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Real Estate Holding Structures for Foreign Investors: Income and Estate Tax Implications of U.S. and Foreign Entities

Direct Investments, Partnerships, Corporations, Trusts

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, February 22, 2024

Recorded event now available

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This webinar will point out the importance of selecting an appropriate holding structure for U.S. real estate owned by foreign taxpayers. Our panel of veteran international tax authorities will weigh the benefits and caveats of choosing a foreign or U.S. entity, including partnerships, corporations, and trusts, as well as analyze the income and estate tax implications of these alternatives.

Description

More and more foreigners are investing in U.S. real estate. Like all taxpayers, avoiding and minimizing taxes paid is a key concern. The choice of holding structure or whether to hold the investment directly impacts the U.S. income and estate taxes paid. Investors may choose a U.S. or foreign, corporation, partnership, or trust to hold U.S. property.

Holding the property directly is the simplest choice; however, the tax consequences of a sale and death must be considered for any holding structure. Although the U.S. estate tax exemption is at an all-time high of $13,610,000 for individuals in 2024, and twice this amount if married, the foreign exemption remains a mere $60,000. Transferring the property before death or treaty benefits could help lessen or eliminate the tax burden of property held personally.

Holding property in a foreign corporation can avoid estate tax consequences; however, these corporations could be subject to branch profits tax, FDAP tax, and would be ill-advised if, as part of an estate plan, shares held in the corporation pass to U.S. beneficiaries. In addition to direct investments and foreign corporations, trusts, domestic corporations, and partnerships could be valid entity choices for foreign investors. Understanding the income tax and the estate tax ramifications of each structure is vital for tax advisers working with international taxpayers.

Listen as our panel of experienced international tax attorneys addresses the tax effects of entity choice on foreign investors in U.S. real estate.

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Outline

  1. Real estate structures for foreign investors: introduction
  2. Estate tax
  3. Corporation
  4. Foreign corporation
  5. Partnership
  6. Trust
  7. Direct investment
  8. Examples

Benefits

The panel will cover these and other critical issues:

  • U.S. income tax consequences of investing in U.S. real estate through a foreign corporation
  • Estate tax implications of personal investments in U.S. real estate
  • Whether a blocker corporation can negate estate tax
  • Utilizing irrevocable trusts to hold U.S. real estate
  • Differences in the tax treatment of real estate held by U.S. and foreign corporations

Faculty

Diosdi, Anthony
Anthony V. Diosdi
Partner
Diosdi Ching & Liu

Mr. Diosdi is an experienced trial lawyer who regularly defends individuals and corporations in matters involving tax...  |  Read More

Liu, Kerrin
Kerrin N.T. Liu
Partner
Diosdi Ching & Liu

Ms. Liu focuses on civil tax litigation, representation before Internal Revenue Service Criminal Investigations,...  |  Read More

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