Davis L.S. Chang CPA, Ph.D. 28 N. First Suite 800 San Jose, CA (408)

Transcription

1 Ways to Bring Money into US & Tax Implications Davis L.S. Chang CPA, Ph.D. 28 N. First Suite 800 San Jose, CA (408) i

2 Method A. As Foreign Investor-Non Resident Alien Individual - No Green Card No Permanent Residency - No Substantial Presence in the U.S. - No Tax Treaty Benefit as to Residency

3 Method B. Via the Foreign Corporation A foreign corporation is a corporation that is not organized under the laws of the U.S. or any one of the states of U.S.. A foreign corporation s articles of incorporation will reflect whether it is a foreign corporation or a domestic corporation.

4 Method C. Making a Gift to U.S. Citizen or Resident and Invested in Real Estate

5 For Methods A & B Direct transfer from Foreign bank to U.S. bank, money owners remain the same, creates no gift tax issue.

6 For Method C (Money owner Change) 1. Potential gift issue, tangible or intangible personal issue. 2. Foreign bank account reporting requirement. 3. Foreign Financial Asset reporting requirement.

7 U.S. Taxpayers vs. Foreign Taxpayers

8 U.S. Taxpayers U.S. Citizen, Resident Aliens and Domestic Corporations Real Estate Income Subject to Taxation - Income Taxation Worldwide Income - Estate and Gift Taxation (Individuals only) Worldwide Assets U.S. citizens, resident aliens and domestic corporations are subject to taxation ti on their worldwide income, including real estate income. United States citizens and resident aliens are also subject to a U.S. estate tax and gift tax on transfers of their worldwide assets, including real estate.

9 Foreign Taxpayers Nonresident Aliens and Foreign Corporations Real Estate Income Subject to Taxation Income Taxation United States Real Estate Income - Generally taxed on net income similar to US Taxpayers - Several Important Exceptions

10 Foreign Taxpayers Capital Gains Taxation: Different - Alien Individual Individual Tax Rates - Foreign Corporation Corporation Tax Rates

11 Foreign Taxpayers Estate Taxation - Alien Individual Residency for Estate Tax Purposes - U.S. Real Property, U.S. companies holding U.S. Real Property and the U.S. estate and gift taxes

12 Foreign Taxpayers The Branch Tax (Foreign Corporation Only)

13 - Income Tax - Capital Gains - Residency - The Branch Tax

14 How should the Foreign Investor Hold U.S. Property Alien Individual Ownership, Partnerships, Limited Liability Companies and Foreign and Domestic Corporations - Capital Gain Benefits - Ordinary Income Taxes - Estate Tax Burdens

15 - Individual Ownership and Conduit Entities - Corporate Ownership

16 Tax Planning Benefits and Traps Unique to the Foreign Investor in Real Estate - Tax Treaties - Liquidation of Corporation - Portfolio Interest - Sale of Foreign Corporate Stock

17 The Tax Planning Structures - Specific Tax Planning Entities for Nonresident Alien and Foreign Corporate Real Estate Investors - Objective Minimize U.S. Income Tax, Capital Gains and Estate Tax on Real Estate Profits - The Structure Individual or Partnership or Limited Liability Company Ownership - The Structure Foreign Corporation Ownership

18 - Individual Ownership/Pass Through Entity - Foreign Corporate Ownership - Real Estate Holding Company

19 Tax Planning for the Foreign Real Estate Investor Nonresident Alien Nonresident Alien Nonresident Alien Foreign Corporation Froeign Corporation CA Foreign Corporation Real Estate Real Estate Real Estate Income Tax Rates Capital Gains Tax Rate 15% Personal Income Tax Rate Graduated to 35% Corporation Income Tax Rate Graduated to 35% (15% below $50,000) Corporation Income Tax Rate Graduated to 35% (15% below $50,000) CA 9.3% CA 8.84% CA 8.84% Estate Tax Rate 35% (2012) 0 0 U.S. Individual Income Tax Tax Return Filing Returns for U.S. Real Estate No U.S. Individual Tax No U.S. Individual Tax Requirements Income Return Required Return Required Branch Tax 30% Requires U.S. Estate Tax Return for US U.S. Real lproporty No U.S. Estate Tax Return Required No U.S. Estate Tax Return Required 30% Earnings not Reinvested in the United 0 States 0