What Foreign Investors in U.S. Real Estate need to know
by: Anthony Parent
IRS Form 5472 is now required for Foreign-owned Limited Liability Companies (LLCs), which include LLCs that own US real estate. The penalty for not filing a form 5472 is $10,000. now $25,000 thanks to Tax Reform. Worse, the IRS is now looking to assess these penalties aggressively. But still even worse is that this type of structure will also create an estate tax obligation should the foreign investor pass away. Learn the risks and what to do by watching this video.
The US tax code creates pitfalls not only for U.S.citizens, but for non-U.S. citizens looking to invest in the United States. If you are considering investing in real estate in the U.S. here's the three most important things for you to know.
Create an LLC
Do not put the property in your name, put it under an LLC. This will reduce your personal liability.
File IRS Form 5472
Since you have created an LLC, you now have a Form 5472 filing requirement every year. Failure to file Form 5472 can result in severe penalties, and can keep your entire return open indefinitely. Be sure you put aside a few days to get the form filed...according to www.irs.gov, the time needed to complete and file this form is approximately:
Recordkeeping: 17 hr, 42 min
Learning about the law or the form: 3 hr, 4 min
Preparing and sending the form to the IRS: 3 hr, 30 min
Understand Estate Taxes
Under US tax law, the estates of foreign holders with US assets are required to pay estate taxes on those assets after the death of the owner. This includes stocks, real estate, or valuables. That's a difficult concept; if a person holds any US-based assets, then their estate is taxed on those assets when they die, even if they're living abroad.
If you're looking to set up the best possible tax consequences for your U.S. investments, or if you're concerned about unfiled reporting requirements, contact us. We can help. Call us at 888-727-8796 or email email@example.com.