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Duly Noted

A Partnership Is In The Eye Of The Beholder. If the beholder happens to be the Canada Revenue Agency (CRA), and the partnership is a limited liability partnership (LLP) or limited liability limited partnership (LLLP) from Delaware or Florida, the partnership is actually a corporation for Canadian tax purposes. CRA officials announced at a conference on May 26 that because these limited liability entities have most of the characteristics of corporations, they will be treated as such. This is already the case for limited liability companies (LLCs), a widely used American business structure that has no analog north of the border. The disparity can create serious tax complications for Canadians who own businesses or property through these entities in the United States, and for Americans who try to use these vehicles in Canada. 2016 TNT 105-3.

The Long Arm Of The IRS Reaches Israel. Elazar Cole, a U.S. citizen, took up permanent residence in Israel in 2010, which entitled him to a 10-year exemption from Israeli tax on capital gains generated outside that country. Later that year, Cole sold his stake in Michigan-based Neogen Corp. at a gain of nearly $115,000. He claimed exemption from U.S. tax under the U.S.-Israel tax treaty, which would have made the gain completely tax-free as a result of his Israeli tax holiday. But the Tax Court ruled against Cole. The court held that the “savings clause” in the treaty preserved the Internal Revenue Service’s right to tax the gain because, despite his Israeli residence, Cole remained a U.S. citizen. Elazar M. Cole v. Commissioner of Internal Revenue, T.C. Summ. Op. 2016-22.

Software ‘Glitch’ Scrambles Vermont Tax Returns. As many as 19,000 Vermonters may need to amend their 2015 tax returns and pay more tax because of errors in several tax software packages, including Intuit’s popular TurboTax and professional ProSeries products. The software did not take into account changes in the state’s tax laws last year that eliminated deductions for state and local income taxes and limited the allowable amount of other deductions. The state tax department announced that it will not charge interest or penalties to taxpayers who correct their returns by June 30, and will forgive penalties (but not interest) for those who amend by Oct. 15. After January 1, the department said, it will follow up with taxpayers who do not make the corrections, and they may face penalties and interest. 2016 STT 95-29.

If you enjoyed this article, be sure to check out Palisades Hudson’s books, The High Achiever’s Guide To Wealth and Looking Ahead: Life, Family, Wealth and Business After 55. Both are available in paperback and as e-books.