Chugh CPAs, LLP's highly skilled tax professionals have a diversity of experiences, skills, and insights into Internal Revenue Service (IRS) processes. We help resolve issues with the IRS National Office and its Examination Division. The Accounting Method and Inventory reviews services include UNICAP tax-saving analysis, assistance with the issuance of favorable changes in accounting methods & accounting periods, favorable resolution of accounting methods and inventory issues raised on examination by Internal Revenue Service.

Chugh CPAs, LLP provides efficient, timely services to our clients. Chugh CPAs, LLP offers tax planning to meet the challenges of an environment in which tax laws throughout the world are becoming more complex and constraining, and revenue authorities are becoming increasingly more demanding. Our technical experience enables us to tailor proven tax method planning strategies to the specific needs and operating profile of each of our clients. Additionally, we provide our clients with a team of highly-trained professionals to implement these strategies, helping to ensure that tax benefits are realized as quickly as possible but also ensuring that the tax benefits are justifiable. We offer a full range of tax services in corporate, partnership, estate, trust and individual taxation. The complexity of current tax laws requires careful review and planning of Business & Individual decisions.

The Various services offered by Chugh CPAs, LLP are as follows:

  • State And Local Tax Services
  • Employer Taxes A Withholding Compliance
  • Tax Planning
  • Tax Problems Government Examinations And Representation


Attorney, CPA, Managing Partner


Address: 15925 Carmenita Road, Cerritos, CA 90703

Phone: 562.229.1250




Address: 1600 Duane Ave, Santa Clara, CA 95054

Phone: 408.343.7625

1. What type of business entity to form?

There are various types of business entities and the type of business structure one chooses depends on several factors including the specific purpose of the business, risk appetite, nature of the business etc. Some of the most common types of business entities and their brief description is provided as under:

-Sole Proprietorship: - It is a simple business entity to set-up with limited capital and lesser legal compliances. However, it comes with a challenge of unlimited personal liability of the owner. It is generally suitable for small retail traders.

-Partnership: - There are few different types of partnership in a business space, such as General Partnership and Limited Partnership. In a general partnership, partners agree to share profits and responsibility and each partner has unlimited liability. 
In a limited partnership, there are general partners and limited partners. A general partner shares unlimited liability in contrast to a limited partner who may take the form of an equity investor sharing the profits and business equity in exchange for financing assets.

-C Corporation: - This business entity type with shareholders is typically helpful when the business requires public funding i.e., issue of stock in exchange for capital. While the owners enjoy limited liability protection, there is huge administrative requirement and heavy cost to run the entity. 

-S Corporation: - This is an entity combining the limited liability protection of a C corporation and the pass-through taxation of a sole proprietorship and partnership. Ideal for small businesses with complex operations.

-Limited Liability Company (‘LLC’): - LLCs are great for high-risk small businesses because of the limited liability protection they offer. It combines the features of a sole proprietorship (pass-through taxation) and C corporation (limited liability).

2. Which is the ideal State for incorporating business from tax perspective?

While the structure of each business is unique, few states stand out as ideal to start a business. Wyoming, Nevada, and Delaware are particularly well-suited for incorporation because of their business-friendly legislation, greater privacy, and learned courts. Learning more about incorporating in each of these states will help you make the best decisions for your company and maximise your benefits when you incorporate.

3. What are the U.S. Tax compliances for the inheritance and gift received from the foreign person?

IRS Form 3520 - Annual Return to Report Transactions with Foreign Trusts, is required to be filed when a US person receives bequests and gifts exceeding $100,000 in a calendar year from a foreign person. This form wherein the amount and description of the bequest is reported is required to be filed by the 15th day of the fourth month following the end of an income tax year (subject to any extensions that may apply).

4. What are the special Tax reporting requirements for Stock options related income?

There are two types of stock options: Incentive Stock Options (‘ISOs’) and Non-qualified Stock Options (‘NSOs’).

a. Incentive Stock Options (‘ISOs’): Sometimes referred to as statutory stock options are a type of employee stock option that are granted only to the employees. There are no tax consequences at the time of exercise, however Alternate Minimum Tax (‘AMT’) may trigger in certain circumstances. Taxable gain on sale of ISOs could be taxed as long-term capital gains or ordinary gains (short-term) depending on the period of holding. 

b. Non-qualified Stock Options (‘NSOs’): These are the type of employee stock options wherein at the time option is exercised, an employee pays ordinary income tax on difference between the grant price and the current fair market value (‘FMV’) on the date of exercise. At the time of sale of NSO stock, capital gain (long term or short term) is calculated depending upon period of holding. The employee gets the step-up basis which is usually FMV at the time of exercise. 

