International pilots, flight attendants and cruise ship employees earn income like salary and wages while working abroad. Most of them might assume that they earn foreign income. As such, under Sec. 911(e), they are eligible to elect the foreign income exclusion on the United States (U.S.) expatriate tax return. However, taxpayers should first determine the source of their income by dividing their earnings based on (1) hours spent in the U.S and the airspace over the U.S.; (2) hours spent in foreign countries and airspace over foreign countries; and (3) hours spent in international airspace and waters. The first two are self explanatory. (1) are considered as the US source of income, and (2) is consider as foreign source of income. But what about number (3)? How should taxpayers classify their source of income while flying in international airspace or performing services over international waters?
In Rogers v. Commissioner, the Rogers claimed that the salary attributable to hours spent in international airspace, was earned "within a foreign country" within the meaning of Sec. 911(b)(1)(A). But the Tax Court in Rogers focused on Sec. 1.911-2(h), and decided that for purpose of Sec. 911 the airspace over international waters was not airspace over the territory under the sovereignty of any government. As such, airspace over international waters was not within a "foreign country" for purposes of Sec. 1.911-2(h) and Sec. 911 (b)(1)(A).
The same treatment of the international airspace for purpose of Sec. 911 was expressed in Savary v. Commissioner , Clark v. Commissioner and Struck v. Commissioner. The consistency of the Tax Courts treatment of the income in questions as non-foreign source income assures the taxpayer that any in...
... middle of paper ...
.... Commissioner, 473 F.3d 790, 798 (7th Cir. 2007), aff'g 126 T.C. 89 (2006).
Clark v. Commissioner, T.C. Memo. 2008-71
(Kuntz &Peroni, U.S. International Taxation (WG&L Electronic Edition 2010), Sec.A2.03[10])
Stankee, "IRS Concedes That Concessionaire Profits Were Not Subpart F Income," 11 /. of InVl Tax'n (Mar. 2000). See also General Explanation of the Tax Reform Act of 1986, fn. 22 above, at p. 829, concluding that even though Sec.863(c) excludes from transportation income salaries of airline employees earned on flights between U.S. airports and foreign country airports, income attributable to services performed in the United States or in the U.S. territorial waters is U.S.-source
Rogers v. Commissioner, T.C. Memo. 2009-111, 97 T.C.M. 1573,
Rogers v. Commissioner, T.C. Memo. 2013-77
Struck v. Commissioner, T.C. Memo. 2007-42
TAM 9327001,
TAM 9327003
TAM 9327004
·The law furthermore specified that all trials concerning tax evasion be conducted in federal courts
IRS case. Murphy claimed that she should not be taxed on compensatory damages from emotional distress and loss of reputation. The court rejected all arguments Murphy made. § 104(a)(2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness. The amount Murray received is not classified as an amount received for personal physical injuries. Second, Murphy claims taxing her on her award is in violation of Article 1, Section 9 of the constitution. On July 3rd, 2007 the courts concluded the amount is taxable under Article 1, Section 8 of the constitution. Third, Murphy claims her award is not defined as her income under §61 of the IRC. §61 of the IRC “gross income means all income from whatever source derived.” The courts interpreted the section broadly to extend to all economic gains not otherwise exempted. Compensatory damages are not exempt and therefore is
David J. Scheffer, “U.S. Law and the Iran-Contra Affair”, The American Journal of International Law 81, no. 3 (July, 1987): 698, accessed May 20, 2014, http://www.jstor.org/stable/2202027.
1. The court stated that they did have power to hear this case: "Since the court has consistently exercised the power to construe and delineate claims arising under express powers, it must follow that the Court has authority to interpret claims with respect to powers alleged to derive from enumerated powers."
Section 183(d) allows a deduction to a taxpayer who engages in for business. The taxpayer must earn a profit for any three years or more. If he does not meet the profit test, his activity is hobby. The gross income should be greater than the deduction in order to qualify for tax deduction under section 183(b)(1).
