Capital Gains Tax for Foreign Investors in the US Real Estate Market

Introduction

The American real estate market remains a magnet for international investors, with impressive figures. According to the National Association of Realtors (NAR), between April 2022 and March 2023, foreign investors injected $53.3 billion into real estate in the United States, with an average purchase price 29% higher than that of domestic buyers.

However, initial enthusiasm often encounters a significant obstacle: the complexity of the American tax system. As IRS data shows, approximately 32% of foreign investors face some kind of tax penalty in the first few years of investment, mainly because they are unaware of the particularities of the system.

This guide was developed for professionals who advise foreign investors – accountants, lawyers and financial advisors – offering not only concepts, but a practical and in-depth roadmap that will turn you into an expert on capital gains taxation in the American real estate market.

Part 1: Ready to Roll 🚀 – Basic Strategies and Practical Actions

Part 1, “Ready to Roll”, offers practical actions and immediate advice for entrepreneurs who need quick and effective guidance.

1. First Steps in Real Estate Taxation for Foreigners:

a) Tax Status: Beyond the Surface

• Non-Resident Alien (NRA): Technical definition under IRC §7701(b)(1)(B)
  • Individuals who do not pass the substantial presence test (less than 183 days in the last 3 years, calculated using the formula: days of the current year 1/3 of the days of the previous year 1/6 of the days of the second previous year)
  • Practical example: John was in the USA for 120 days in 2023, 90 days in 2022 and 60 days in 2021. Calculation: 120 (90/3) (60/6) = 150 days → Classified as NRA
• Individual vs. Corporate differentiation:
  • Individual: 30% withholding tax on gross earnings
  • Foreign Legal Entities: Possibility of effective taxation (income minus deductible expenses) at rates ranging from 21% to 37%

Example:

On a sale of US$ 1 million with a gain of US$ 300 thousand:

• Individual: Tax of US$ 90,000 (30% of the gain)
• Legal Entity: Possibility of reduction to US$ 63,000 (21% after deductions)

b) Basic Tax Structure: Numbers and Processes

• FIRPTA Withholding:
  • Standard withholding: 15% on the gross amount of the sale (not the gain)
  • Example: Property sold for $1 million will have $150,000 withheld at the time of sale
  • Process for recovering excess withholding through Form 1040-NR
  • Deadline for recovery: up to 18 months after the end of the tax year
• State and Municipal Taxes:
  • Detailed table of tax rates by state (example: Florida 0%, New York 8.82%, California 13.3%)
  • Specific state withholding process (example: California requires 3.33% additional withholding through Form 593-C)

2. Development of Tax Minimization Strategies:

a) Investment Structuring – Detailed Analysis

• Direct Investment as an Individual:
  • Advantages:
    • Administrative simplicity (approximate annual cost: US$ 1,000-2,000)
    • Direct application of international treaties
  • Disadvantages:
    • Exposure to Estate Tax (40% on amounts over US$ 60,000)
    • Unlimited personal liability
  • Practical example: Brazilian investor with property worth US$ 500,000 – In the event of death, heirs may have to pay up to US$ 176,000 in Estate Tax
• LLC or American Corp:
  • LLC Structure:
    • Single-member LLC: Treated as “disregarded entity” for federal tax purposes
    • Multi-member LLC: Taxed as a partnership
  • Corp. structure
    • Taxed as a Corporation
  • Costs involved:
    • Incorporation: US$ 500-1,500
    • Annual maintenance: US$ 2,000-5,000
    • Registered Agent: US$ 100-300/year
  • Example of savings: LLC structured correctly can reduce Estate Tax by up to 100%
• Foreign Corporation:
  • Implementation process:
    • Incorporation in the country of origin
    • Registration in the USA
    • Annual compliance structure
  • Cost-benefit analysis:
    • Initial setup: $5,000-15,000
    • Annual maintenance: US$ 10,000-20,000
    • Potential tax savings: 20-40% in taxes

b) Pre-acquisition planning

1. Obtaining the ITIN:
   • Detailed application process:
     • Form W-7
     • Documentation required (certified passport)
     • Processing time: 7-11 weeks
   • Alternatives during the wait:
     • Structuring via partners with ITIN/SSN

