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Structuring Foreign Investment in U.S. Real Estate: Entity Selection and Transaction Structures

FIRPTA, Determining Individual vs. Entity Ownership Structures, Achieving Optimal Tax Treatment

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Tuesday, January 30, 2024

Recorded event now available

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This CLE/CPE course will provide tax counsel with a thorough and practical guide to structuring alternatives and tax considerations for foreign investors in U.S. real estate. The panel will outline best practices for determining the purchasing entity and review tax planning opportunities in structuring the deal.

Description

The United States remains the most popular destination for foreign real estate capital investment. Tax and investment advisers representing non-U.S. persons investing in U.S. real property must understand the tax consequences arising from competing structures for the ownership vehicle and the mechanics of the purchase transaction itself.

For income and transfer tax purposes, foreign investors must balance various tax issues to determine the appropriate ownership vehicle for U.S. property. Various ownership structures--whether direct ownership by a non-U.S. person or use of a foreign or domestic corporation, trust, or partnership--each have particular income and estate tax consequences for the foreign owner. In addition to entity selection, there are various opportunities and pitfalls in structuring the purchase transaction. Because real estate investment is a highly tax-driven activity, counsel must be well-versed in the tax consequences of various transactions and entity structures, plus the related tax compliance requirements.

Listen as our panel of tax practitioners goes beyond the basics to provide a comprehensive and practical guide to structuring foreign investment in U.S. real estate, from ownership profile through finalizing the real estate deal.

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Outline

  1. Persons subject to U.S. taxation
    1. U.S. citizens and residents
    2. Nonresident aliens
    3. U.S. corporations
    4. Foreign corporations
    5. Domestic U.S. trusts
    6. Foreign trusts
  2. U.S. taxation of foreign persons
    1. U.S. income taxation
    2. U.S. estate tax
    3. U.S. gift tax
  3. Special rules under Foreign Investment in Real Property Tax Act (FIRPTA)
    1. Gain from sale of U.S. real property interests (USRPIs) by foreign investors treated as business income
    2. The definition of USRPIs is very broad
    3. 15% withholding tax applies to gross proceeds from the sale
    4. Exceptions to FIRPTA
    5. Special considerations
  4. Advantages and disadvantages of alternative investment structures
    1. Individual ownership
    2. Ownership by U.S. LLC
    3. Ownership by U.S. corporation
    4. Ownership by foreign corporation
    5. Ownership by U.S. subsidiary of a foreign corporation
    6. Ownership by foreign trust
  5. Tax strategies
    1. 1031 exchange
    2. Portfolio interest
    3. REIT structures
    4. Shared equity mortgage
    5. Exceptions to FIRPTA
    6. International tax treaties

Benefits

The panel will review these and other key issues:

  • What is the definition of "U.S. real property interest" and why is that relevant?
  • What are the various tax consequences of a foreign person owning U.S. real estate in an individual capacity?
  • What is the impact of blocker corporations and other intermediary entities on the tax treatment of foreign investment in U.S. real estate?
  • How to avoid excessive withholding tax upon a sale of U.S. real property interests
  • What is the impact of tax reform on U.S. real estate investments by foreign entities?

Faculty

Byrne, Christopher
Christopher J. Byrne, CPA
Attorney
Christopher J. Byrne

Mr. Byrne has been practicing in the field of international taxation and cross-border estate planning as a Certified...  |  Read More

Levine, Richard
Richard S. LeVine
Special Counsel
Withersworldwide

Mr. LeVine's practice focuses on cross-border estate, gift and income tax planning for owners of privately held...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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