Accounting
IRS seeks to bolster rules for foreign trusts and gifts
An IRS rule proposal could give tax professionals and clients who receive assets through foreign trusts and gifts answers to technical questions they’ve been posing for decades.
Last month, the agency held a public hearing
The proposal is less controversial than another IRS proposal that would enforce
The IRS proposal would bring “more clarity or certainty on needing to report transactions,” said Brian Harvel, an Atlanta-based partner with the
“The key takeaway for me is that the IRS and Treasury want people to report more rather than less,” Harvel said in an email. “That is in line with what other countries are doing around the world, except that the U.S. places more emphasis on privacy and recognizes that there are a lot of legal
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The proposal stems largely from a 1996 law, the
“In these schemes, foreign trusts were used to transfer large amounts of assets offshore, where it was much more difficult for the IRS to identify whether U.S. persons owned an interest in such trusts, and whether such persons were reporting and paying the required taxes on their income from such trusts,” the rule said. “Many of the foreign trusts were established in tax haven jurisdictions with bank secrecy laws.”
In rolling out the proposal earlier this year,
“The proposed regulations address potential uncertainty under current law, including the necessary requirements for complying with the foreign trust and gift provisions, and the relevant tax consequences and potential penalties for compliance failures,” according to the preamble to the rule.
The proposal would alter the regulatory definition of the terms “U.S. persons” and loans known as “qualified obligations,” and the treatment of indirect loans from foreign trusts that some taxpayers have used to bypass the rules, according to a guide to
In addition, the proposal expands reporting requirements to more kinds of transactions known as “constructive” transfers and distributions from trusts while filling in more details about exceptions to those guidelines and spelling out more rules for how to legally accept foreign gifts with proper notification to the IRS.
“For nearly thirty years, taxpayers have been waiting for the IRS to issue regulations related to foreign trusts and foreign gifts,” Weinstock and Fincher wrote. “Since 1996, when Congress enacted a myriad of provisions to prevent tax avoidance through the use of foreign trusts and gifts, taxpayers have had to rely on less formal guidance (e.g., Notice 97-34, Revenue Procedures 2014-55 and 2020-17) on those provisions.”
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In other words, tax professionals welcomed the codification of some highly specific policies, but they still asked the agency through more than
For example, the American Institute of CPAs
“Practitioners have needed guidance in this area for more than 25 years,” Eileen Sherr, AICPA’s director of tax policy and advocacy, said in a statement at the time.
Sarah Pabst/Photographer: Sarah Pabst/Bloomb
Treasury Secretary Scott Bessent said Republicans are looking at all options to help pay for President Donald Trump’s campaign promises on tax cuts, including increasing levies on the wealthiest Americans.
“We’re going to see where the president is” on the issue, Bessent said in an interview during a trip to Argentina Monday. “Everything’s on the table.”
Bessent said he and his counterparts in the administration and on Capitol Hill are working toward a “refinement portion” of legislation that would extend and potentially expand Trump’s 2017 tax cuts — many of which are set to expire at year-end.
“We’ve got broad agreement and we’re going to go from there,” Bessent said at the US ambassador’s residence in Buenos Aires.
Bloomberg reported earlier this month that Republicans were weighing the creation of a new bracket for those earning
Bessent has said that he is working to expand the 2017 cuts to include no taxes on tipped wages and overtime pay, and a new benefit for Social Security recipients. He also said he wants to give people the ability to deduct the interest payments on their auto loans.
The Treasury chief was visiting Argentina to show support for the country after it received a new round of IMF funding last week. He earlier announced that the US would start trade negotiations with the country, after meeting with President Javier Milei and Economic Minister Luis Caputo.
There are a great accounting firms of all sizes all over the country, but if you had to pick a capital for the profession, it would probably have to be New York City.
Of all the states in the country, New York hosts the headquarters of the most
Two-fifths of the state in the union host no large-firm headquarters — but that’s not to say those states don’t have representation. The Big Four firms have offices all across the country, as do many of the 12 other firms with over
A majority of Americans don’t know that their taxes are about to increase.
According to Cato Institute’s
The TCJA was passed by a 51 to 49 Senate vote on Dec. 2, 2017, and signed into law by President Donald Trump during his first term on Jan. 1, 2018. The overhaul to the Tax Code decreased the tax rate for five of the seven individual income tax brackets, raised the standard deduction, suspended the personal exemption, removed a mandate requiring individuals to purchase health insurance under a provision of the Affordable Care Act, and raised the child tax credit and created a nonrefundable credit for non-child dependents, among other things.
Mike Theiler/Bloomberg
Part of the unawareness surrounding the expiring tax cuts is simply due to familiarity. Only 9% of people are very familiar with the TCJA, 28% say they know a moderate amount about it and 34% say they know nothing.
When respondents learned that the TCJA will expire, 53% said that Congress should either make the cuts permanent (36%) or extend them temporarily (17%). Only 13% said they wanted Congress to let the tax cuts expire, and 34% didn’t know enough to say.
Respondents’ support for extending the tax cuts increased when they learned that the average person’s taxes will increase between $1,000 and $2,000 a year — 57% said to make the tax cuts permanent, and 28% said to extend them temporarily.
Eight in 10 respondents say they worry they cannot afford to pay higher taxes next year. But only 45% expect their personal tax bill to increase, while 5% expect it to decrease and 23% think it will stay the same. Twenty-six percent don’t know what will happen.
Respondents were split on whether they thought the U.S. can afford the tax cuts: 45% said the U.S. can afford to make the TCJA permanent, 21% said the country cannot afford to do so and 34% said they don’t know.
However, 51% felt their taxes were handled fairly, while roughly half of respondents think their taxes are too high (55%) and believe their tax bill exceeds their fair share (55%).
The Cato Institute is a libertarian public policy think tank based in Washington, D.C. It surveyed 2,000 Americans from March 20 -26 for the report, in collaboration with YouGov.
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