How It Can Produce Surprisingly Gratifying Results For Foreign Persons

The simple rule for the source of interest paid by individuals has become an international tax shelter for tax-averse foreign persons. The active ingredient in virtually all international tax haven operations is the deduction of interest from a stream of business income otherwise subject to high taxation. The second ingredient is the deflection of interest, free of further U.S. tax, to some benign low-tax environment.

In order to understand how the source rule for interest can produce surprisingly gratifying results for foreign persons, it is necessary to understand the rule itself. And what is that rule? Interest paid by individuals, partnerships, and trusts takes its source from their place of Read More