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1.89 MB
Extraction Summary
2
People
2
Organizations
1
Locations
1
Events
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Relationships
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Quotes
Document Information
Type:
Tax bulletin / legal memorandum
File Size:
1.89 MB
Summary
This document is page 6 of a 'Tax Bulletin 2018-1' outlining changes from the Tax Cuts and Jobs Act. It details the mechanics of the new pass-through entity deduction with a hypothetical example of a married couple, discusses Corporate International Taxes (including repatriation of foreign earnings), and notes the repeal of Roth IRA recharacterization. The document bears a 'HOUSE_OVERSIGHT' Bates stamp, suggesting it was part of a document production for a Congressional investigation, likely related to financial structures used by Epstein or associated entities.
People (2)
| Name | Role | Context |
|---|---|---|
| H | Hypothetical Taxpayer (Husband) |
Used in an example regarding pass-through entity taxation.
|
| W | Hypothetical Taxpayer (Wife) |
Used in an example regarding pass-through entity taxation; described as an employee receiving W-2 wages.
|
Organizations (2)
| Name | Type | Context |
|---|---|---|
| House Oversight Committee |
Indicated by the Bates stamp 'HOUSE_OVERSIGHT' at the bottom of the document.
|
|
| Senate |
Mentioned regarding the legislative history of the pass-through deduction availability for trusts/estates.
|
Timeline (1 events)
Locations (1)
| Location | Context |
|---|---|
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Implied by references to U.S. taxation, U.S. corporate shareholders, and federal tax laws.
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Relationships (1)
H
→
Spouses
→
W
H and W file a joint return... married filing jointly
Key Quotes (3)
"Under the Act, however, trusts and estates can benefit from the pass-through deduction."Source
HOUSE_OVERSIGHT_029443.jpg
Quote #1
"Capital gains, dividends, and other preferential income from a business would not be considered 'business income'"Source
HOUSE_OVERSIGHT_029443.jpg
Quote #2
"Roth recharacterization no longer allowed."Source
HOUSE_OVERSIGHT_029443.jpg
Quote #3
Full Extracted Text
Complete text extracted from the document (2,841 characters)
TAX BULLETIN 2018-1: TAX REFORM SIGNED INTO LAW
next $100,000 of taxable income for married filing jointly ($50,000 for others). The following is a simple example for a pass-through entity.
EXAMPLE
H and W file a joint return on which they report taxable income of $200,000 (determined without regard to this provision). H has a sole proprietorship that is a qualified business and is a "specified service business." W is an employee and receives only W-2 wages from her job.
H’s qualified business income is $150,000. 20 percent of the qualified business income is $30,000. Because H and W’s taxable income is below the $315,000 threshold amount for a joint return, (i) the wage limit does not apply to H’s qualified business, and (ii) the limitation applicable to specified service businesses does not apply. H’s deductible amount for qualified business income is $30,000.
On their joint return, H & W would qualify for a $30,000 deduction, reducing their taxable income from $200,000 to $170,000. That taxable income would then be subject to regular income rates.
While upper-income wage earners in high-tax states generally do not fare well under the Act, taxpayers with substantial income from pass-through businesses should see a tax benefit compared with current law, since the weighted average rate of business income would be approximately 30%. Capital gains, dividends, and other preferential income from a business would not be considered "business income" and would continue to be taxed at preferential tax rates.
Under the initial Senate version, the pass-through deduction was not available to trusts or estates. Under the Act, however, trusts and estates can benefit from the pass-through deduction.
CORPORATE INTERNATIONAL TAXES
2017 Law
2018 Law
2018 Law
International Corporate Tax – Scope
Worldwide with deferral available
100% of foreign-source portion of dividends paid by foreign corporation to U.S. corporate shareholder (that owns at least 10%) would be exempt from U.S. taxation
Worldwide with deferral available
100% of foreign-source portion of dividends paid by foreign corporation to U.S. corporate shareholder (that owns at least 10%) would be exempt from U.S. taxation
One-Time Deemed Repatriation of Foreign Earnings
No
U.S. shareholders owning at least 10% of a foreign corporation would be taxed on post-1986 net foreign earnings and profits (15.5% on earnings and profits comprising cash or cash equivalents; 8% on remaining earnings and profits); may elect to pay tax over a period of up to 8 years, in annual installments that allow more to be paid at the back end
No
U.S. shareholders owning at least 10% of a foreign corporation would be taxed on post-1986 net foreign earnings and profits (15.5% on earnings and profits comprising cash or cash equivalents; 8% on remaining earnings and profits); may elect to pay tax over a period of up to 8 years, in annual installments that allow more to be paid at the back end
OTHER PROVISIONS
The Act has other provisions of note that are not included in the charts above.
• Roth recharacterization no longer allowed. Under 2017 law, if you converted a traditional IRA to a Roth IRA, you could "recharacterize" that conversion within certain time limits, in effect undoing it. For tax years beginning after 2017, the Act repeals this rule, meaning you can no longer recharacterize
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