Thanks for mentioning this! Do you know roughly what revenue threshold typically triggers the country-by-country reporting requirement? And how did you handle the permanent establishment issue in Germany - did you have to create a legal entity there or was there another solution?

The country-by-country reporting threshold is generally €750 million (about $800 million) in annual consolidated group revenue for most countries following OECD guidelines. But there are local variations, and some countries have additional reporting requirements at lower thresholds. For our German permanent establishment issue, we ended up creating a formal subsidiary since we were planning expansion there anyway. But there are other approaches depending on your situation - some companies use a third-party employer of record, limit employee time in-country, or restructure responsibilities. The key is addressing it proactively rather than waiting for tax authorities to come knocking. In our case, we faced some back taxes and penalties before we got everything properly structured.

The OECD Transfer Pricing Guidelines have a whole chapter on intangibles including software. But honestly it's super technical. I found the book "Transfer Pricing and Intellectual Property" by Abdallah and Murtuza more digestible - it has software examples. Software is tricky because you need to separate the value of the core IP from the local customization and support.

5 Does the IRS actually enforce the court order though? My friend said the IRS told her they don't care about custody agreements and just follow their own tie-breaker rules about who the kid lived with more days.

3 The IRS does respect court orders for dependent claims, but they don't automatically know about them. That's why you need to provide the documentation. If the court order specifically states who claims the child in which tax year, the IRS will enforce that over their tie-breaker rules. However, if your court order is vague or doesn't specifically address tax dependency, then the IRS will default to their tie-breaker rules which primarily look at where the child lived for more nights during the year. That's why it's important to have clear language in your custody agreement about tax matters.

11 I did this last year! Get an IP PIN for your kid through the IRS website. Your ex won't be able to claim your child without the PIN, which only you'll know. Completely stopped my ex from "accidentally" claiming our kid. You have to request a new PIN each year though.

This is so helpful! Did your CPA require any specific documentation to prove the "placed in service" date? I have the property management contract, but I'm wondering if I should gather anything else just to be safe.

My CPA wanted several things to document the "placed in service" date: 1. The signed property management agreement (most important) 2. Listing photos and official listing date from the property management company 3. Evidence of any advertising for tenants (online listings, etc.) 4. Email communications showing we were actively trying to find tenants He also suggested I keep all receipts for the flooring work along with photos of the damaged original flooring to justify the "repair" classification for the damaged portion. Having documentation of the water damage was particularly important in our case. Better to gather too much documentation than not enough, especially if you're claiming a loss in a year with no rental income. It raises the audit risk a bit, but if you have good documentation, you should be fine.

I used TurboTax last year for this exact situation. Their rental property section actually handles it pretty well. When you add the property, there's a field for "date placed in service" - put your December 2022 date there. Then it will let you enter all expenses even if you show $0 for income. For the flooring, TurboTax will ask if each expense is a repair or improvement. If you classify as repair, you deduct it all immediately. If improvement, it adds it to the depreciation schedule. The key is being consistent with how you classify things. One tip: make sure you answer "Yes" to actively participating in the rental when it asks. This is important for being able to deduct losses against other income (up to $25,000 depending on your overall income level).

That's really interesting! I hadn't heard of using a blocker corporation like that. Would this approach work better than simply having two separate subsidiaries under the parent company? And did you have to deal with any step-transaction concerns from the IRS?

The blocker approach works better than two subsidiaries under a parent because when you have subsidiaries, the parent's qualification depends on the aggregate activities of all subsidiaries. With the blocker structure, you're allowing direct investment into the qualified entity. We didn't face step-transaction concerns because we established the structure well before any sale was contemplated (about 3 years prior). The IRS generally respects properly structured entities with legitimate business purposes. The key is having proper governance, separate books, arm's length transactions between entities, and maintaining the structure for a substantial time before any sale. Also make sure your qualified corporation meets the active business requirement independently and isn't just a passive investment vehicle.

How much was the penalty? I'm planning to sell shares in our business next year and now I'm worried about claiming QSBS incorrectly!

Can your parents just give you the difference in what they would've saved? Like if they get an extra $2000 by not claiming you, but you lose $1200 in credits, could they just give you the $1200 so everyone wins?

Yes, that's actually exactly what my parents did! They calculated that they would save about $800 by claiming me, but I would lose $1200 in credits. So they decided not to claim me and instead gave me $900 as a gift. That way our family as a whole came out ahead, and I still got more than if they had claimed me. The key is that regardless of their decision or any money they give you, you still need to answer the tax form questions honestly. The question isn't asking about what someone else decided to do on their return - it's asking whether you meet the criteria to be claimed as a dependent.

Yikes that's scary! Did you have to pay any penalties too? I wonder how the IRS even figured out that your parents could have claimed you?