The IRS usually do not need to validate ordinary business transactions since both the involved parties behave on their own self-interests. However, the IRS is skeptic of any transactions when it comes to evasion of estate taxes and international subsidiaries. When two unrelated companies enter in a transaction, they are involved in arm’s length transaction. However, such is not the case for related companies as they may try to distort the price of the transaction to avoid tax burden. As the boundary of tax evasion and tax avoidance is very thin, especially when it comes to estate tax and international subsidiaries, people often tend to topple over to the evasion side. The case of Estate of H.A. True, Jr. v Commissioner of Internal Revenue in 2005 illustrates the difficulty of obtaining the objective of tax avoidance and how expensive the failed effort of tax avoidance can be (Journal of Financial Service Professionals). Numerous cases of tax avoidance and evasion such as XILINX Inc. and H.A. True illustrate the confusion surrounding the arm’s length standards (ALS) and its application to cost sharing agreements (CSAs). In case of XILINX, the court altered its decisions few times considering the uncertainties of the arm’s length standards. Meanwhile the company believed to have satisfied the standards. Due to the complexity of the arm’s length standards, these cases were compared to other similar transactions. However, it is rare to find two identical cases which meet all the criteria. In both of these cases, the court couldn’t pin point what the actual standards of the arm’s length standards were, giving rise to opportunities of tax evasion. To put the arm’s length standards to a simplest form, the standard requires the two related parties to structure their transactions in such a manner as they would if they were two unrelated parties in similar
Basis – Resident individuals are taxed on worldwide income, while nonresidents are taxed only on Kazakh-source income;
Keen, M. and J. Strand (2007). "Indirect Taxes on International Aviation*." Fiscal Studies 28(1): 1-41.
This paper discusses the contrast of two landmark United States (U.S.) Supreme Court cases that helped to clearly define how the Fourth and Fifth Amendments of the U.S. Constitution is interpreted, and analyzes the difference between the “Constitution” and “Constitutional Law.” Two cases that are referenced in this analysis are (1) Katz v. United States, 386 U.S. 954 (U.S. March 13, 1967), and (2) Olmstead v. United States, 277 U.S. 438 (U.S. June 4, 1928), which differed in ruling; one eventually overturning the other. Finally, a conclusion is drawn as to the importance of these case decisions in the lives of Americans.
Taxes in the United States include payroll taxes, property taxes, sales taxes, and a multitude of others. These taxes may be imposed on individuals, business entities, estates, trusts, or other forms of organizations. In general, there is a lot of inquiry on the current tax system. With endless loopholes, a regressed economy, and corruption there has been widespread anger on the current structure of taxation. Consequently, the wealthy have managed to become even richer despite the economic crisis. Furthermore, many taxpayers in the upper class have found loopholes to avoid substantial taxation or otherwise known as tax evasion. (Stewart 2013) Tax evasion has only grown over the years and with the national debt has become a major issue. What is more, is the intense complexity of the entire taxation process. Addressing all the issues and problems regarding the taxation structure is a meticulous and arduous process. With this in mind, politicians from both parties have tried to address individual issues within the taxation paradigm. Being that the United States has the highest corporate tax in the globe, politicians have tried to change policy regarding taxation on businesses. (Sullivan 2013) How...
A tax haven is a country that offers foreign corporations and individuals relatively low corporate and income tax rates, with a politically and economically stable environment. Some tax havens are Switzerland, Hong Kong, Bermuda, Ireland, and the Cayman Islands. The United States government has been fighting against the movement of corporations because it is not collecting taxes from these corporations that it could have used to reduce government debt. However, corporations have found loopholes that exempt them from United States tax laws. Companies are moving their headquarters across seas for tax benefits to keep their shareholders content. The United States government needs to reduce its corporate tax system so the country does not lose more companies, jobs, and money to foreign entities.
...th 2001). Roth argues that the concept of international jurisdiction is not a new idea but was exercised by the US government in the 1970 after an aircraft hijacking. Also the war crime courts established after the end of World War II exercised international jurisdiction. In fact the Geneva Convention states that is a person regardless of their nationality should be brought before the court of any state in which that person has committed grave breaches of law and convention. Roth states that the concept of international jurisdiction is not a new one but that only in recent years have states been willing to act on universal jurisdiction and go after criminals of the international community regardless of their stating or power within the international community. Roth believes in the ability and authority of international organizations and institutions (Roth 2001).
While this proposition is true, it did not in any way stop Turkey from asserting jurisdiction over acts in a foreign ship that resulted in the death of Turkish nationals aboard the Boz-Kourt as the ship is placed in the same position as national territory. The same principles of international law that apply between the territories of two different States apply and international law does not prohibit the cognizance of the acts aboard a foreign ship. This conclusion would have been amended had there been a rule of customary international law that established the exclusive jurisdiction of the State whose flag was flown. However, France failed to conclusively prove the existence of such a rule of customary international law and so, the previous conclusion
The IRS (Internal Revenue Service) is the government agency responsible for tax collection and tax law enforcement in the U.S. (IRS, 2014). It has been striving to fight against Identity theft. They have rec...
2.Income taxes:Income earned by the sole proprietorship is income earned by its owner and is taxed as such