Real Estate Holding Structures for Foreign Investors: Income and Estate Tax Implications of U.S. and Foreign Entities

More and more foreigners are investing in U.S. real estate. Like all taxpayers, avoiding and minimizing taxes paid is a key concern. The choice of holding structure or whether to hold the investment directly impacts the U.S. income and estate taxes paid. Investors may choose a U.S. or foreign, corporation, partnership, or trust to hold U.S. property.

Holding the property directly is the simplest choice; however, the tax consequences of a sale and death must be considered for any holding structure. Although the U.S. estate tax exemption is at an all-time high of $13,610,000 for individuals in 2024, and twice this amount if married, the foreign exemption remains a mere $60,000. Transferring the property before death or treaty benefits could help lessen or eliminate the tax burden of property held personally.

Holding property in a foreign corporation can avoid estate tax consequences; however, these corporations could be subject to branch profits tax, FDAP tax, and would be ill-advised if, as part of an estate plan, shares held in the corporation pass to U.S. beneficiaries. In addition to direct investments and foreign corporations, trusts, domestic corporations, and partnerships could be valid entity choices for foreign investors. Understanding the income tax and the estate tax ramifications of each structure is vital for tax advisers working with international taxpayers.

Listen as our panel of experienced international tax attorneys addresses the tax effects of entity choice on foreign investors in U.S. real estate.

1. Real estate structures for foreign investors: introduction
2. Estate tax
3. Corporation
4. Foreign corporation
5. Partnership
6. Trust
7. Direct investment
8. Examples

The panel will cover these and other critical issues:

• U.S. income tax consequences of investing in U.S. real estate through a foreign corporation
• Estate tax implications of personal investments in U.S. real estate
• Whether a blocker corporation can negate estate tax
• Utilizing irrevocable trusts to hold U.S. real estate
• Differences in the tax treatment of real estate held by U.S. and foreign corporations

Learning Objectives

After completing this course, you will be able to:

• Identify how U.S. estate tax impacts U.S. situs property held by foreign investors
• Determine if a blocker corporation can be used to avoid estate tax
• Decide how the tax treatment of U.S. and foreign corporations holding property differs
• Ascertain how holding real estate in a foreign corporation could help circumvent U.S. estate tax

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of international taxation including residency determination, foreign entity classifications, application of treaty benefits, as well as GILTI, Subpart F, and the related Section 250 deductions.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).