Advanced Tax Planning for Nonresident Aliens: Pre-Immigration Strategies

The tax reform law changed the tax landscape and created new opportunities for nonresident alien taxpayers to establish residence in the U.S. Given some of the advantages for nonresident aliens to invest and become resident aliens in the U.S., tax advisers need to understand the more complex and powerful tax planning tools for foreign taxpayers.

One of the significant issues nonresident aliens face on establishing residency is the treatment of capital gains on the sale of assets held in the U.S. or their country of origin. Generally, nonresident aliens must take as their tax basis an amount equal to the U.S. dollar value of the purchase price of the asset. A nonresident alien does not get a step-up or mark-to-market adjustment on existing assets when he becomes a resident alien. So a critical task for tax advisers to nonresident aliens planning to seek resident alien status is to increase the basis in current assets or accelerate the sale of assets to avoid U.S. income tax.

Additional planning steps may include establishing a “drop-off trust” for high net worth individuals. Structured and funded correctly, these trusts can minimize income taxes. However, failure to fund the trust adequately or follow residency rules can create a transfer tax problem, such as inclusion in the individual’s gross estate. Advisers must plan for change from a resident alien to a nonresident alien in addition to the opposite.

Listen as our experienced panel provides a practical guide to tax planning for non-aliens and using the pre-entry nonresident alien tax planning to cover the exit process if the person determines he will be returning to the country of origin.

1. Pre-immigration planning for nonresident aliens planning on obtaining resident alien status
2. Basis planning
   1. For current assets located outside the U.S.
   2. Marketable securities and assets which can be sold and re-purchased before establishing presence in the U.S.
   3. Transactions and strategies for low-basis assets
3. Drop-off trusts and other strategies for high net worth nonresident aliens
4. Strategy and treatment of investments by nonresident aliens not contemplating immigration to the U.S.

The panel will discuss these and other relevant topics:

• Pre-immigration basis adjustment strategies for nonresident aliens planning to establish residency in the U.S.
• Creating and funding “drop-off trusts”
• Timing rules for establishing resident alien status
• Treatment of U.S. investments by nonresident aliens

Learning Objectives

After completing this course, you will be able to:

• Describe the basis treatment of assets owned by a nonresident alien before, and after, obtaining residency status
• Identify strategies and possible transactions for avoiding U.S. capital gains or income tax on the sale of low basis assets before a nonresident aliens becomes a resident alien
• Discern whether a “drop-off” trust will eliminate transfer taxes and what residency and funding rules to follow
• Determine tax treatment and minimization strategies for nonresident aliens making investments in the U.S. but not planning to obtain residency status

• 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 at mid-level within the organization, supervising other preparers/accountants, in tax planning and preparation of complex tax forms. Specific knowledge and understanding of the IRS rules governing foreign investment in U.S. real estate and other U.S.-based assets; familiarity with relevant taxes including: income, withholding, FIRPTA, transfer taxes, and new foreign tax provisions under TCJA.

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).