In a new decision, the Tax Court upheld heavy penalties imposed by the IRS on a U.S. expat taxpayer who failed to report his ownership in two foreign corporations. The decision certainly serves as a cautionary tale for expats – the IRS is serious about foreign reporting and the U.S. court system has its back.
When purchasing a real property overseas, there are situations when it may prove advantageous or even necessary to do so through an offshore corporation, rather than owning the property individually. It is crucial to understand that this can also have significant US tax consequences for US persons. Fortunately, “checking the box” on Form 8832 provides a possible solution to this problem, taking advantage of the protections provided by the corporate entity while avoiding many of its tax repercussions.
Benefits of Corporate Ownership
Investment in real property through a vehicle offering limited liability, as opposed to direct ownership, offers numerous protections. Should any legal claims arise, such as in the case of tenant injury when renting out property owned through a corporation, the liability of Read More
There were proposed and final regulations issued for Form 5472 on June 6th, 2014. The long arm of the United States Government is not only reaching out to U.S. corporations doing business in other countries, it is also expecting compliance by foreign corporations that do business in the U.S or have a stake in US Corporations.
Form 5472 is an information return used by a 25% foreign-owned U.S. corporation or a foreign corporation engaged in a U.S. trade or business to provide information when reportable transactions occur during the tax year of a reporting corporation with a foreign or domestic related party under sections 6038A and 6038C.
What Is a Reporting Corporation? A reporting corporation is either: Read More
In my tax practice in the Middle East, it is very common for family members to have legal title to assets they do not own. For example, it is common for a parent to have the eldest son hold legal title to property in which the child has no beneficial interest whatsoever; sometimes the nominee relationship is entered into in an attempt to circumvent forced inheritance shares of Sharia law, or to avoid probate.
What is a Nominee and How Does a Nominee Relationship work?
A nominee is a person or entity named by another party (called a “nominator”) to hold title to a certain property. The nominee is the registered owner of the property but he is not the beneficial owner. All rights and incidents of true ownership belong to the beneficial owner and essentially, the nominee stands in a position of trust to follow the orders of the Read More