Author: John D. Hollinrake, Jr.

John D. Hollinrake, Jr.

Partner, Tax
Columbia Center
701 Fifth Avenue, Suite 6100
Seattle, Washington 98104-7043
+1 (206) 903-8812
hollinrake.john@dorsey.com

“ECI” and its Trap for Unwary Canadian Investors in Partnerships and LLCs

A Canadian which holds a partnership interest in a U.S. or non-U.S. partnership that has “effectively connected income” (“ECI”) is subject to U.S. tax withholding with respect to the Canadian partner’s allocable share of the partnership’s ECI.  That withholding tax must be remitted by the partnership to the IRS irrespective of whether any distributions are...

The “Pot” Thickens – IRS Releases Marijuana Industry Resources

The IRS has released a new webpage dedicated to the marijuana industry to help growers, processors, researchers and retailers understand and comply with their U.S. federal income tax responsibilities. The IRS Marijuana Industry webpage covers numerous topics that may be relevant for businesses directly engaged in, or related to, the cultivation, processing and sale of...

Covid-19 Tax Relief Makes Winners out of Losses (for some)

The CARES Act, signed into law on March 27, 2020 in the wake of the onset of the Covid-19 pandemic, contained numerous changes to U.S. federal income tax law. One such change applied to the deductibility of net operating losses (“NOLs”). Legislation enacted in December 2017 commonly known as the “Tax Cuts and Jobs Act”...

COVID-19 Delays EIN Process for Canadian Applicants

Current closures at the Internal Revenue Service (“IRS”) have caused significant delays in obtaining an Employer Identification Number (“EIN”) for some U.S. businesses formed by Canadians, including new U.S. subsidiaries formed by Canadian companies. An EIN is a nine-digit number that the IRS assigns to businesses, which is necessary for many essential tasks, including making...

Stranded Canadians Taxed in the Time of Covid-19

As Covid-19 continues to spread, many countries, including the United States and Canada, are increasingly closing their borders in an attempt to slow the rate of infection. This precaution may, however, have unintended tax consequences for Canadians who find themselves stranded on the U.S. side of the border for the duration of the shutdown. Under...

Loans to U.S. Subsidiaries Should Be Carefully Structured and Documented to Obtain U.S. Tax Benefits

Canadian companies should carefully structure and document loans and advances to their U.S. subsidiaries. If loans to U.S. subsidiaries are not properly structured and documented, such loans may be recharacterized as equity investments for U.S. federal income tax purposes, and important U.S. tax benefits will be lost. Properly structured loans are treated as debt for...

Tax Consequences to U.S. Shareholders of Holding Shares in a Passive Foreign Investment Company or PFIC

If a non-U.S. corporation (the “Company”) is a “passive foreign investment company” or “PFIC” for any tax year during which a U.S. shareholder owns shares in the Company, certain adverse U.S. federal income tax consequences of the acquisition, ownership, and disposition of shares will generally apply to such U.S. shareholder. A U.S. shareholder will be...

Reminder of Required IRS Cost Basis Reporting for Canadian Companies

Canadian companies should be aware that if they engage in certain “organizational actions” that affect the tax basis of shares held by U.S. persons (including many types of acquisitions and business combinations where shares are issued to U.S. persons), they are required by the U.S. tax laws to evaluate the effect of the action on...