2. Structure Analysis – Decision Matrix:

3. Cost Planning – Breakdown

3. Total initial setup:
   • Legal costs: US$ 2,000-5,000
   • Accounting costs: US$ 1,500-3,000
   • Registrations and licenses: US$ 500-2,000
4. Annual recurring costs:
   • Accounting: US$ 2,400-6,000
   • Legal: US$ 1,000-3,000
   • Tax compliance: US$ 1,500-4,000

4. Creation and Maintenance of Tax Compliance System:

a) Expense Recording System

• Deductible Expenses:
  • Depreciation (MACRS system):
    • Residential property: 27.5 years
    • Commercial property: 39 years
    • Example: US$ 1M property (land US$ 300k, construction US$ 700k)
      • Annual depreciation: US$ 25,454 (700k/27.5)
  • Maintenance Costs:
    • Regular repairs: 100% deductible
    • Improvements: Capitalized and depreciated
    • Specific list of deductible vs. capitalizable items
  • Administrative Expenses:
    • Property management: 5-10% of gross income
    • Insurance: US$ 1,000-3,000/year
    • Property taxes: 1-2% of value/year

b) Ongoing Tax Management

• Monitoring obligations and deadlines:
  • Annual Declarations:
    • Form 1040-NR: Due April 15
    • Form 8825 (for LLCs): Itemization of income and expenses
    • Schedule E: Reporting of rental income
    • Sample Monthly Schedule:
      • Accounting reconciliation
      • January: Collection of documents (1098, 1099)
      • March: Statement preparation
      • April: Filing and payment
  • Withholding tax:
    • Form 8288: Submission within 20 days of sale
    • Form 8288-A: Documents withholding for seller
    • Form 8288-B: Request for reduction of withholding
    • Detailed withholding process:
      • Calculation: 15% of gross amount
      • Deposit: Via EFTPS (Electronic Federal Tax Payment System)
      • Documentation: Physical submission of forms to the IRS
  • Specific State Requirements:
    • California: Form 593-C (additional 3.33%)
    • New York: Form IT-2663 (8.82% maximum rate)
    • Texas and Florida: No state withholding
    • Comparative Table by State:

c) Exit Planning Strategies

• Timing for Tax Minimization:
  • Holding period analysis:
    • Short term (< 1 year): Maximum taxation
    • Long term (> 1 year): Reduced rates
  • Numerical example:
    • Sale after 11 months: 30% on gain
    • Sale after 1 year: Possible reduction to 20%
    • Potential savings: 10% of total gain
• Structuring Installment Sales:
  • Installment Sale (Form 6252):
    • Detailed calculation of deferred gain
    • Tax treatment of interest received
    • Practical example:
      • Sale of US$ 1M
      • Entry: US$ 300k
      • Balance: 5 years, US$ 140k/year
      • Tax savings: Distribution of gain over multiple tax years
• 1031 Exchange – Complete Process:
  • Detailed Timeline:
    • Day 0: Sale of property
    • Day 45: Identification of replacement properties
    • Day 180: Completion of the acquisition
  • Specific requirements:
    • Qualified Intermediary (QI)
    • Like-kind property
    • Equal or greater value
  • Costs involved:
    • QI fees: US$ 1,000-3,000
    • Legal fees: US$ 2,500-5,000
    • Due diligence: US$ 2,000-4,000

4. Practical aspects of FIRPTA

1. Withholding tax system:

• Detailed calculation process:
  • Base value: Total sales price
  • Standard rate: 15%
  • Possible adjustments:
    • Reduction to 10% in specific cases
    • Exemption for homes < US$ 300k

• Complete example:

