blog

FATCA Postponed – Implementation Time Table

September 28, 2011

 IRS Notice 2011-53 delays both the FATCA §1471 withholding and reporting requirements one year to January 1, 2014, and phases in those requirements over two years starting in 2014.
The revised version of Notice 2011-53 extends the application of the phase-in to §1472 as well. 
We have provided a Table Below listing the details of the time schedule as it relates to FATCA implementation.
This delay in the withholding and reporting procedures should allow enough time to permit FFIs to build their computer systems, request and receive any required regulatory approvals, and train appropriate personnel to comply with the rules.
Of course, whether enough time has been provided depends on the resolution of the conflict-of-law issues and the promulgation of proposed regulations by December 31, 2011, and final regulations by the summer of 2012.
Implementation of FATCA Requirements
Execution of FFI Agreements
Date on which the IRS will begin accepting applications to enter into FFI Agreements. January 1, 2013
Last date to enter into an FFI Agreement to ensure that there is no withholding beginning on January 1, 2014. The effective date of all FFI Agreements entered into before July 1, 2013, will be July 1, 2013. FFI Agreements entered into after June 30, 2013, may not forestall withholding beginning on January 1, 2014. June 30, 2013
Reporting of U.S. Accounts

Due Diligence
New Accounts Transition Date Under Notice 2011-53
Participating FFIs must implement account opening procedures described in Notice 2010-60 to identify U.S. accounts. On or after the effective date of the FFIA
Pre-Existing Accounts Transition Date Under Notice 2011-53
Large Private Banking Accounts. Completion of Step 3 (Notice 2011-34) due diligence for private bank accounts with balances or values greater than or equal to $500,000. Within one year of the effective date of the FFIA
Smaller Private Banking Accounts. Completion of private banking procedures for pre-existing private bank accounts with balances or values less than $500,000. Later of December 31, 2014, or one year after the effective date of the FFIA
All Other Pre-Existing Accounts. Completion of due diligence procedures in Notices 2010-60 and 2011-34. Two years after the effective date of the FFIA

New Accounts, Documented U.S. Accounts, Transition Date Under 2011-53
and Private Banking Accounts

Limited Reporting for First Year: This limited reporting also applies to FFIs that elect to report as a U.S. FFI under §1471(c)(2)

• Name, address, and U.S. TIN of each U.S. person who is an account holder or, if the account is owned by a U.S.-owned foreign entity, name, address, and U.S. TIN of each substantial U.S. owner;

• The account balance as of December 31, 2013, or, for closed accounts, the balance immediately before closure; and

• The account number.

May elect to report under Notice 2011-34.

Must report any recalcitrant account holders.
 Form W-9 received by June 30, 2014, must be reported to IRS by September 30, 2014
Post-2013 Years
Reporting in accordance with Notice 2011-34 as implemented in future regulations.
Withholding
Types of Withholdable Payments Transition Date Under Notice 2011-53
U.S.-Source FDAP Payments (e.g., interest, dividends, royalties, rent, etc.). Payments made on or after January 1, 2014
Gross Proceeds (i.e., gross proceeds from the sale of assets that produce or may produce U.S.-source FDAP income). Payments made on or after January 1, 2015
Passthru Payments. Note that a U.S.-source FDAP payment that also would be a passthru payment is subject to the January 1, 2014, effective date. Payments made on or after January 1, 2015
Other
Expiring QI, WFP, and WFT Agreements Transition Date Under Notice 2011-53
Original expiration date of December 31, 2012 Automatic extension until December 31, 2013

Read more at: Tax Times blog

Lack of Meaningful Participation in Prior Case Provides Innocent Spouse Relief

September 27, 2011

The husband of a gambler who did not know that his wife was inaccurately reporting her gambling losses did not “participate meaningfully” in a prior Tax Court deficiency case the U.S. Tax Court held Sept. 26 and thus he is entitled to innocent spouse relief (Harbin v. Commissioner, T.C., No. 9994-07, 137 T.C. No. 7, 9/26/11).

Tax Court Judge Diane Kroupa found that intervenor Bernice Nalls, the spouse of petitioner Leonard Harbin “effectively exercised exclusive control over the prior deficiency case as it related to the deficiencies at issue” which she said “stemmed from intervenor's gambling activities.” Kroupa said that Harbin depended on Nalls to contest the deficiencies at issue and Harbin only participated in the prior deficiency case through a lawyer's representation.

Attorney James E. Caldwell represented both Harbin and Nalls in the 2004—2005 Tax Court litigation which included claimed deductions for gambling losses (Docket No. 10774-04). In the litigation, the couple and the Internal Revenue Service executed a stipulated decision that petitioner and his spouse owed deficiencies and accuracy-related penalties for 1999 and 2000.

Caldwell did not explain the advantages and risks of joint representation to Harbin, Kroupa said, and Caldwell proceeded with the joint representation of Harbin and Nalls “despite the conflict of interest.” Caldwell also represented both Harbin and Nalls “in their contentious divorce” which was finalized in 2004.

Text of this decision is available at http://www.ustaxcourt.gov/InOpHistoric/HarbinDiv.TC.WPD.pdf

Read more at: Tax Times blog

M&A Land Mark Victory cited in recent Florida Tech Advice

September 26, 2011

Florida - Gambling Ship Eligible for Exemption on Certain Receipts, Advisory Explains
SUMMARY

Facts: The taxpayer is a Florida Limited Liability Company organized in the state of Florida. The taxpayer will operate a gaming and entertainment ship, which will operate out of the Port Authority, Florida.

Question: Is the taxpayer eligible for the partial exemption provided for in s. 212.08(8), F.S., on the purchase of the vessel used in the operation of the “cruise to nowhere”?

Answer: Yes. Pursuant to the recent Florida Supreme Court case, Department of Revenue vs. New Sea Escape Cruises, Ltd., 894 So.2d 954 (Fla. 2005), the taxpayer is eligible for the partial exemption provided in s. 212.08(8), F.S.

For more information go to https://taxlaw.state.fl.us/wordfiles/SUT%20TAA3%2011A-024.pdf

Read more at: Tax Times blog

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