FAQ

The following are a number of general recurring questions clients have asked us over the years.We are providing simplistic answers to those questions below. However, we do not suggest in any way that our answers below are true in each and every possible situation as each tax, accounting, financial, business or regulatory issue an individual or business faces should always be considered as an independent unique issue.

Q. When my accountant reviews and completes my accounting should I expect it to be exactly correct?

A. No. Exact and correct are terms that accountants do not use to describe accounting. Accounting is a language of its own. Each accountant may interpret the business purpose,intent and ultimate effect of a business transaction differently than another accountant.

Q. If I am going to start a new business in the U.S. should I organize an LLC?

A. This is a complex question but our first consideration, which is solely based on tax considerations, is always to determine the length of time you expect to “own and operate”the business. If you are going to own the business for longer than a few years then we seevery few legitimate reasons to use an LLC. If you plan to organize the entity and sell it within a few years then an LLC is possibly an “ok” entity to select. However, outside of the real estate and investment management sectors and possibly a few others, we see very little or no “tax” or other benefits that an LLC provides its owners – as compared to a corporation.

Q. If I am getting divorced should I file my U.S. taxes “jointly” with my partner in the last year before we were divorced?

A. There are many issues to consider in this scenario. However, we routinely see U.S. taxpayers decide to file separately in the final year of their marriage. We believe this is primarily because when the two individuals file jointly they are accepting the liability to pay U.S. taxes for not only themselves but their spouse as well. In a divorce, these individuals may not wish to accept that liability.

Q. When translating a controlled foreign corporation's balance sheet and profit and loss for foreign reporting purposes on Form 5471 what exchange rate should I use.

A. The IRS provides an average annual exchange rate for simplified translation calculations. See https://www.irs.gov/individuals/international-taxpayers/yearly-average-c... However, this exchange rate can not be used in all cases. Please refer to the instructions for the form being prepared for specifics.