Discussion:US Green Card holder with Foreign Real Estate
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| 21 June 2007 | |
| Hi: My client formed an S Corporation for the purposes of investment. These are stocks as well as real estate investments (foreign based). Am I missing something or what are the pitfalls associated with having foreign investment in an S? He almost titled the real estate in the C.....but he has not done that...in fact, I think that the foreign property is titled in his own name (for now) so before he puts it in the S, I was wanting to learn the disadvantages. Any bullets that you can offer? | |
| 21 June 2007 | |
| Real estate should not (if at all possible) be held in a corporation...S or C. Debt basis in the S is a concern for real estate in this type of corporation. Also, built in gains, as well as increase in value in a C corporation for real estate and the double taxation of the distributions of that gain, etc. etc.
Why does the US citizen want to hold r/e that is foreign sourced in his US company? | |
| 21 June 2007 | |
| 1) Could you please elaborate on the debt basis issue in the S Corporation? I know that debt taken out on account of the real estate would not increase his basis in that property. But what else?
2) If the US citizen holds the property in a foreign Corporation, that would be OK. More reporting in the form of a 5471, etc. right? What did you have in mind? | |
| 21 June 2007 | |
| The mortgage on the real estate would provide basis to the S corporation, but would not provide basis to the shareholder for purposes of Sec. 1367. | |
| 22 June 2007 | |
| By the way, the real estate mortgage was financed using S Corp funds but is titled in the SH's name due to the complications of titling the real estate overseas with the US company. Is this a problem? Also, another question. The Mortgage is in the SH's name as well but it is booked as a mortgage payable on the S Corp books. Issues with this? Should I be asking my legal associate these questions? Thank you. | |
| 23 June 2007 | |
| Any answer in this forum will be incomplete without also knowing the foreign income tax, stamp tax, wealth tax, estate tax, probate etc issues. Consequently you will need foreign advice before recommending any action. | |
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