Monthly Archives: December 2015

HOW FATCA REPORTING IS MAKING FOREIGN INVESTMENT CHALLENGING

U.S. citizens and permanent residents are required to report all income wherever earned together with the existence of foreign accounts and certain investments. In an effort to prevent U.S. citizens and permanent residents from avoiding taxation of foreign held assets, the U.S. government has obtained the agreement of many foreign governments to require local financial institutions to report account existence and activity.  FATCA, the Foreign Account Tax Compliance Act requires financial institutions that offer accounts to U.S. citizens and permanent residents identify and report account information to the Internal Revenue Service.  As a result, FATCA has made it increasingly more difficult to open a foreign account since it requires foreign financial institutions to undertake these reporting efforts, at their own expense, effectively making opening such an account extremely difficult and, often, those accounts are now unavailable.

Financial institutions, including, banks, stock brokers, insurance companies, mutual fund companies, are now required to report the following assets owned by U.S. citizens and permanent residents: cash accounts, stocks, bonds, options, derivatives, mutual funds, interests in foreign partnerships, pension plans and any financial instrument that has a foreign issuer, and real estate held by a foreign entity.  Financial institutions that do not participate in will be penalized by a withholding tax of an additional 30% on all U.S. source fixed and determinable, annual or periodic income. Other penalties may also apply making foreign financial institutions shy away from offering accounts to U.S. citizens and permanent residents.

There foreign assets that are exempt from the FATCA reporting requirements. Cash accounts with less than $10,000, gold, silver or other tangible assets held in foreign safety deposit boxes, real estate held in the name of the individual, personal property located in foreign countries provided these are owned directly in the individual’s name and some foreign investments held by a retirement plan, IRA, SEP or 401(k).

Investments in foreign countries are a very good way to diversify your portfolio and can provide excellent returns. If this strategy is attractive to you, consider investing in real estate or obtaining a safety deposit box where you can accumulate gold, silver or other tangible asset, such as diamonds or other gems. Please contact us if you have any questions or would like to discuss your options to discover great returns through foreign investment.

 

Tips For Drafting Enforceable Contracts

Ensuring your Contracts are Enforceable.

Often when negotiating a contract the parties are on friendly terms and understand the intention behind each provision whether express or implied. The difficulty lies somewhere down the road should the parties dispute the meaning of one or more of those terms.  When drafting a contract you should be keenly aware that it will likely be construed by a court who has little knowledge of the party’s intentions and will have to assess the contractual language objectively, setting aside any subjective notion of the party’s intention.

Although the court is entitled to consider the objective commercial purpose, the origin of the transaction, and often its context in the marketplace. But it is prevented from looking at prior drafts, notes, emails, or other indicia of the negotiations.  The court interprets the contractual language in a clear and natural meaning of the language used.  The court will rely on the express terms, as drafted, providing clarity to those terms that are, perhaps less clear resulting in the dispute.

There is some precedence that the court may recognize implied terms in very specific and highly restrictive circumstances. The court will not conclude a term is implied unless a reasonable reader would consider the term to be so obvious as to go without saying or be necessary for business efficacy.  It seems the reasonableness standard is not applied lightly, rather the exercise of construction applying traditional notions of interpretation.

Thus when drafting a contract you should keep in mind the importance of the language used as well as what might be interpreted by a reasonable reader as obvious and necessary to fulfill the terms of the contract. One example of this might be, termination fees for early termination of a contract.

Here are a few tips:

  • Draft clearly using plain language and eliminate any ambiguity
  • Address issues that may be implied by the circumstances
  • Define the meaning of specific words to avoid confusion later
  • Use recitals to outline the background the more detail set out the more information the court has to determine relevant circumstances
  • When using dates, monetary payments, cure periods etc be very specific rather than language such as “On or before” or “commencing on”
  • When reviewing make certain there are no conflicts between the various provisions
  • Ensure all section/provision number references are correct

Please contact us if you would like any assistance with drafting your contracts, we would be happy to help.