Comprehensive Analysis of Superannuation Fund and Tax Implications

This assignment provides a detailed analysis of superannuation funds and their associated tax implications, as well as IRS guidelines. It covers various aspects, including the tax treatment of superannuation funds, the eligibility for Foreign Earned Income Exclusion, and the use of Foreign Tax Credits. The analysis also examines the tax treatment of client-owned car expenses, emphasizing the importance of maintaining mileage records for business travel. It further explores the tax implications of renting properties to relatives, as per section 280A of the IRS, and the deductibility of expenses such as dry cleaning of work suits and the payment of phone bills by the company. Overall, the assignment provides a comprehensive overview of the tax implications of various financial transactions and expenses, offering insights into relevant IRS regulations and guidelines.

1. Super annauation Fund
Superannuation fund is a type of savings fund in which company deposits certain amount
of its employees. It will not be taxable until and unless, employee withdraws the amount
from the fund. Thus, it will also not be taxable in the hands of client.
Superannuation is not qualifying income for the Foreign Earned Income Exclusion so you
will not be eligible to use the exclusion for superannuation income. You can instead use
Foreign Tax Credits to offset the US taxes on this income.
Passive Foreign Investment Company (PFIC) investments held within an employee
benefits trust do not need to be reported separately on Form 8621 on an annual basis.
The contributions or growth taxed on the US expatriate tax return becomes your US basis
in the fund. At distribution, this basis is not taxable on the US return.
2. Car Expenses
Client owned car, which he was saying that 75% is used for business purposes. However,
as per IRS (Internal Revenue Services), a person cannot claim any car expenses as
deduction whether he is maintaining records or not.
You must keep mileage records for any business travel you do. In fact, the IRS
specifically asks you on your tax return whether you have written evidence of your auto
expenses and is likely to deny your deduction if you don't have them.
At a minimum, you should keep a notebook in the car and jot down your odometer
reading at the beginning and end of the year. In between, you should jot down your
starting and stopping odometer reading for each business trip you take, as well as the
reason for the trip.

If you commute to a regular place of business, you'll also need to know the distance from
your home to your workplace and the number of commuting trips you made during the
year, because the IRS specifically asks for this information.
3. Propertes given on rent to relatives
As per section 280A of IRS, if a person gives any property to its relative having a proper
contract then that income will be liable to tax.
 A rental property is rented during the year and used by the owner for personal
purposes less than the greater of 14 days or 10% of the number of days during the
tax year that the unit was rented at fair rental value.
 If a home qualifies as a rental property, expenses including mortgage interest, real
estate taxes, homeowner association dues, utilities, and maintenance expenses can
be used to offset rental income. If total expenses exceed rental income, the
expenses may even generate a net loss.
4. Dry cleaning of Work Suits
As per IRS, dry cleaning of work suits relates to the personal expenditure, which cannot
be claimed as deduction.
5. Payment of phone bill by Company:
Payment of phone bill by company is reimbursement only. It will not be taxable in the
hands of client