Mexican Tax Consequences
1. As a result of the sale of the building and the land, St. John Mexico will accrue Mexican income tax liability of $1. 3M (using the U.S. net book value)/$1.7M (Using the Mexican net book value).
2. As a result of the lease transaction, the company will be assessed on annual rent payment an annual VAT amount of $ 93K. Additionally, it is minimal taxable income will be increase by 44K due to the increase in the operating expense as result of the inclusion of the rent expense, which would result in an additional income tax liability of $13K.
3. Generally, Mexico imposes 10% withholding taxes on the distributed divided. However, under the US/Mexico treaty the distribution is exempt from the withholding taxes.
U.S. Tax Consequences
1. The sale of business assets does not trigger Subpart F income and therefore, the sale transaction does not have any US. Income tax consequences.
2. Even though net proceeds available for distribution from the sale of the real estate is $4.9M [i.e. $6.2M (i.e. net proceeds – $1. 3M (i.e. Mexico income taxes)], only $2.9M will includible in the U.S. taxable income after apply the rules of IRC Sections 959 and 987.
3. The distribution of the net proceeds from the sale of the real estate will result in U.S. tax liability of $200K, which will be offset by attributes carried over from prior years.
Other Business Perspectives:
Currently, the company experiences, among others, two types of risks with respect to its
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a Additional Sec. 263A costs of $7,000 for the current year are included in other costs.
A2c. Profit or Loss from the Sale of Property: The taxpayer couple sold personal and rental property for this tax period. Both sales have potential gains. However, the gain from the sale of the personal residence qualifies for exclusion up to $500,000 under Section 121 as they lived in and used the residence at least two of the five years prior to the sale. The gain or loss is calculated as the sale price less selling costs and adjusted basis of the property. Proceeds from the sale of the rental property are taxable because it is an income producing property and would be considered normal income. However, Section 1231 designates that exchanges of business property held longer than one year may be considered a long-term capital gain if there is a gain realized and any loss would be considered an ordinary loss. Any depreciation taken in past tax years will need to be recaptured in the tax year of the sale.
Real estate transfers such as 1031 like-kind exchanges, vacation, and reverse exchanges enable property owners to defer tax consequences. But tax law and Internal Revenue Service regulation compliance takes careful planning and execution. Herbert Law Firm LLC has decades of experience in structuring
I found that the median list price in the “Westside Connection” neighborhood to be $123.00 per square foot. I then took this amount and multiplied it by our subject house, which is 1,176 square feet. This amount was then multiplied by 5% to find the depreciated value of the house. The average cost of the land in this neighborhood was previously calculated to be an additional $22,000. Plus the landscaping and other miscellaneous improvements to the site are estimated to be $1,000.
ANALYSIS: The type of business entity that Ms. Growne selects can have both legal and tax implications. Having said this, there are some tax and legal considerations to examine regardless of the type of purchasing entity.
Let’s begin with what fair market is and how that number is produced. Fair market value is the “Fair market value is an estimate of the price at which real property would change hands in an arm’s length transaction. That is, a voluntary transaction between a willing buyer and a willing seller, both having equal bargaining power and a reasonable knowledge of the pertinent facts.” (https://fitsmallbusiness.com/what-is-fair-market-value/). Fair market value is established in three different ways, comparative market analysis, having an appraisal done by a
Good morning Anthony. I added three additional columns to the "Washington Sales by Qtr_ with Potential Tax Liab " spreadsheet. The first two are for the B&O tax liability and Penalty using the rates provided by James. The last column is the Total potential Tax Liability excluding interest since, according to James, it is no easy way to compute that amount. I resend James' email to Sara, so she could help me answering his last two questions. She is going to confirm with Russ about these questions and send me an email once she has the answer.
The Foreign Investment Law underpins Mexican corporate law regarding how it will inform the company structure, governance, taxation, and activities, such as financing that are controlled within the law’s domain.
In order to compute the foreign tax credit for corporations first the total amount of foreign taxes actually paid by the corporation must be determined. This is called the direct foreign tax credit. The next step is to determine the foreign taxes deemed paid. This step applies only when actual dividends are paid by a foreign corporation to a U.S. corporation which owns at least 10 percent of the foreign company’s outstanding stock. The equation to determine the foreign taxes deemed paid in this circumstance is as follows:
The Department of Tax Administration (DTA) appraises properties at total fair market value, analyzing valid sales of properties in a 12 to 18 month period prior to the effective date of the assessment. Sales price information and market conditions from 2009 are not good indicators of fair market for the current year assessment. In addition, the 2009 sale of the subject was new construction, subject to the variables and incentives offered by builders that may not translate into the resale market. In fact, in 2009 the subject was bought for slightly higher than owner provided Comp #2 and relatively similar to Comp #1 and #3.