December 12, 2008 - Phil Hodgen

Blogworthy topics from my real estate course today

Today I gave an all-day course on U.S. taxation of nonresident investors in U.S. real estate. (Link is to the next time I’m giving this course — in San Jose on January 6, 2009). The course was sponsored by the Cal CPA Education Foundation. It was at the Sheraton in Anaheim, hard by Disneyland. No, I didn’t go to Disneyland afterwards.

As we went through the day I took notes on a number of topics and questions that seemed blogworthy. I’ll post on them as time goes by. Here they are:

  • Estate tax situs rules for airplanes and boats. (Question: nonresident flies his airplane to the United States and then dies. The nonresident has tangible personal property located in the United States–the airplane that landed in the U.S. Will there be estate tax?)
  • Gift tax rules applicable to the gift of LLC membership interests by nonresidents. (Dad owns U.S. real estate in a single member LLC. Dad is a nonresident of the United States. Dad gives the membership interests in the LLC to his U.S.-resident daughter. Gift tax or not?)
  • Cash gifts by nonresidents.? (The eternal problem of “I’m a nonresident and I have a U.S. bank account. What are the gift tax ramifications if I (1) withdraw cash and hand over a stack of $100 bills as a gift to someone (2) write a check on my U.S. bank account as a gift to someone (3) other variations on that theme.)
  • The “net election”. I promised to post the magic language you attach to the income tax return to make this election. (This is what you do so rental income is taxed after you deduct related business expenses–net income–rather than having tax on the gross rental income received, without deduction for business expenses). UPDATE: Posted on
  • Mortgage situations involving foreign lenders. When interest is paid to the foreign lender there will be 30% withholding tax imposed. What can you do here to reduce/eliminate withholding?
  • Basis step-up on assets held in a foreign grantor trust with a nonresident grantor. How does that work?

Thanks to the 33 people in the room today. If I missed a question, please let me know. You can comment below or shoot me an email.? I’ll get to work on these and start writing. Be patient, though. I have a life. 🙂

I have cross-posted this to

Speeches, Publications, and Events US Real Estate Investments