Foreign Investment in U.S. Real Estate: Portfolio Interest Exemption and IRC 163(j) Interest Limitations
Blocker Corporations, REITS, BEAT, FIRPTA Withholding Rules and Exemptions
Recording of a 110-minute CPE webinar with Q&A
This webinar will provide tax advisers with a practical guide to the opportunities and challenges for foreign investors in U.S. real estate. The panel will discuss the impact of the 2017 tax reform law on entity selection, FIRPTA withholding requirements, and blocker corporations. The webinar will also focus on the planning opportunities available to non-U.S. investors through the portfolio interest exemption to mitigate the new Section 163(j) interest limitations.
Outline
- Overview of tax rules that apply to foreign investors in U.S. real estate
- Income
- FIRPTA and withholding requirements
- Estate and gift tax
- Income tax residency and estate/gift tax residency
- Treaty application
- New Section 163(j) business interest deduction limitation rules
- Portfolio interest exemption benefits
- Deductions not subject to 163(j) limitations
- Foreign lender not subject to tax on interest income paid by U.S. blocker corporation
- Exemption from 30% mandatory U.S. federal withholding
- Interaction with tax treaty provisions
- Documentation and structuring requirements to claim the portfolio interest exemption
- Registered obligation rules
- W-8BEN required from the lender
- Non-bank foreign (non-U.S.) lender
- Exceptions to portfolio interest exemption
- Typical structure of blocker corporation for foreign persons or corporations to hold U.S. real property assets
- Planning opportunities through entity selection or change
Benefits
The panel will review these and other key issues:
- Tax implications of purchasing U.S. real estate individually or through a U.S. LLC vs. a foreign corporation, a U.S. corporation, or a trust
- How the 163(j) business interest deduction limitation rules enhance the tax value of the portfolio interest exemption
- Tax reporting obligations for non-U.S. owners of U.S. real estate
- Special FIRPTA rules that apply to REITs
Faculty

Richard S. Lehman
Attorney
United States Taxation
Mr. Lehman's tax law practice focuses on an array of commercial transactions involving an international and... | Read More
Mr. Lehman's tax law practice focuses on an array of commercial transactions involving an international and domestic client base. He previously served as Senior Attorney, Interpretative Division, Chief Counsel’s Office, Internal Revenue Service, Washington D.C. He authored articles on taxation and was editor and contributing author of A Guide to Florida International Business and Investment Opportunities.
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Michael D. Melrose
Attorney
Baker & McKenzie
Mr. Melrose is a member of the Firm's tax and wealth management groups. He frequently advises high net worth US and... | Read More
Mr. Melrose is a member of the Firm's tax and wealth management groups. He frequently advises high net worth US and foreign individuals, family offices, trust companies as well as US and foreign-based multinational corporations in relation to a variety of US and cross-border business related issues and international tax, trust, and succession planning issues.
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Paul O'Quinn
Attorney
Baker & McKenzie
Mr. O'Quinn’s practice is focused on tax planning and tax controversy. He advises clients on various aspects... | Read More
Mr. O'Quinn’s practice is focused on tax planning and tax controversy. He advises clients on various aspects of tax law, including international tax planning for individuals and multinational corporations, and tax dispute resolution. Prior to joining the firm, Mr. O'Quinn clerked for the Honorable David Gustafson at the United States Tax Court.
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