Selling Price: US$ 1,000,000

Base Retention: US$ 150,000

Possible Adjustments:

– Reduction Certificate: -US$ 50,000

Final Withholding: US$ 100,000

b) Documentation System

• Essential Forms:
  • Form 8288:
    • Deadline: 20 days after sale
    • Required information:
      • Buyer’s and seller’s details
      • Property details
      • Calculation of retention
    • Filling process
  • Form 8288-A:
    • Required copies: A, B and C
    • Specific distribution:
      • Copy A: IRS
      • Copy B: Seller (for refund request)
      • Copy C: Buyer’s file
    • Critical information to include
  • Form 8288-B:
    • Withholding reduction process:
      • Documentation required:
        • Purchase and sale agreement
        • History of costs and improvements
        • Capital gain projection
      • Approval timeline: 45-90 days
      • Strategies for accelerated approval

c) Tax Recovery Process

• Filing of the Adjustment Declaration:
  • Form 1040-NR:
    • Deadline: April 15 of the following year
    • Documentation required:
      • Copy of Form 8288-A
      • Proof of cost and improvements
      • Capital gain statement
    • Detailed calculation of actual gain
• Supporting documentation:
  • Complete list of documents:
    • HUD-1 or Closing Disclosure of the purchase
    • Proof of improvements made
    • Selling expenses (commissions, etc.)
    • Previous related statements
  • Organization and filing:
    • Cataloging system
    • Storage period (minimum 7 years)
    • Digital backup recommended

5. Specific Considerations for Consultants

1. Initial Due Diligence

• Verification Checklist – 25 Essential Points:
  1. Client identification
     • Personal documents
     • Investment history
     • Current tax residence
  2. Asset analysis
     • Source of funds
     • Current investment structure
     • Investment objectives
  3. Risk assessment
     • Client’s risk profile
     • Exposure to Estate Tax
     • Asset protection needs

b) Client Communication System:

• Communication Protocol:
  • Initial meetings:
    • Standardized agenda
    • Necessary documents
    • Expectations and timelines
  • Regular reports:
    • Standardized format
    • Defined frequency
    • Monitoring metrics
• Documentation of recommendations:
  • Memo template:
    • Current situation
    • Alternatives considered
    • Final recommendation
    • Risks and mitigations
  • Approval system:
    • Customer signature
    • Record of decisions
    • Communications archive

Part 2: Deep Dive 🤿 – Technical Delving into Advanced Strategies

Part 2, “Deep Dive”, provides in-depth analysis for those wishing to dive into the technical and complex aspects of international finance.

Detailed Analysis of Applicable Tax Regimes:

a) FIRPTA in Detail:
Legal Basis – IRC Sections 897 and 1445:
Section 897:
Definition of US Real Property Interest (USRPI)
Treatment of gain as “Effectively Connected Income”
Application: All US real property and interests in US Real Property Holding Corporations (USRPHCs)
Section 1445:
Withholding mechanism
Buyer’s responsibility
Penalties for non-compliance:
Fine of 10% of the amount not withheld
Interest on late payment (federal rate 3% per year)
Possible criminal liability in cases of fraud
Relevant case law:
“Grecian Magnesite Mining v. Commissioner” case (2017):
Decision: Sale of interest in partnership is not automatically FIRPTA
Impact: Need for look-through analysis
Practical application: Possibility of structuring via partnerships
Case “Pekar v. Commissioner” (2022):
Decision: Unilateral reduction of retention impossible
Consequence: Need for pre-approved Form 8288-B
Fine imposed: US$ 126,500
Specific Exceptions – Detailed Analysis:
Residential properties under US$ 300,000:
Requirements:
Residential use by the buyer
Sale price up to US$ 300,000
Signed declaration of intention to use
Practical example:
Sale: House for $295,000
Buyer: Family for own use
Result: Total exemption from withholding
Documentation: Declaration of residential use
Property for own use:
Specific criteria:
Minimum physical presence
Documentation of personal use
Limited rental income
Example:
Property: Condominium in Miami
Use: Minimum 6 months/year
Rent: Maximum 180 days/year
Result: Reduction to 10% withholding
Special exemption situations:
Non-recognition provisions:
1031 Qualified exchange
Transfers in corporate reorganizations
Certain corporate distributions
Specific cases:
Foreclosure properties
Transfers to tax-exempt entities
Qualified inheritances and donations
b) Interaction between Taxes – Multilevel Analysis:
Federal vs. state taxation:
Credits system:
Foreign Tax Credits available
State Tax Credits
Limitations and carry-forwards

