Nonresidents often show up and sign contracts to buy U.S. real estate in their own names. Then, before the sale is complete, they set up a holding structure. They transfer the purchase contract to the holding structure, and the purchase is complete.
As I wrote a few weeks ago, transferring a purchase contract from a nonresident individual to a holding structure is a “disposition” of U.S. real estate. The result?
Of the three tests that an expatriate must meet to be non-covered, the certification test is the most difficult to understand. It is also the only test to which there are no exceptions – fail this test, and you are a covered expatriate.
Today’s topic will be limited to a general discussion of what it means to pass this test.
Expatriation occurs when a US citizen or “long-term resident” terminates his or her citizenship or permanent residence. 1
If the expatriate meets certain thresholds for net worth and the amount of tax they have been paying over the last five years, he or she will be what is known as a covered expatriate.... continue reading
I received an email from Scott, a good friend who, well, does taxes in Mexico.
He had a question about an American couple in Mexico who are setting up a S de RL (Sociedad de Responsabilidad Limitada), which is similar to a U.S. LLC. One of the features of this type of entity is that it must have two owners. H and W. How convenient.
Mexico has community property laws for married couples, and Scott tells me that this S de RL is a community property asset of H and W.
Will this entity (S de RL) be treated as a corporation, partnership, or disregarded entity for U.S.... continue reading
Let us imagine that you are planning to expatriate in 2018, and that you will be a covered expatriate. You have a number of rental properties in the United States. Those rental properties have accumulated a substantial amount of passive activity losses (PALs) during the time that you have owned them. Because you are a covered expatriate, you will need to pretend you sold all those properties at fair market value on the day before your expatriation and report the gains or losses on your tax return as if you really sold the properties.... continue reading
I received an email from a practitioner this morning and figured it’s worth a blog post.
Reader C in Sydney asked me:
Election to be a U.S. taxpayer
Would a MFJ couple (US citizen and NRA Spouse) using Sec 6013(g) Election qualify for Unlimited Spousal transfer from decedent US Citizen? Inquiring minds would like to know 🙂
Nonresidents who are married to U.S. persons (citizens or residents for income tax purposes) can choose to be fully subject to U.S. income tax laws. Ordinarily, a sane person would attempt to avoid this status, if possible.
But sometimes we do the math and it actually saves tax overall to do so. ... continue reading