Taxation of Transferring Funds From Abroad

Pedram Ben-Cohen is an Attorney-at-Law and a Certified Public Accountant (CPA) who specializes in civil and criminal tax controversy and litigation. Mr. Ben-Cohen is also a Certified Taxation Law Specialist, certified by the State Bar of California Board of Legal Specialization. Mr. Ben-Cohen represents clients in civil and criminal tax matters, including voluntary disclosures, offshore matters, audits, appeals, litigation, and collection defense.

Prior to establishing the in 2009, Mr. Ben-Cohen was associated with the international law firms of Latham & Watkins, LLP and Gibson, Dunn & Crutcher, LLP. He also gained tax controversy experience working at Deloitte & Touche, LLP and the Tax Division of the U.S. Attorney’s Office. Mr. Ben-Cohen was admitted to the California Bar in 2003.

Mr. Ben-Cohen graduated from Georgetown Law School and earned a B.S. degree from the University of Southern California, where he majored in accounting.

Three Typical Sources of Funds

1. Gifts from Family
2. Sale of Real Estate
3. Bank Accounts

Gifts From Family

1. Gifts from Non-U.S. Persons
   1. Form 3520, Annual Return to Report Transactions with Foreign Trusts
   2. and Receipt of Certain Foreign Gifts
   3. Failure to timely file Form 3520 may result in a penalty of up to 25% of
   4. the gift
2. Gifts from U.S. Persons

1. Annual exclusion
   • $15,000 in 2020
2. Unified lifetime exemption
3. Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return
   • $11.18 million until 2025 ($22.36 million if filing jointly)

Sale of Real Estate

1. Cost Basis
   1. Purchase price
   2. Fair market value at time of inheritance
   3. Carryover basis if gift
2. Schedule D, Capital Gains and Losses
3. Sale documents translated in English

1. Federal Capital Gains Tax
   • 15% if income is between $40,001 and $441,450 ($80,001 to $496,600 if filing jointly)
   • 20% if income is over $441,450 ($496,601 if filing jointly)
   • Obamacare Capital Gains Tax
     • Additional 3.8% if income is over $200,000 ($250,000 if filing jointly)
   • California Capital Gains Tax
2. Taxed as ordinary income, up to 13.3%
3. Sale documents translated in English

Bank Accounts

1. Non-Willful vs. Willful

1. Disclosure of the accounts to accountant or others
2. Source of the funds: unreported income, inherited funds, gifts
3. Taxpayer’s education, profession, command of English language
4. Level of involvement in investment activity and account mgmt.
5. Reasons for opening the foreign account
6. Manner account was held
   • In name of taxpayer, numbered account, nominee entity such as trust/corporation, hold mail
7. Amount of money in the account
   • $100,000 vs. $100 million

Bank Accounts

1. Non-Willful
   1. Streamlined Domestic Offshore Procedures
      • FBARs for 6 tax years
      • Amended tax returns for 3 tax years
      • 5% miscellaneous offshore penalty of highest aggregate foreign asset value
      • Taxes owed plus interest
   2. Streamlined Foreign Offshore Procedures
      • FBARs for 6 tax years
      • Original or amended tax returns for 3 tax years
      • No penalties
      • Taxes owed plus interest

Bank Accounts

1. b. Willful
   1. Criminal Clearance
      • Form 14457, Voluntary Disclosure Practice Preclearance Request and Application
   2. Automatic Examination
      • Tax returns and FBARs for 6 tax years
      • 50% FBAR penalty
      • Accuracy-related penalty applied to 5 tax years
      • Civil fraud penalty applied to 1 tax year

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