Practical example:
Capital Gain: $500,000
Federal Tax: $105,000 (21%)
NY Tax: $44,100 (8.82%)
State credit: $44,100 deductible
Effective savings: $9,261

Double Taxation Avoidance Treaties:

Country-by-Country Analysis:

Brazil:
Current situation: No treaty in force
Main features:
FIRPTA withholding
Taxation in the USA
Possibility of offsetting tax actually paid in the US
Planning required
Credit:
15% on capital gains (Legal basis: Law 9.250/95 and IN RFB 1.455/14)
Documentation required:
Proof of payment in the USA
Sworn translation
Consular recognition
Specific considerations:
Brazilian CFC rules
CBE declaration (Central Bank)
Annual DIRPF/DIRPJ
Recommended structuring:
Level 1: Holding company in favorable jurisdiction
Level 2: US LLC or Corporation
Level 3: Property holding entities

United Kingdom:
Legal basis: UK-US Treaty (2001, updated 2017)
Article 13 – Breakdown:
Real estate gains taxed at source
Rate reduction to 15%
Specific exemptions available
Benefits for REITs:
Reduced rate: 15% on dividends
Exemption for portfolio gains
Requirements:
Less than 10% stake
Minimum holding period: 1 year
Potential savings: 15-25%
Credit system:
Certificate of Tax Residence (UK)
UK tax credit available
Calculation method:
– Tax paid in the USA
– Limited to tax due in the UK
– Carry forward available
Specific documentation:
Certificate of Tax Residence (UK)
Form W-8BEN/W-8BEN-E
Annual Tax on Enveloped Dwellings (ATED)
Ideal structuring:
UK Limited Company US LLC
Partnership structure
REIT investment vehicle

Canada:
Detailed real estate protocol:
Basis: Article XIII of the treaty
Updates: 2007 protocol
Automatic application of benefits

Specific benefits:

Type of property
Tax rate
Requirements
Residential
0-15%
Own use
Commercial
15%
Standard
REITs
15%
Qualified

Residential exemptions:
Principal residence exemption:
One property per family
Minimum use: 24 months
Occupancy documentation
Value limit: US$ 1 million
Tax sparing mechanism:
Full credit in Canada
Double taxation elimination method
Carry forward: 5 years
Compliance requirements:
T1135 Foreign Income Verification
Canadian tax certification
US tax ID (ITIN/EIN)
Optimized structuring:
Option 1: Canadian ULC US LLC
Option 2: Limited Partnership
Option 3: Trust structure

Portugal:
Legal basis: Portugal-US Treaty (1994)
Main points:
Reduced rate for real estate gains: 15%
Estate Tax exemption for certain assets
Full tax credit in Portugal
Specific requirements:
Portuguese tax residency certificate
Form 8802 to apply for benefits
Annual declaration in both countries
Potential savings: 15-25% in total taxes

Italy:
Italy-US treaty (1999)
Features:
Special protocol for REITs
Reduced withholding for real estate gains
Presumptive credit system
Procedures:
Bilingual documentation required
Consular certification required
90-day claim period
Tax benefits:
a) For Capital Gains:
– Possibility of reduced taxation on the final gain
– Preferential rate for long-term gains
– Application of bilateral credits
b) For Rental Income:
– Possible reduction in taxation
– Preferential treatment for certain structures
– Benefits for REITs

