Germany: Amendment to the Rules on the Taxation of Lifetime Benefits from Foreign tax-priviledged Retirement Assets
The Annual Tax Act 2024 amends the rules on the taxation of a lifetime benefit from a foreign tax-priviledged retirement account / pension plan. § Section 22 no. 5 is amended as follows: a) In sentence 2, the words "Section 3 no. 66 and" are replaced by the words "Section 3 no. 66," and…
Tax Court of Münster: Distributions upon the Termination of a Trust may be Subject to German Income Tax
In its ruling dated March 23, 2023 - 1 K 2478/21 E, the Münster Tax Court (Finanzgericht Münster) decided that the assets distributed upon the termination of a "non-transparent" US trust may be taxable under § 20 (1) No. 9 sentence 2 in conjunction with sentence 1…
BFH: The Treaty does not prevent Germany from imposing Inheritance Tax on the Acquisition of a U.S. citizen beneficiary resident of Germany even if he has stayed no longer than 10 years in Germany
The German Federal Fiscal Court (BFH) ruled on September 20th 2022 (file number: II B 2/22, NV) that the Germany-U.S. Estate and Gift Tax Treaty does not prevent Germany from imposing German inheritance tax (Erbschaftsteuer) on a U.S. citizen beneficiary who is a German tax…
German Federal Fiscal Court Ruling on Gift Tax triggered by Distributions from a Foreign Trust
In its decision dated June 25, 2022, file no. II R 31/19 the German Federal Fiscal Court (Bundesfinanzhof) held that distributions from a Foreign pool of assets with the purpose to bind assets (Vermögensmasse ausländischen Rechts, deren Zweck auf die Bindung von Vermögen…
German Federal Fiscal Court: Assets titled in Trust to which the Grantor has reserved comprehensive Powers are to be considered owned by him for German Inheritance and Gift Tax Purposes
The German Federal Fiscal Court (Bundesfinanzhof) has held in its judgment of June 25, 2021, file number II R 13/19, that assets in a trust to which the grantor has reserved comprehensive powers are to be considered owned by him for inheritance and gift tax purposes. Substantive excerpts from the…
Decicison of the German Federal Fiscal Court on the Taxation of Distributions from a 401(k) to Beneficiary in Germany
1) Distributions from a 401(k) are other income pursuant to Section 22 No. 5 Sentence 1 of the German Income Tax Act (Einkommensteuergesetz, EStG). 2) Pursuant to Sec. 22 No. 5 Sentence 2 EStG, the income is taxable in the amount of the difference between the contributions and the distributions,…
Concerns about a reduction in the U.S. Estate and Gift Tax exclusions? Make a gift now to benefit from historical exclusion levels.
The U.S. Treasury provided clarity for estate planners and their clients by issuing regulations that confirm that individuals who make gifts now seeking to benefit from current exclusion levels (basic exclusion amount of $11.4 for 2019) will not be adversely impacted after 2025 should the exclusion…
The Curtailing of Stretch IRAs
Effective January 1, 2020, the use of IRAs as an instrument for passing a stream of income tax free or tax deferred withdrawals will be limited to ten years. Prior to the changes passed in Congress’s spending package, an IRA owner could pass on his/her withdrawals to a young beneficiary which…
German Gift Tax on Distributions from a U.S. Trust to a German resident Subsequent to an Election under Art. 12 para 3 of the Germany-U.S. Estate and Gift Tax Treaty
On March 6, 2019 the Ministry of Finance of Brandenburg published a binding decision on the taxation of distributions from a U.S. trust subsequent to electing the right under Art. 12 para 3 of the Germany-U.S. Estate and Gift Tax Treaty. The decision was rendered after the Ministry conferred…
German Federal Fiscal Court Ruling on Taxation of Distributions from a Foreign Family Foundation and a Foreign Trust
In its decision dated July 3, 2019, the German Federal Fiscal Court (Bundesfinanzhof) held that distributions from a foreign family foundation (ausländische Familienstiftung) to an individual which has a fiscal residence in Germany are subject to German gift tax (Schenkungsteuer) under §…
Taxation of Distributions from an 401(k) to an individual Resident in Germany
In its decision dated August 9, 2018, the Fiscal Court of Cologne (Finanzgericht Köln) held that for German residents taxation should be limited to the difference between the contributions to a 401(k) and the distributed amount from the 401(k) assuming that the contributions were not…
Estate Tax: Effect of the Tax Cut and Jobs Act on German Domiciliaries
On December 22, 2017, Public Law 115‑97 ("Tax Cuts and Jobs Act") was enacted. Sec. 11061 of the Act more than doubles the estate and gift tax exemption amount for decedents dying or gifts made after December 31, 2017, and before January 1, 2026, by increasing the basic exclusion amount…
Estate, Gift and Generation Skipping Transfers Tax Exemptions 2017 Update
Federal Estate Tax: The estate tax exclusion for 2017 has been raised from $5.45 million for individuals and $10.9 million for married couples in 2016to $5.49 million for individuals and $10.98 million for married couples in 2017. (See IRC §2001) The maximum estate tax rate applied to…
