Immigrating to the United States, tax avoidance: In recent years, the U.S. government has spared no effort in tracing overseas accounts, resulting in a record number of people renouncing U.S. citizenship, with some even willing to give up their green cards. In fact, for overseas individuals intent on bringing money into the U.S., even without a U.S. green card or citizenship, as long as they plan legally in advance, investing in the U.S. will not lead to issues of gift or estate taxes.
Mr. Liu, a graduate of the USC Marshall School of Business, currently working at a mainstream accounting firm, plans to return to his place of residence after gaining considerable experience and join the group of individuals who renounce their green cards. He stated that his company offers conditions including obtaining a green card, but the tax issues he is currently handling taught him that overseas individuals wishing to invest in U.S. real estate do not necessarily need a green card or citizenship for protection. Moreover, he does not like the U.S. tax law’s principle of nationality, which requires reporting any income from anywhere in the world, hence he does not intend to reside permanently.
Mr. Liu mentioned that the firm frequently engages with clients from around the world interested in purchasing property in the U.S. From the seniors, he learned that for such clients, as long as a corporation is established to hold the purchased property, even if it is gifted to their children later, since it is considered intangible assets, there will be no gift tax issues. If overseas individuals establish a trust for U.S. real estate, there will be no estate tax issues even if they unfortunately pass away, although the costs of establishing a trust are not insignificant.
Accountant Li Xinzong stated that for non-resident foreigners, any gift in the U.S. is exempt from tax only up to $14,000; they cannot enjoy the $5.34 million exemption on gift and estate tax available to U.S. citizens. Therefore, for any U.S. tangible assets gifted over the $14,000 threshold, such as property, a gift tax of 18% to 40% is typically required. However, if the gift consists of intangible assets, there will be no gift tax issues. As such, if a homebuyer places the property under the name of a corporation or a limited liability company (LLC), the gifted asset becomes company shares, which are considered intangible assets, and thus no gift tax is due.
However, if the value received by the recipient exceeds $100,000, they are still required to file Form 3520 with the IRS; this filing does not imply tax payment.
Accountant Shi Qixiang indicated that placing real estate under a corporation or LLC means that regardless of whether the property incurs losses or profits after deducting expenses such as rental and maintenance fees, a minimum corporate tax of $800 must still be paid annually.
It should be mentioned that non-resident foreigners only have a $60,000 exemption for gift and estate taxes in the U.S.; therefore, regardless of citizenship status, if they intend to invest in the U.S., they should plan in advance. Essentially, if a foreigner gifts U.S. assets to a U.S. citizen during their lifetime, it will involve gift tax. If, after their death, a U.S. citizen inherits the U.S. assets, it will involve estate tax.
However, if a foreigner gifts overseas assets, it will not be subject to U.S. tax law, thus there are no gift tax issues. If the foreigner gifts tangible assets within the U.S., such as property or cash from bank deposits, gift tax will apply. Conversely, if the gift consists of stocks, since they are considered intangible assets, there will be no gift tax issues. However, if a foreigner unfortunately passes away and the stocks are inherited by a U.S. taxpayer, they become tangible assets and estate tax issues arise. If cash is inherited, there are, however, no estate tax issues.
