We can help you cleanly exit from the US system -- we know the tax rules and have been through the process many times.Learn More
Buying the property correctly is the secret to tax success. We know how to set things up correctly from the start.Learn More
Trusts can act as a firewall against the US tax system, but are hard to do right. We create, terminate, and fix trusts.Learn More
For companies that operate across the US border, we can help with the complexity of US tax planning.Learn More
I received a question from a reader, and it is a good way to explain the saving clause of an income tax treaty.
The question, from reader E.C., is simple:
Are U.S. Social Security benefit payments to a U.S. citizen who is a resident of Italy taxable in Italy or in the U.S.?
Income tax treaties are agreements between two countries. Treaties attempt to make live easier for residents of one country who have income from the other country.
So, for instance, a U.S. citizen living in Italy is:
Let’s talk about how a covered expatriate’s Roth IRA is taxed at the time of expatriation.Summary
A Roth IRA is treated as if there is a make-believe distribution to a covered expatriate on the day before renouncing U.S. citizenship or abandoning green card status.
The income tax cost of the make-believe distribution is zero if:
If those two conditions are not satisfied, part of the fictional distribution will be taxable.... continue reading
This is a question from an email:
I have a foreign mutual fund that invests in stocks of US corporations. Is the mutual fund a PFIC?
In this post, I will discuss why this mutual fund is a PFIC. Here is the tl;dr version: There is no exception in the PFIC rules for invests in the US.
Passive foreign investment company (PFIC) is a classification under US tax law. When a US person receives a distribution from a PFIC or sells shares in a PFIC for a gain, special rules apply.... continue reading
This scenario is loosely based on some analysis we did for a client:
I bought 10% of units in a private unit trust in a foreign country back in 1990. All other unit holders are nonresident aliens. We could transfer the units by giving notice to the trust without seeking permission. All unit holders are personally liable for the debts of the trust in proportion to their unit holding. It invested in stocks and bonds. It and its nonresident alien shareholders never filed anything in the US tax system.
In this post, I will discuss why this unit trust was a PFIC when it was bought and why it underwent a deemed liquidation in 1997.... continue reading
Congress hates foreign trusts.1 We know this because:
I like to convert foreign trusts to domestic trusts in order to eliminate these problems. Beneficiaries of domestic trusts do not have to file the offending forms (eliminating the penalty risk), and do not face the horrific tax cost imposed on distributions.... continue reading