U.S. Tax Court: German Who Gave Up U.S. Residency Liable for Exit Tax
The case involved a German national, Mr. Topsnik. Mr. Topsnik was born in Germany and moved to the U.S. obtaining a green card and residency status in 1977. Mr. Topsnik started a business with its principal place of business in California and purchased a home in Hawaii during the…
New Regulations Change Withholding Requirements for Dispositions of U.S. Real Property
The IRS has issued regulations pursuant to the Protecting Americans from Tax Hikes Act (“PATH”) that make changes to the income tax withholding requirements for nonresident aliens when U.S. situs property is liquidated. While foreign individuals are generally exempt from capital gains…
Michael Jackson and US-Federal Estate Tax
The increase in the estate tax threshold to $5.25 million has significantly decreased the estates captured by the U.S. estate tax. The IRS reported that in 2012 at which time the estate tax threshold was $5.12 million only 9,400 estate tax returns (Form 706) were received. Nevertheless, for the…
German Federal Tax Court: Distributions of a US trust to beneficiaries domiciled in Germany are subject to German gift tax
The German Federal Tax Court (Bundesfinanzhof) has ruled on September 27th 2012, that distributions from a US trust to beneficiaries domiciled in Germany are subject to German gift tax ((reference: 2012 – II R 45/10) unless the beneficiary is the settlor himself. The decision is…
Fiscal Cliff and Federal Estate Tax
The tax compromise between President Obama and the Congress that avoided the fiscal cliff in early January maintained the $5million estate tax and generation-skipping transfer (“GST”) exemption at $5million. The per-person exemption will be indexed for inflation and will change…
Obama Care’s Impact on Permanent Residents and Expatriates
On November 6, 2012, Barack Obama was re-elected president of the U.S. and the democrats recaptured the Senate. The election results effectively ensure that the Affordable Care Act (“ACC”) will be implemented. The ACC imposes obligations that most individuals maintain health care…
Succession regulation published and will apply from 17 August 2015
Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of…
Does estate tax exemption end 2013?
On July 25, 2012, the U.S. Senate voted on a bill to extend income tax cuts that expire December 31, 2012. Unfortunately, the bill failed to address the estate tax. The vote was along party lines and Democrats sidestepped the estate tax, which currently allows for an individual exemption of $5.12…
FATCA Intergovernmental Arrangements
On July 26, 2012, the U.S. Department of the Treasury published a model intergovernmental agreement to implement the Foreign Account Tax Compliance Act (“FATCA”). FATCA targets non-compliance by U.S. citizens and residents using foreign accounts. The agreement was developed in…
European Court of Justice: 13 a Abs. 1 und 2 (commerical property) does not violate European law
Legislation of a Member State, such as that at issue in the main proceedings which, for the purposes of calculating inheritance tax, excludes the application of certain tax advantages to an estate in the form of a shareholding in a capital company established in a third country, while conferring…
California Court of Appeal: Intentional Interference With Expected Inheritance
On May 3, 2012, California’s tort law became aligned with the majority of U.S. states in recognizing the tort of intentional interference with expected inheritance (“IIEI”). The California Court of Appeal, Fourth Appellate District, in the case Beckwith v. Dahl, held that IIEI is…
US financial institutions will be required to report to the IRS interest payments made to certain nonresident alien individuals
Beginning on December 21, 2012, US financial institutions will be required to report to the IRS interest payments made to certain nonresident alien individuals. The new regulations were enacted in concert with the Foreign Account Tax Compliance Act, which provides for a greater exchange of tax…
German inheritance tax: Does German law violate Art. 56, 58 of the Treaty?
Reference for a preliminary ruling from the Finanzgericht Düsseldorf (Germany) lodged on 18 April 2012 — Yvon Welte v Finanzamt Velbert (Case C-181/12) Finanzgericht Düsseldorf Parties to the main proceedings Applicant: Yvon Welte Defendant: Finanzamt Velbert Question…
Probate law in California: Fewer Estates Subject to Probate
Pursuant to Assembly Bill 1305 fewer estates will be subject to probate in California come January 1, 2012. The legislation, signed by Governor Jerry Brown in July 2011, increases the maximum value of estates that are subject to court supervised probate. The maximum value of an estate to avoid…
USA: IRS reopens Offshore Voluntary Disclosure Program (OVDP)
The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs. The IRS reopened the Offshore…
Convention between Germany and USA for the Avoidance of Double Taxation with respect to taxes on estates, inheritances, and gifts
The German Government has issued a consolidated version of the "Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation with respect to taxes on estates, inheritances, and gifts."