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A Checklist of the Most Common Tax Mistakes Made by Foreigners in the U.S.

Investing in U.S. Real Property?

Opening Investment Accounts in U.S. Banks?

Setting Up Foreign Trusts?

Engaging in Business Activities in the U.S?

Plan Accordingly and Seek Tax Advice Prior to Making Investment Decisions or Becoming U.S. Tax Residents!

  • Investing in U.S. Real Estate Property in the U.S.?

Foreigners considering U.S. real estate investment should keep in mind legal liability implications. In the case of investing in rental real estate, personal liability can be avoided through setting up U.S. structures, and thus not acquiring real estate in personal name. Depending on the type of property acquired (personal, rental or commercial), the value of property and the number of units, certain U.S. tax implications should be addressed.

  • Investing in U.S. Stock and Bond Market?

One of the most common mistakes is for foreigners to invest in U.S. stock market in personal name, without considering potential U.S. estate tax implications.

  • You and Your Beneficiaries Might Have the Very Unpleasant Consequence of the U.S. Estate Tax…

U.S. estate tax applies to foreigners’ gross estate composed of U.S.-situs assets. U.S. real estate in personal name? U.S. real estate in the name of a U.S. LLC or a U.S. C Corporation? The fair market value of the above, at the time of death, is included in the gross estate and subject to a maximum estate tax rate of 40%! Please contact us for adequate tax advice and appropriate U.S. estate tax planning.

  • Do Not Forget to Take Advantage of the U.S. Double Tax Treaties!

Foreigners’ passive U.S. source income (i.e. dividends, interest, royalties, etc.) is subject to a flat 30% withholding. However, this rate is reduced if a tax treaty is in existence between the foreigner’s country and the U.S. Please contact us for guidance on the proper way to claim treaty benefits.

  • Foreign Trusts with U.S. Beneficiaries?

Foreigners overlook potential U.S. tax implications upon setting up a foreign irrevocable trust with beneficiaries who at one point become U.S. tax residents. High penalties can apply upon distributions from foreign irrevocable trusts to U.S. beneficiaries.

  • Seek Tax Planning Prior to Arriving to the U.S.!

Foreigners forget that the U.S. tax system taxes worldwide income. A U.S. tax resident must report income from worldwide sources of income and comply with various reporting obligations. It is crucial to discuss the worldwide net worth and potential tax solutions with a tax advisor prior to becoming a U.S. tax resident.

  • Are You an Incidental U.S. Citizen?

U.S. citizens who have lived most of their life abroad are subject to U.S. tax on worldwide sources of income. Living outside of the U.S. for most of one’s life does not exempt U.S. citizens from U.S. tax and reporting obligations.

  • Avoid High Penalties for Not Reporting Gifts from Foreign Trusts, Existence of Foreign Corporations, etc.!

U.S. tax residents are subject to various U.S. tax reporting obligations for informational purposes only. For instance, certain U.S. ownership in a foreign corporation leads to a reporting requirement in the U.S. Similarly, foreigners owning a certain percentage in U.S. corporations, are also subject to reporting obligations for informational purposes. Please discuss with us your specific scenario.

Contact us to discuss your scenario, your status in the U.S. and how you might be affected by the U.S tax system by virtue of having investments or business in the U.S.

Remember!

Whether you engage us or not - contrary to accountants or advisors - information you share with us enjoys the legal protections of Attorney-Client privilege!

Olga

ClientServices@ovlawgroup.com

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