Spain:
Spain-US agreement (2013)
Special provisions:
Protection for investments via SOCIMIs
Preferential rates for rental income
Tax sparing mechanism
Documentation required:
Spanish tax residency certificate
Declaration of beneficial owner
Specific annual reports
Specific advantages:
Reduction of withholding to 10%
Extended tax credit
Protection against double taxation in inheritances

Panama:
Current situation: No treaty in force
Structural alternatives:
Use of holding companies
Triangular structures via treaty countries
Specific tax planning
Recommended strategies:

Option A: Holding company in treaty jurisdiction
Option B: American corporate structure
Option C: Use of offshore trust
Special considerations:
Panama CFC rules
FATCA/CRS compliance
Economic substance requirements

India:
India-US treaty (1989, modified 2016)
Main aspects:
Specific protocol for real estate gains
Complex credit system
Limitation of benefits (LOB)
Compliance requirements:
Indian PAN card
Specific Form W-8BEN-E
Quarterly statements
Recommended structuring:
Holding company in Singapore or Mauritius
Indian LLP for investments
Robust substance documentation

South Korea:
Korea-US treaty (1976, updated)
Main benefits:
Reduction of withholding tax to 12.5%
Protection against double taxation on inheritances
Extended tax credits
Procedures:
Documentation required:
– Korean tax certificate
– Application for benefits (Form 8802)
– Quarterly reports
Potential tax savings:
Direct: 17.5% in withholdings
Indirect: Tax credits in Korea

United Arab Emirates (Dubai):
Status: No comprehensive treaty
Alternative structuring:
Use of intermediate jurisdictions
Dubai free zones
Islamic investment structures
Specific considerations:
Absence of taxes in Dubai
Need for economic substance
Compliance with Sharia Law
Recommendations:
Structure A: DIFC Holding US LLC
Structure B: RAK Company Delaware Corp
Structure C: Offshore US Partnership


Practical Recommendations:
Robust documentation:
Tax residency certificates
Country-specific forms
Beneficial owner declarations
Timing of implementation:
Pre-investment: 60-90 days
Maintenance: Quarterly requirements
Divestment: Planning 6 months in advance

Implementation of Tools and Technologies:

Integrated Tax Management Systems:

Specialized Software:

System | Annual Cost | Functionalities
—————–|————-|————————|
KwikLedgers | $1,200 – 2,400 | Full compliance |

Essential Features:
Depreciation calculation:
Available methods (MACRS, ADS)
Tracking of basis adjustments
Customized reports
Expense tracking system:
Automatic categorization
Bank reconciliation
Allocation by property

b) Investment Analysis Tools:
Fiscal Projection Models:
Inputs required:
Purchase price
Acquisition costs
Valuation projection
Operating expenses
Exit scenarios
Outputs generated:
Post-tax ROI
Internal rate of return
Payback period
Sensitivity analysis

Risk Management and Mitigation – Complete Framework:

a) In-depth Tax Risk Analysis:
IRS Audit Triggers:
High Value Transactions:
Threshold: Above US$ 1 million
Additional documentation required:
Source of funds
Financing structure
Market price analysis
Audit fee: 12.1% of cases
Discrepancies in Reports:
Between Form 8288 and 1040-NR
Between state and federal declarations
Preventive documentation required
Occurrence rate: 23% of cases
Complex Structures:
Multi-layered Holdings
Transactions between related parties
Required Transfer Pricing Documentation
Probability of revision: 31%
b) Mitigation Strategies – Detailed Protocol:
Robust Documentation:
Archiving System:
Level 1: Essential Documents
– Original contracts
– Property records
– Tax documentation

Level 2: Supporting documentation
– Relevant communications
– Market analysis
– Valuation reports

