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Now according to Law360, a Virginia federal jury on August 21, 2018 convicted former Trump campaign chairman Paul Manafort on some charges of filing false tax returns and lying to banks in order to secure tens of millions of dollars in loans. Paul Manafort was found guilty on 8 counts of filing false tax returns and lying to banks, while the jury deadlocked on 10 more counts. (AP)

Returning guilty verdicts on 8 counts of bank fraud, subscribing to False Tax Returns, and failure to Disclose Foreign Bank Accounts, jurors largely rejected Manafort’s claim that his protege and onetime co-defendant Rick Gates was responsible for false claims about the longtime GOP operative’s finances and a network of offshore bank accounts that were the source of millions of dollars in payments to U.S. vendors to support Manafort’s luxurious lifestyle. The jurors deadlocked on the other 10 counts.

The government at trial elicited testimony from Manafort’s bookkeeper and tax preparers who said he was deeply involved with matters relating to his personal finances, even though Gates was often their point of contact for day-to-day matters. Gates cut a deal with prosecutors to testify against his former boss and admitted that he embezzled hundreds of thousands of dollars from Manafort.

Manafort’s attorneys unloaded on Gates at trial, painting the individual described by multiple witnesses as Manafort’s “right-hand man” as a liar and thief who embezzled money to fund a transnational extramarital affair.

But ultimately, the jury either rejected defense’s claims that Gates’ was too untrustworthy to rely on as a witness, or they decided the remaining balance of evidence was sufficient to prove the government’s claims.

 Do You Have Undeclared Income from Offshore Banks?

 

 

Don’t Want to Wind up like Paul Manafort?  

 

Want to Know if the OVDP Program is Right for You?

 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

  

 

for a FREE Tax Consultation

at: www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243

 

According to Moodys Gartner, the transition tax on businesses, introduced by the US Tax Cuts and Jobs Act 2017, may cause some Canadian-resident US individuals with a substantial unexpected US tax liability. They will have to pay the tax without being able to claim it as a tax credit against their Canadian income, unless the Ottawa government decides to allow them relief from this double taxation. 

 

At the 2018 Society of Trust and Estate Practitioners (STEP) conference held in Toronto, the Canada Revenue Agency (CRA) confirmed that a Canadian resident shareholder’s Canadian tax liability would not be eligible for a credit to offset the Transition Tax paid (see question #12 of the CRA Roundtable Questions & Answers here). Accordingly, this can lead to double taxation for these unfortunate Canadian residents. 
 
The allowance of a domestic tax credit for foreign tax paid on domestic income is specifically found in the Article XXIV of the Canadian/US Tax Treaty which provides relief by deeming the source of some types of income to be foreign, thereby enabling the use of FTCs to offset the Canadian or US. tax otherwise payable.
 
Another possible solution would have been for CanadaCo to pay out an immediate dividend of the same amount in 2017, as the income would be included on the personal returns in both countries in 2017.  

This problem may also be faced by US citizens living in other countries besides Canada, since most other industrialized countries will not consider this transition tax nor other types of accrued Subpart F income, as taxable in their country:

1. The 965 deemed distribution is taxable in the U.S. in 2017, but there is no taxable event in the country of residence and therefore no tax paid in the country of “tax residence”.
2. There is no credit allowed for the U.S. tax paid on the individual’s 2017 foreign tax return where he/she actually lives.
3. When the amount of the 2017 IRC §965 inclusion is later distributed to the US shareholder, that distribution is taxed in the foreign jurisdiction a second time.
4. Therefore, unless the US/Country of Residents tax treaty provides a solution, the §965 inclusion amount will be taxed twice, first by the United States in 2017 and then by the country of residence upon distribution in years after 2017.

Need International Tax Help?

 



Contact the Tax Lawyers at
Marini & Associates, P.A.

 

 

 

 for a FREE Tax Consultation Contact us at 

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243). 

 

 
 
Sources:
 
Moodys Gartner
 
Forbes
 

According to Law360, the Eighth Circuit vacated a favorable U.S. Tax Court decision for Medtronic Inc., in its $1.36 billion tax dispute with the IRS, after finding that the judge in the case had not justified the pricing.

The case will return to the Tax Court, which found in January 2017 that the medical equipment company owed only $14 million in an adjustment over its 2005-2006 tax years, stemming from royalty payments to the company's U.S. headquarters from its Puerto Rican subsidiary.

The Eighth Circuit did not reject the Tax Court's decision outright but ordered U.S. Tax Court Judge Kathleen Kerrigan to justify more extensively her determination that Medtronic's overall transfer pricing method was correct.

In a June 2016 order, Kerrigan agreed with Medtronic that the "comparable uncontrolled transactions" method of transfer pricing was the best method for determining the correct royalty rate for the use of intellectual property by Medtronic Puerto Rico Operations Co., a subsidiary that manufactured medical equipment. In that method, the internal transfers of assets are priced according to transactions of similar products between independent companies.

Using that methodology, Kerrigan found that the royalty rate for medical device pulse generators should be 44 percent, while the rate for pacemaker leads should be 22 percent. Based on those figures, Medtronic and the IRS reached an agreement to reduce Medtronic's tax bill to $14 million while the case remained under appeal.

The IRS argued that because the Puerto Rican subsidiary was merely an assembly arm, the comparable uncontrolled transactions method was inappropriate. The agency used the comparable profits method, which takes into account profits from similar firms, to argue that Medtronic's U.S. entities should have received 90 percent of the income from the transaction, which it used to make an overall adjustment of $1.36 billion for the two years.

Writing the lead opinion for the Eighth Circuit, Judge Roger Wollman said the Tax Court didn't explain how it determined that Medtronic's choice of comparable prices, which used pricing from a 1992 settlement with another supplier, was appropriate. Judge Wollman also said the Tax Court didn't account for significant differences in the transactions, including the types of intellectual properties sold and the nature of the contracts.

In addition, the judge found that the Tax Court did not sufficiently analyze how the Puerto Rican subsidiary assumed risk in the transaction, which Medtronic used to justify its royalty agreement.

"In the absence of such a finding, we lack sufficient information to determine whether the Tax Court’s profit allocation was appropriate," Wollman wrote.

 Fellow Eighth Circuit Judge Bobby Shepherd noted in a concurring opinion that the Tax Court did not account for effects that could potentially distort prices in a legal settlement, including that the parties settled to avoid future litigation costs.

Marini& Associates, P.A. 

 

 

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243