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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Tax Preparer

Date & Time
  • event Date

    Tuesday, January 19, 2021

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    110 minutes

Credit Information

  • BARBRI is a NASBA CPE sponsor and this 110-minute webinar is accredited for 2.0 CPE credits.

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

$197.00
CPE
ALL

This course will cover the tax rules for nonresidents aliens (NRAs) owning rental property in the U.S. Our foreign tax expert will explain making the net election, Form 1040NR and other U.S. foreign reporting requirements, the current IRS initiative targeting these properties, and the limited relief available for missed net elections.

Faculty

Mishkin Santa
Principal, Director of International Tax
The Wolf Group, PC

Mr. Santa focuses his practice on repatriation tax, as well as individual income tax compliance, estate, gift & trust tax compliance, FBAR Assistance, foreign trust tax compliance, exit tax planning, EB-5 investor program, international assignment structuring and planning, offshore voluntary disclosure programs, foreign corporation (Subpart F, Transfer Pricing, E&P Studies), and asset protection planning. His client base includes U.S. citizens living overseas, U.S. nonresidents, EB-5 investors, U.S. domestic individuals and families, international businesses, international based families with investments in multiple jurisdictions and tax residency in multiple jurisdictions, U.S. citizens or residents who are beneficiaries of foreign trusts and who will receive gifts or inheritances from non-US persons,  and trustees of trusts with U.S. grantors or U.S. beneficiaries.


 

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Description

Passive ownership of rental property by NRAs usually does not rise to a sufficient level of activity to qualify as operating a trade or business in the U.S. For NRAs, not filing a return reflecting these, often passive losses, can have devastating tax results.

Gross rental income earned by a nonresident is taxed at a flat rate of 30 percent. The use of graduated rates available in the tax tables and deductions related to rental expenses are not allowed for NRAs. However, making a "net election" under Section 871(d) allows foreign investors to treat the property as effectively connected with a U.S. trade or business. This election almost always saves a foreign investor substantial tax dollars. It allows using the same tax brackets used by U.S. residents and allows the deduction of rental expenses, including depreciation and real estate taxes.

Often NRAs choose to place rental properties in single-member LLCs, which requires additional foreign reporting, namely Form 5472. Noncompliance comes with a hefty $25,000 penalty. Also, the IRS recently announced its latest compliance campaign targeting NRAs, not reporting rental income from U.S. properties. Understanding the tax ramifications of real estate owned by nonresidents is critical for tax professionals working with foreign investors.

Listen as our international tax expert explains the tax considerations and consequences of real estate rental in the U.S. by NRAs.

Outline

  1. Reporting U.S. rental income: Form 1040NR
  2. Net elections and missed net elections
  3. LLCs and additional foreign reporting requirements
  4. Property sales
  5. Current IRS campaign

Benefits

Our international tax expert will explain:

  • How and when to make a net election under IRC Section 871(d)
  • When Form 5472 is required to be filed by nonresidents
  • What relief is available for missed net elections
  • What the IRS expects to find during its audits of foreign owned rental property
  • Passive loss considerations for foreign owned rentals

NASBA Details

Learning Objectives

After completing this course, you will be able to:

  • Determine how to prepare for current IRS initiative targeting NRA owned U.S. rental properties
  • Decide when filing Form 5472 may be required
  • Identify taxpayers who are NRAs
  • Ascertain when it is beneficial to make a net election

  • 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).