Level 3: Complementary Documentation
– Maintenance records
– Tenant history
– Improvements made
Transfer Pricing Policy:
Methodology accepted by the IRS
Contemporary documentation
Analysis of comparables
Mandatory annual update
c) Contingency Planning:
Procedures in the event of an audit:
Initial Phase (First 30 days):
Notification received
Preliminary assessment
Engagement of experts
Preparation of documentation
Response Phase (30-60 days):
Detailed analysis
Preparation of defense
Preliminary negotiation
Resolution strategy
Resolution phase (60-180 days):
Presentation of defense
Negotiation with authorities
Settlement or litigation
Implementation of adjustments

Advanced Structuring Strategies:

(a) Detailed Hybrid Structures:
Blocker Corporations:
Basic Structure:
Offshore corporation
American LLC subsidiary
Segregated bank account
Tax Advantages:
Elimination of Branch Profits Tax
Reduced exposure to Estate Tax
Flexibility of distributions
b) Partnership Structures:
Advanced Configurations:
Limited Partnership (LP):
General Partner offshore (1%)
Limited Partner offshore (99%)
Benefits:
Operational flexibility
Asset protection
Tax efficiency
Master Limited Partnership:
Trading in the USA
Special tax benefits
Qualification requirements
c) International Succession Planning:
Asset Protection Structures:
Irrevocable Offshore Trust:
Recommended jurisdictions:
Cayman Islands: Maximum protection
Singapore: Tax efficiency
New Zealand: International recognition
Private Trust Company (PTC):
Governance structure:
Family board
Investment committee
Independent protector
Specific benefits:
Family control
Operational flexibility
Multi-generational protection
d) Financing Strategies – Detailed Analysis:
Debt Structures:
Back-to-Back Loans:
Structuring:
Offshore Deposit: Collateral
US Loan: Rate 1-2%
Documentation required:
Independent contracts
Proof of funds
Bank compliance
Potential savings:
Interest deduction: 21-37%
Reduced tax base
Repayment flexibility
Thin Capitalization Rules:
Deductibility limits:
30% of adjusted EBITDA
Carry forward of excess
Specific documentation
Practical example:
Property value: $1,000,000
Maximum financing: $750,000
Deductible interest: $45,000/year
Tax savings: $9,450 (21%)

Case Studies:
a) Case 1: Complex Real Estate Portfolio
Initial Scenario:
Client: Brazilian family
Investment: $5M in 3 properties
Objectives:
Asset protection
Tax efficiency
Succession planning
Solution Implemented:
Level 1: Holding Company (Singapore)
Level 2: US LLC (Delaware)
Level 3: Property LLCs (by state)
Results:
Tax reduction: 37%
Asset protection: 100%
After-tax ROI: 8.2%
b) Case 2: Optimized Exit Strategy
Situation:
Commercial property
Value: $2.5M
Potential Gain: $900k
Strategy Implemented:
1031 Exchange structured
Multiple identification
Strategic parceling
Results:
Total deferral: $189,000
Reinvestment: 2 properties
Incremental ROI: 4.3%

Conclusion

• Practical Recommendations:
  1. Complete initial assessment
  2. Proper structuring
  3. Strict compliance
  4. Continuous monitoring
• Additional Resources

• KwikLedgers monthly webinars
• Documentation templates
• Expert advice

FAQs

1. How do I calculate taxable capital gains?
   • Calculation basis: Sale price – Adjusted basis
   • Adjusted basis includes:
     • Original purchase price
     • Acquisition costs
     • Capitalized improvements
     • Accumulated depreciation (reduces basis)
   • Complete numerical example:

Selling price: $1,000,000

Purchase price: $700,000

Improvements: $100,000

Depreciation: ($150,000)

Adjusted basis: $650,000

Taxable gain: $350,000

• What are the critical deadlines for tax compliance?