5. M & A related:

Which is better – Stocks or Assets sale?
a. Stock sale or a stock purchase is when a buyer acquires the shares of the selling shareholder. The buyer obtains all company equity including assets and liabilities. On the other hand, an Asset sale is a transaction where the buyer purchases individual assets and liabilities from the seller entity. The seller, however, retains possession of the legal entity. 
Often, the buyer would prefer an asset sale since the buyer gets step-up tax basis in the assets purchased resulting in future tax savings. The seller, however, may prefer a stock sale since sales proceeds are taxed at a lower capital gains rate and avoids corporate level tax. The decision to structure the deal as a stock sale or an asset sale is usually a joint decision of buyer and seller and is based on various factors including company’s structure. 

b. Whether to make an election regarding Section 338(h) (10)?
A section 338(h)(10) election of the Internal Revenue Code (‘IRC’) is a tax election for a qualified stock purchase (‘QSP’), which recharacterizes a stock purchase as an asset purchase for tax purposes. It remains stock purchase, however, for all other legal purposes. If the election is made, a buyer may enjoy incremental tax benefits (not available otherwise in a stock purchase) by obtaining a step-up basis on the assets owned by the seller. 

6. Foreign income reporting: -

a. Do U.S. Shareholders need to report net income of foreign entity on an annual basis or an option of deferral of income to future years available?
A US Shareholder of a Controlled Foreign Corporation (‘CFC’) may be subject to Global Intangible Low-Taxed Income (‘GILTI’) tax. It is a minimum tax imposed by Tax Cuts and Jobs Act (‘TCJA’) on the profits of CFCs. GILTI income is a deemed amount of income derived from CFCs.  
Certain U.S. shareholders, however, may be eligible to elect high-tax exception election and may be able to completely exclude the GILTI income from federal taxable income. 
As a compliance requirement, U.S. shareholders in foreign corporation or CFCs are required to file informational return form 5471 along with their annual tax return. 

b. Whether Foreign Tax Credits available for the foreign income which is being reported?
Foreign tax credit (‘FTC’) is a tax benefit available to offset income tax paid to foreign countries on income derived from foreign sources (i.e., income earned abroad or from foreign investments). FTC can be used to reduce federal tax liability and excess credit (if FTC exceeds U.S. tax liability) can be carried forward. Form 1116 is used to calculate and claim the credit.

c. Is it worthwhile to make an election of Section 962 by individual Shareholders?
Section 962 election of the IRC allows the U.S. individual shareholders to be taxed as a C Corporation on certain income earned by its foreign subsidiary. This allows an individual to tax his gross income under corporate rates instead of high tax rates for individuals. In addition to above, taxpayers who make a section 962 election may also deduct 50% of the amount of GILTI inclusion. While section 962 election may greatly reduce an individual’s tax liability, it is in reality a deferral of tax until a later actual repatriation of section 962 earnings and profits is made.

7. Availability of full or partial exclusion of Capital Gain income under Section 1202 Stocks (i.e., QSBS Stocks)?

Section 1202 of the IRC allows a non-corporate taxpayer to potentially exclude up to 100% of the amount of eligible gain realized from the sale or exchange of a Qualified Small Business Stock (‘QSBS’) held for more than five years. A QSB stock is a stock of C-Corp acquired at original issuance and gain that is eligible for exclusion is greater of $10 million or 10 times the aggregate adjusted basis of QSB stock issued by such corporation and disposed off by the taxpayer during the taxable year.

8. Availability of Rollover of Capital Gains under Section 1045.

If the QSB stock, discussed above, was held for six months or more but not more than five years, the taxpayer can make a section 1045 election to rollover gain from the sale of such stock. However, certain conditions as provided under are to be met to avail the benefit of section 1045:

-Non-corporate taxpayer must sell QSB stock.
-The QSB stock must be held for at least six months before the sale.
-Replacement QSB stock must be purchased within 60 days of the sale.
-Taxpayer must make a timely election on or before due date to file tax return.    

9. Exception of types of income from reporting under NIIT Tax (Net Investment Income Tax)

NIIT tax does not apply to the following sources of income: wages, social security benefits, unemployment compensation, life insurance proceeds, alimony, income from a non-passive business, tax-exempt interest, tax-exempt capital gains, deferred compensation from a tax-exempt organization and retirement or pension plan payments. 

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