To File or Not to File Form 706?

In Robert Blumenfeld's 32 year career as a senior attorney at IRS International Estate Tax, perhaps the greatest bone of contention, certainly the hardest fought issue, was over domicile, whether to file a Form 706 or a Form 706 NA.  The stakes in terms of tax dollars often was in the millions of dollars. The estate of a US citizen or domiciliary is subject to FET on a world-wide basis  while nonresident aliens estates are subject to tax on assets with a "situs" in the US pursuant to section 2104 of the IRC.

There is no dispute about the fact that if a decedent is a US citizen dying with an estate of over $5.4 million, a 706 needs to be filed. What about US residents? If the resident is not a citizen, it may well raise the issue of which tax return is correct. Most attorneys and accountants deal with income tax, not estate tax. There is a sharp dichotomy between the tax result for a US resident and a US domiciliary although they can be mutually exclusive. The filing threshold for a nonresident alien is $60,000, a far cry from $5.4 million.

Domicile is a matter of physical presence plus intent. Obviously the decedent cannot be queried about his intent so we need to look at extrinsic facts to determine what the decedent's state of mind was. Did he intend to be a US domiciliary (i.e. remain permanently in the US)? Here we are forced to look at a number of factors to determine the decedent's intent.

• Although the decedent had a home in the United States, did he maintain a home in his native country? Did he have a small home in the United States and extremely glamorous home in the foreign country or vise versa?
• Documents-did his last will and testament or his trust refer to him as a domiciliary of, say, Dade County, Florida?
• Did the decedent maintain connections in his foreign country like, bank accounts, religious affiliations, club memberships, drivers licenses, voting status?
• What part of each year did he physically stay in the United States?
• Can his intent to be gleaned from his foreign income tax returns?
• What type of visa did he have in the United States? Was it renewable or permanent in nature?
• Did he have a US green card?
• Did most of his family stay in his native country or did he bring the family with him to the United States?
• In Florida had he homesteaded his local residence?
• Had he closed his business in the foreign country prior to or since his arrival in the United States? Had he opened a new business enterprise in the United States?

Obviously in a short blog post, we can't review every permutation. The above list reviews some of the main factors that IRS agents look at to determine a decedent's domicile.

As mentioned above, the difference in tax liability could be huge. 

For example for a decedent with an $11 million estate 2 million of which is US situs assets produces the following results:

1. Decedent is a Nonresident Alien. the IRS can tax, at a 40% rate, approximately $2 million so the FET will be something in the neighborhood of $800,000.
2. Decedent is a US Domiciliary, the IRS will be able to levy tax on an estate of $11 million, most of which is in a country which has no treaty with the United States. The tax will be approximately 40% of $5,600,000 or roughly $2,200,000. $1,400,000 is certainly an amount of money which the IRS feels is worthy of an examination.
   

Before deciding on whether to use a 706 or 706-NA, be sure to review all of the facts regarding whether the decedent is a nonresident alien or a US domiciliary. If you decide the 706-NA is the way to go, do you have enough supportive evidence to justify this conclusion?

Have a US Estate Tax Problem?

 

Estate Tax Problems Require 

an Experienced Estate Tax Attorney

Contact the Tax Lawyers at

Marini & Associates, P.A.

 for a FREE Tax Consultation Contact US at

www.TaxAid.us or www.TaxLaw.ms

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

Robert S. Blumenfeld  - Estate Tax Audit Counsel
Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

OVDP Penalty Increased To 50% For 29 Foreign Banks!

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers.

This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators. 

The complete list is as follows:

1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. HSBC India
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield).
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
13. BSI SA (effective 3/30/15)
14. Vadian Bank AG (effective 5/8/15)
15. Finter Bank Zurich AG (effective 5/15/15)
16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
17. MediBank AG (effective 5/28/15)
18. LBBW (Schweiz) AG (effective 5/28/15)
19. Scobag Privatbank AG (effective 5/28/15) 
20. Rothschild Bank AG (effective 6/3/15)
21. Banca Credinvest SA (effective 6/3/15)
22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
    
23. Berner Kantonalbank AG (effective 6/9/15)
24. Bank Linth LLB AG (effective 6/19/15)
    
25. Bank Sparhafen Zurich AG (effective 6/19/15)
26. Ersparniskasse Schaffhausen AG (effective 6/26/15)
27. Privatbank Von Graffenried AG (effective 7/2/15)
28. Banque Pasche SA (effective 7/9/15) 
29. ARVEST Privatbank AG (effective 7/9/15)

A list of foreign financial institutions or facilitators meeting this criteria is available.

Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.


In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. account holders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. account holders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);
• Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

“With each Additional Agreement, 
the world where criminals can hide their money 
is becoming smaller and smaller.  Those who circumvent offshore disclosure laws have little room to hide.”said Chief Richard Weber of IRS-Criminal Investigation.

The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation. 

Taxpayers who had undeclared income from one of these 25 Banks are still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.

Do You Have Undeclared Income from One
of the 29 Banks Delivering Names to the IRS?

Do You Value Your Freedom?

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.us or www.TaxLaw.ms or

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

2 More Swiss Banks Agree to Turn Over Names of US Depositors

On Wednesday, July 8, 2015 we posted More & More Swiss Banks Turn Over Names to the DOJ! Bring the Total to 27 Banks!" well make that 29 now.

Now the Department of Justice announced on  July 9, 2015 that two banks, Banque Pasche SA and ARVEST Privatbank AG, have reached resolutions under the department’s Swiss Bank Program.

“Banque Pasche and ARVEST have provided detailed information regarding the ways in which Swiss banks helped U.S. taxpayers conceal foreign accounts and evade their U.S. tax obligations, including through the use of numbered and coded accounts and sham offshore entities.”

“The days of safely hiding behind shell corporations and numbered bank accounts are over,” 

said Acting Assistant Attorney General Caroline D. Ciraolo 

of the Department of Justice’s Tax Division.

“As each additional bank signs up under the Swiss Bank Program, More and More Information Is Flowing  to the IRS Agents and Justice Department Prosecutors going after  Illegally Concealed Offshore Accounts and the Financial Professionals

who help U.S. Taxpayers Hide Assets Abroad.”

 Under the program, banks are required to:

 

· Make a complete disclosure of their cross-border activities;

· Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

· Cooperate in treaty requests for account information;

· Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);

· Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and

· Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

Banque Pasche SA is headquartered in Geneva, Switzerland, and owns and controls a group of companies in various jurisdictions, including Monaco and the Bahamas.     From at least August 2008 to August 2013, Banque Pasche assisted certain U.S. taxpayers in evading their U.S. taxes and filing obligations, filing false income tax returns with the IRS and hiding offshore assets from the IRS.

Banque Pasche offered a variety of traditional Swiss banking services that it knew could and did assist U.S. taxpayers in concealing assets and income from the IRS.  For example, Banque Pasche offered hold mail service, as well as code name or numbered account services.  These services allowed certain U.S. taxpayers to minimize the paper trail associated with their undeclared assets and income.

Banque Pasche also permitted certain U.S. taxpayers to open accounts held in the name of sham, conduit or nominee offshore structures where the U.S. taxpayer’s interest in the account was not reported to the IRS.  With respect to these accounts, Banque Pasche would obtain from the entity’s directors an IRS Form W-8BEN (or equivalent bank document) that falsely declared that the beneficial owner was not a U.S. taxpayer. As of Dec. 31, 2008, Banque Pasche had U.S.-related accounts held by entities created in Panama or the British Virgin Islands with U.S. beneficial owners.  The majority of these accounts had false IRS Forms W-8BEN in the file.

Banque Pasche also opened accounts for U.S. taxpayers who had left other Swiss banks that were being investigated by the department, including UBS and Credit Suisse.  Banque Pasche knew or should have known that the beneficial owners of the majority of these accounts were attempting to evade U.S. tax and foreign account reporting requirements. Many of these accounts were held by Panamanian corporations with U.S. beneficial owners.  Some of these accounts were managed by a particular Geneva-based attorney who held a power of attorney over them.  When these accounts were subsequently closed, the assets were transferred to banks located in Israel and Hong Kong in an attempt to further escape detection from U.S. authorities.

