TAX 9869 Lecture Notes - Lecture 39: Withholding Tax, Foreign Corporation

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17 Jul 2020
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Other things that could create a US trade/biz
You have to look at activity- continuous/regular, here are the things
for you to consider:
If I am (under US law NOT treaty) engaged in a biz through an independent
agent (the person doesn’t work exclusively for me)- not my employee/may
have 6 other jobs, but perform services for me (do sales activity for me in
US). If person is of an independent nature, then you can avoid US trade/biz
if they’re not my employee.
If I’m a foreign corporation and I want to have activity in the
United States (sales activity, want to sell my product), but I
don’t want to hire someone as an employee because I don’t
want to create a US trade/biz, I might just say I’m calling that
dude an independent agent.
He’s a 1099 (not my employee).
But just calling him that doesn’t meant that= substance over
form. Substantively what is happening?
If this person does nothing except work for you, and takes
direction straight from you and if you’re taking a vacation, he
has to call/email you, that person is most likely working just for
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you. He’s a dependent agent and could create a US trade/biz.
BUT if he’s truly independent, then he would not create a US
trade/biz.
Dependent agents/employees’ activities could create a US
trade/biz for the person who is paying.
US Real Ppty interest- if I own the property, does this mean I am engaged
in a US trade/biz in the US?
If a person from China owns an apt in NY, as long as they rent it out,
could be withholding tax on rental pmts, but doesn’t mean I’m
engaged in a US trade/biz.
Once i sell ppty, FIRPTA rules (897) says I am considered to be
engaged in a US trade/biz for that sale and I have to pay US tax on
that point.
Interesting because up to the point of sale, may not have been
engaged in a US trade/biz, now that you come along and sell it,
you’re considered to be engaged in a US trade/biz (all of a sudden
switch!!).
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