ways to bring money into us tax implications · ways to bring money into us & tax implications...

Ways to Bring Money into US Ways to Bring Money into US &&&&

Tax ImplicationsTax Implications

Davis L.S. Chang CPA, Ph.D.28 N. First Suite 800San Jose, CA 95113

(408)279-9988d i @d i [email protected]

Method AMethod AMethod A.Method A.

As As FForeign Investororeign Investor--Non Resident Alien Non Resident Alien As As FForeign Investororeign Investor Non Resident Alien Non Resident Alien IndividualIndividual

- No Green Card – No Permanent Residency- No Substantial Presence in the U.S.- No Tax Treaty Benefit as to Residency

Davis Chang CPA, Ph.D. (408) 279-9988 [email protected]

Method B.Method B.

Via the Foreign CorporationVia the Foreign Corporation

A foreign corporation is a corporation that is i f S 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.


M th d CM th d CMethod C.Method C.

Making a Gift to U.S. Citizen or Making a Gift to U.S. Citizen or Resident and Invested in Real EstateResident and Invested in Real Estate


For Methods A & B For Methods A & B For Methods A & B For Methods A & B

Direct transfer from Foreign bank to U.S. bank, money Direct transfer from Foreign bank to U.S. bank, money owners remain the same creates no gift tax issueowners remain the same creates no gift tax issueowners remain the same, creates no gift tax issue.owners remain the same, creates no gift tax issue.


For Method C (Money owner Change)For Method C (Money owner Change)

1. Potential gift issue, tangible or intangible personal1. Potential gift issue, tangible or intangible personal issue.issue.

2. Foreign bank account reporting requirement.2. Foreign bank account reporting requirement.2. Foreign bank account reporting requirement.2. Foreign bank account reporting requirement.

3. Foreign Financial 3. Foreign Financial Asset reporting requirement.Asset reporting requirement.


U.S. Taxpayers U.S. Taxpayers U.S. Taxpayers U.S. Taxpayers

vs vs vs. vs.

F i TF i TForeign TaxpayersForeign Taxpayers


U.S. TaxpayersU.S. TaxpayersU.S. TaxpayersU.S. Taxpayers

U S Citizen Resident Aliens and Domestic Corporations Real U.S. Citizen, Resident Aliens and Domestic Corporations – Real Estate Income Subject to Taxation

- Income Taxation – Worldwide Income- Income Taxation – Worldwide Income- Estate and Gift Taxation (Individuals only) – Worldwide Assets

U.S. citizens, resident aliens and domestic corporations are bj t t t ti th i ld id i i l di l subject to taxation 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 estateworldwide assets, including real estate.


Foreign TaxpayersForeign Taxpayers

Nonresident Aliens and Foreign Corporations – Real Estate g pIncome Subject to Taxation

Income Taxation – United States Real Estate IncomeIncome Taxation – United States Real Estate Income

- Generally taxed on net income similar to US Taxpayers- Several Important Exceptions



Capital Gains Taxation: Different

- Alien Individual – Individual Tax Rates- Foreign Corporation – Corporation Tax Rates



Estate TaxationEstate Taxation

- Alien Individual Residency for Estate Tax PurposesAlien 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


Foreign TaxpayersForeign TaxpayersForeign TaxpayersForeign Taxpayers

The Branch Tax (Foreign Corporation Only)The Branch Tax (Foreign Corporation Only)


-- Income TaxIncome Tax

-- Capital GainsCapital Gainspp

-- ResidencyResidency-- ResidencyResidency

Th B h TTh B h T-- The Branch TaxThe Branch Tax


How should the Foreign Investor Hold U.S. Property How should the Foreign Investor Hold U.S. Property –– Alien Individual Ownership, Partnerships, Limited Alien Individual Ownership, Partnerships, Limited Liability Companies and Foreign and Domestic Liability Companies and Foreign and Domestic CorporationsCorporations

C i l G i B fi- Capital Gain Benefits- Ordinary Income Taxes

Estate Tax Burdens- Estate Tax Burdens


Individual Ownership andIndividual Ownership and-- Individual Ownership andIndividual Ownership andConduitConduit EntitiesEntities

-- Corporate OwnershipCorporate Ownership


Tax Planning Benefits and Traps Tax Planning Benefits and Traps Unique to the Foreign Investor in Unique to the Foreign Investor in Unique to the Foreign Investor in Unique to the Foreign Investor in Real EstateReal Estate

T T i- Tax Treaties- Liquidation of Corporation- Portfolio InterestPortfolio Interest- Sale of Foreign Corporate Stock


The Tax Planning StructuresThe Tax Planning Structures

- Specific Tax Planning Entities for Nonresident Alien and Foreign Corporate Real Estate Investorsg p

- Objective – Minimize U.S. Income Tax, Capital Gains and Estate Tax on Real Estate ProfitsEstate Tax on Real Estate Profits

- The Structure – Individual or Partnership or Limited Li bilit C O hiLiability Company Ownership

- The Structure – Foreign Corporation Ownership


-- Individual Individual Ownership/Pass Through Ownership/Pass Through EntityEntity

-- Foreign Foreign Corporate Corporate OwnershipOwnership

-- Real Real Estate Holding CompanyEstate Holding Company


Tax Planning for the Foreign Real Estate Investor

Nonresident Alien Nonresident Alien Nonresident Alien

Foreign Corporation Froeign Corporation

CA Foreign Corporationg p

Real Estate Real Estate Real Estate

Capital Gains Tax Rate 15%

Income Tax Rates

Corporation Income Tax Rate Graduated to 35% (15% below $50,000)

Corporation Income Tax Rate Graduated to 35% (15% below $50,000)

Personal Income Tax Rate Graduated to 35%

CA 9.3% CA 8.84% CA 8.84%

Estate Tax Rate 35% (2012) 0 0

Tax Return Filing Requirements

U.S. Individual Income Tax Returns for U.S. Real Estate

IncomeNo U.S. Individual Tax

Return RequiredNo U.S. Individual Tax

Return RequiredRequirements Income Return Required Return Required

Branch Tax 30% Requires U.S. Estate Tax Return

f U S R l P t

No U.S. Estate Tax Return Required

No U.S. Estate Tax Return Required

for U.S. Real Proporty

30% Earnings not Reinvested in the United

States0 0Davis Chang CPA, Ph.D. (408) 279-9988 [email protected]

ways to bring money into us tax implications · ways to bring money into us & tax implications...

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