Banque Pasche has fully cooperated with the department during its participation in the Swiss Bank Program.  For example, it described in detail the structure of its business with U.S. persons, which included the policies concerning U.S. accountholders.  Banque Pasche also provided the names of members of its management committee and information about its relationships with external asset managers.

Since Aug. 1, 2008, Banque Pasche had 186 U.S.-related accounts, as defined under the Swiss Bank Program, with an aggregate maximum balance of approximately $655 million.  Of these 186 accounts, 110 had U.S. beneficial owners and an aggregate maximum balance of approximately $111 million.  Banque Pasche will pay a penalty of $7.229 million.

ARVEST Privatbank AG was a private bank headquartered in Pfaffikon, Switzerland.  It provided portfolio management and related private banking services primarily to high net worth clients.  On April 15, 2015, it ceased being a licensed Swiss bank.

ARVEST opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Department of the Treasury, as required by U.S. law.  The bank helped clients set up entities, including trusts and foundations, in Liechtenstein, St. Kitts and other jurisdictions, with bank representatives serving as officers of certain of these entities, and opened ARVEST accounts in the names of these entities.

For several U.S. customers, ARVEST gave the accountholders a travel debit card, which did not have a name imprinted on the card.  These cards were tied to accounts that the accountholders held in their names at a third-party Swiss Bank specializing in this service.

Since Aug. 1, 2008, ARVEST had 52 U.S.-related accounts, with a maximum aggregate asset value of over $134 million.  ARVEST will pay a penalty of $1.044 million.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. 

With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

In accordance with the terms of the Swiss Bank Program, both of  these Swiss Banks were able to mitigated their penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at Banque Pasche SA  & ARVEST Privatbank AG who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Do You Have Undeclared Income from a Swiss Bank

 Who Is Handing Over Names to the IRS?

 

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.us or www.TaxLaw.ms or

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

Another Tax Protester - Unrepresented Pro Se Taxpayer - Loses in Tax Court - Not a Surprise!

The U.S. Tax Court affirmed nearly all IRS determinations relating to more than $600,000 in tax deficiencies and penalties stemming from a Florida concrete laborer and his refusal to file tax returns for 2005 through 2007. (Porter v.Commissioner, T.C., No. 2193-10, T.C. Memo. 2015-122, 7/1/15).

Want Experienced Tax Advise?

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

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

OVDP Penalty Increased To 50% For 27 Foreign Banks

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers.

This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators. 

The complete list is as follows:

1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. HSBC India
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield).
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
13. BSI SA (effective 3/30/15)
14. Vadian Bank AG (effective 5/8/15)
15. Finter Bank Zurich AG (effective 5/15/15)
16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
17. MediBank AG (effective 5/28/15)
18. LBBW (Schweiz) AG (effective 5/28/15)
19. Scobag Privatbank AG (effective 5/28/15) 
20. Rothschild Bank AG (effective 6/3/15)
21. Banca Credinvest SA (effective 6/3/15)
22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
    
23. Berner Kantonalbank AG (effective 6/9/15)
24. Bank Linth LLB AG (effective 6/19/15)
    
25. Bank Sparhafen Zurich AG (effective 6/19/15)
26. Ersparniskasse Schaffhausen AG (effective 6/26/15)
27. Privatbank Von Graffenried AG (effective 7/2/15)

A list of foreign financial institutions or facilitators meeting this criteria is available.

Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.


In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. account holders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. account holders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);
• Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

“With each Additional Agreement, 
the world where criminals can hide their money 
is becoming smaller and smaller.  Those who circumvent offshore disclosure laws have little room to hide.”said Chief Richard Weber of IRS-Criminal Investigation.

The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation. 

Taxpayers who had undeclared income from one of these 25 Banks are still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.

Do You Have Undeclared Income from One
of the 25 Banks Delivering Names to the IRS?

Do You Value Your Freedom?

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.us or www.TaxLaw.ms or

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