We can help you cleanly exit from the US system -- we know the tax rules and have been through the process many times.

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Real Estate

Buying the property correctly is the secret to tax success. We know how to set things up correctly from the start.

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Foreign Trusts

Trusts can act as a firewall against the US tax system, but are hard to do right. We create, terminate, and fix trusts.

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For companies that operate across the US border, we can help with the complexity of US tax planning.

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October 13, 2017

How Should I Own My U.S. Real Estate?

How I Think About Real Estate Holding Structures

Foreign investors in U.S. real estate always have the same question:

How should I own the real estate that I am buying in the United States?

This is how I think when I think about that question. If you sit down in my conference room and talk to me, our conversation will follow this outline.

The Primary Risk: Estate Tax

For human investors, the primary risk is estate tax. (Ignore corporate investors and pension plans).

Estate tax is imposed on the value of U.S. assets owned by nonresidents when they die. The tax rate is 40%, and for all practical purposes the real estate asset is fully taxable.... continue reading

October 10, 2017

How to Complete Form 8854, Part I

Expatriates have the rare pleasure of becoming intimate (in a one-time sort of way, usually) with Form 8854. Let’s take a look at Part I of the Form 8854.

  • What information are you asked to provide?
  • By what right does the IRS claim the power to force you to provide this information?
  • How do you answer the questions correctly?
Line 1 – Mailing Address, Telephone Number

The IRS wants to be able to find you after you expatriate. They’re coming to get you, Murdoch.

For this they need your mailing address1 and telephone number.2

Line 2 – Address of Principal Residence

If you don’t live at your mailing address, then you must provide your actual residence address.... continue reading

October 6, 2017

“Algebraic formulae are not lightly to be imputed to legislators”

Edwards v. Slocum, 264 U.S. 61 (1924).  Enough said.... continue reading

October 5, 2017

Foreign Tax Credit on Sale of a PFIC

This is a question that sometimes comes in an email:

I am a US citizen living abroad. I sold a PFIC. I paid foreign tax on the gain. Can I use the foreign tax as a foreign tax credit?

We do not have a definitive answer to this question, because there is very little guidance from the IRS on this matter. This post discusses the positions you can take and our preferred approach.

What are PFICs?

Passive foreign investment company (PFIC) is a specific classification under US tax law. When a US person receives a distribution from a PFIC or sells shares in a PFIC for gain, there are special rules that apply.... continue reading

September 29, 2017

What “Abode” Means for the Foreign Earned Income Exclusion

The foreign earned income exclusion is a marvelous thing for Americans abroad. It eliminates income tax entirely on a fairly large chunk of income.

Americans pay tax to the USA on all of their income, no matter where they are on the planet, and where they earn their income.

The United States is unlike (almost) every other country by having this method of taxation. Other countries have an immensely practical and sane approach to income tax: “If you live here, you pay tax here. If you don’t live here, you don’t pay tax here.”

To soften the blow, the foreign earned income exclusion says Americans living abroad will not pay income tax on up to $102,100 of earned income (salary, self-employment) in 2017.... continue reading

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International Tax Lunch

October: International Tax Lunch

Dual Status Returns: What They Are, How They Work, How to Prepare Them

When someone becomes a U.S. person for tax purposes mid-year or ceases to be a U.S.

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