Tax Law
The tax law is a highly complicated area of law. It is far from being static. In fact, it continues to grow, change and evolve; and it keeps on getting more complex whenever new tax legislation is passed. Sources of tax law in the United States include the federal and state constitutions, the Internal Revenue Code, other tax legislations, administrative pronouncements such as revenue rulings and revenue procedures by the U.S. Treasury Department and the Internal Revenue Service, and court or judicial decisions interpreting tax laws.
The most common federal taxes are the income tax and the transfer taxes.
Income Tax
Under the Internal Revenue Code, an income tax is imposed on all income earned by U.S. individuals as well as corporations, trusts and estates. Income that a partnership or certain limited liability companies earn is generally taxed to the participants rather than at the entity level. Foreigners may also be subject to U.S. income taxation if their incomes are deemed to be from U.S. sources. The rates applicable to the income of an individual are progressive, that is, you will be taxed at a lower rate on the first dollar of your taxable income than your last dollar.
Transfer Taxes
Transfer taxes, such as estate and gift taxes, are levied upon the transfer of your property or estate to another person without paying any consideration. In the case of lifetime gifts and transfers that take effect at death, a uniform rate structure will be applied. Although the tax is charged on you, as the transferor, subsequent income earned from the transferred property or estate is taxed to the transferee or beneficiary. Like income tax, the rates of transfer taxes for the U.S. citizen and resident aliens are also progressive.
Because of the continued complexity of U.S. tax laws, you must seek advice from a tax lawyer as regards to income tax filing or any dealings so as to maximize favorable tax consequences.