Tax controversies and the family office


Tax controversies and the family office

An ounce of prevention is worth a pound of cure

In 2009, the Internal Revenue Service announced the formation of a Global High Wealth Industry group to increase the focus on certain matters related to high-income taxpayers, as well as to strengthen the rigor of its audit processes in this taxpayer segment.

Executive summary

  • For fiscal year 2011, IRS examination coverage taxpayers with $10 million or more of AGI, examination coverage was nearly a third of all returns filed, at 29.93%
  • Statistics indicate that the IRS is extending examinations to four to five related entities and the IRS has indicated that more emphasis will be placed on partnerships and Form 1120-S returns
  • Areas likely to get scrutiny include valuation issues, management fees paid by related entities, private foundations, off-shore holdings, and passive foreign investment companies
  • The IRS is commonly examining compliance with reporting requirements for foreign accounts, including those related to FBAR and new foreign asset reporting under the HIRE Act
  • Family Offices must be carefully review the information they providing and must be aware of potential exposure to others of providing certain information
  • Family Offices can prepare by doing periodic risk assessments or by conducting an audit readiness assessment
  • Family Offices should establish specific procedures and formats for retaining tax related documents, as well as intervals for document destruction

Performance issue 11 – May 2013

Performance is a triannual digest, dedicated to investment management professionals, which brings you the latest articles, news and market developments from Deloitte’s professionals and clients. 

Performance issue 11
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