• FIRPTA withholding (Form 8288 and 8288-A):
  • Submission: 20 days after sale
  • Payment: Same deadline
  • Late payment penalty: 10% interest
• Annual declaration (Form 1040-NR):
  • Regular deadline: April 15
  • Possible extension: October 15
  • Specific requirements per state

3. How to structure multiple real estate investments in the US?

• Structuring options:

Structure A: Holding individual LLCs

– Advantages: Segregation of risk

– Disadvantages: Higher cost

Structure B: Single LLC with series

– Advantages: Reduced cost

– Disadvantages: Not accepted in all states

• Considerations by volume:
  • 1 property: single LLC
  • 1 property: Holding company

4. What is the difference between FIRPTA and other tax regimes?

• FIRPTA (Foreign Investment in Real Property Tax Act):
  • Application: Real estate only
  • Withholding rate: 15%
  • Base: Gross sale value
• Regular non-resident regime:
  • Application: Any income
  • Rate: 30%
  • Base: Net income

5. How to optimize the tax structure for different types of real estate?

• Residential Real Estate:

Value < $300k: Direct investment

Value $300k-1M: Simple LLC

Value > $1M: Corporate structure

• Commercial Real Estate:
  • Triple net lease: LP structure
  • Multi-tenant: LLC per property
  • Mixed-use: Hybrid structure

6. What are the approximate maintenance costs of different structures?

• Detailed annual breakdown varies by jurisdiction:

LLC Simple:

– Accounting: $1,200 – 2,400

– Renewal fees: $600

Corporate Structure with Holding:

– Accounting: $2,400 – 6,000

– Renewal fees: $1,200 – $5,000

– Compliance: $2,300

7. How does the excess withholding tax recovery process work?

• Step by step:
  1. Documentation required:
     • Original Form 8288-A
     • Proof of cost
     • Earnings statement
  2. Deadlines:
     • Submission: Up to 3 years
     • Processing: 4-6 months
  3. Acceleration process:
     • Fast-track available
     • Additional cost: $2,000
     • Reduced time: 60 days

8. What are the main tax traps to avoid?

• Top 5 common mistakes:
  1. Inadequate structuring:
     • Consequence: Double taxation
     • Potential cost: 20-40% extra
  2. Failure to meet deadlines:
     • Penalties: Up to $25,000
     • Interest: Federal rate 3%
  3. Insufficient documentation:
     • Audit risk: 60%
     • Regularization cost: $5,000-15,000
  4. Disregard for state taxes:
     • Impact: 0-13.3% additional
     • Specific penalties per state
  5. Inadequate succession planning:
     • Estate tax exposure: 40%
     • Restructuring cost: $20,000

9. How do the depreciation rules work for foreigners?

• Detailed MACRS system:

Residential Property:

– Period: 27.5 years

– Method: Straight line

– Basis: Construction value

Commercial Property:

– Period: 39 years

– Method: Straight line

– Improvements: 15 years

• Practical example:
  • Total value: $1,000,000
  • Land: $300,000
  • Construction: $700,000
  • Annual depreciation: $25,454

10. What are the special considerations for different nationalities?

• Analysis by region:
  1. Latin America:
     • Limited treaties
     • Focus on offshore structuring
     • CFC rules considerations
  2. Europe:
     • Treaty network
     • Holding structures
     • Specific tax benefits
  3. Asia:
     • Hybrid structures
     • Exchange control regulations
     • Specific succession planning

Kleyton Tartarotti

Member of the IMA (Institute of Management Accountants) – USA

Member of the AICPA (American Institute of CPAs) – USA

Member of AAII (American Association of Individual Investors) – USA

Member of AAA (American Accounting Association) – USA

Member of the FMA (Financial Management Association) – USA

These associations not only attest to Kleyton’s commitment to professional excellence, but also ensure that his knowledge is always at the forefront of international financial and accounting practices.

With a robust academic background, including a Bachelor’s degree in Accounting and MBAs in International Finance and Accounting, as well as in International Business, Kleyton offers a unique and comprehensive perspective on the global business landscape.

Through the Tartarotti Report, Kleyton invites visionary entrepreneurs and executives to connect, explore opportunities for collaboration and, together, successfully navigate the complex world of international corporate finance.