Who should be listed as the buyer on the sales contract?
Did you know . . . . .

Non-resident aliens are subject to U.S. estate and gift tax rules that are different
from those applied to U.S. citizens and residents.

  • The U.S. real property of a non-resident alien who dies while holding title in his or her name or jointly with someone else is subject to U.S. estate tax.
  • The federal estate tax provides an exemption equivalent of only $60,000 for non-resident aliens as compared to $600,000 for residents and citizens.
  • Marital deduction is available only if the surviving spouse is a U.S. citizen or if the property is transferred to what is known as a qualified domestic trust.
  • If the real estate was held in the individual name of a foreign investor who is a non-resident alien, a probate proceeding may be required in order to convey proper title from the estate.
  • Gifts of U.S. real property by non-resident aliens are subject to U.S. gift tax.

Is the rental income taxable from the foreign investor?

  • Both rental income from real property located in the United States  and the gain from its sale will always be U.S. source income subject to tax in the United States regardless of the foreign investors status and regardless of whether the United States has an income treaty with the foreign investors home country.
  • The method by which rental income is taxed depends on whether or not the foreign investor is considered to be "engaged in a U.S. trade or business".
  • If it consists of merely passive activity such as a net lease which provides for the  lessee  to pay rent, as well as all the other operating expenses, the rental income is subject to a flat 30 percent withholding tax (unless reduced by an applicable income tax treaty) applied to the gross income rather than the "net rent" received.
  • If, on the other hand, the foreign investor is engaged in a U.S. trade or business such as the development, management, or operation of a major shopping center, the rental income will be subject to withholding and will be taxed at ordinary progressive rates.

What should you look for in a Real Estate professional?

  • One who understands all of the substantive issues of law and tax.
  • One who explains all of the aspects of investing in U.S. real estate.
  • One who has a proven track record with other foreign investors.  
  • One who has valuable contacts who routinely deal with foreign investors in such areas as  Mortgage Lending, Title Companies, Closing Agents, Rental Management Companies, and Attorneys who are familiar with International Real Estate Law.

  • One who offers comprehensive research on the proposed property and market.

  • One who aggressively markets your property, for the greatest exposure possible, in a variety of mediums such as newspaper ads, full color catalogs, toll free property hotlines that offer listeners audio brochures,  and comprehensive web sites.

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