Some Alternative Methods for Foreign Investor to Take Title to U.S. Residential Real Property
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BENEFITS AND BURDENS OF SOME
ALTERNATIVE METHODS FOR A FOREIGN INVESTOR TO TAKE TITLE TO
U.S. RESIDENTIAL REAL PROPERTY
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U.S. Residential Real Property held by FOREIGN HOLDING COMPANY Owning a California SINGLE MEMBER LIMITED LIABILITY COMPANY to be Disregarded for Tax Purposes BENEFITS
- U.S. Gift Tax. Same as if the U.S Residential Real Property was held by Foreign Holding Company (see Item No. 3); namely, future transfers by nonresident aliens of intangible property (namely, shares of stock) are not subject to U.S. gift tax.
- U.S. Estate Tax. Same as if the U.S Residential Real Property was held by Foreign Holding Company (see Item No. 3); namely, shares of stock in foreign corporation are excluded from U.S. estate tax upon death of non-U.S. shareholders.
- General Benefits. Use of a single member limited liability company may make it easier to obtain title insurance or to obtain future financing on and sale of the property.
BURDENS
- Disposition of Assets. Does not provide for an orderly disposition of assets upon death of the non-U.S. shareholder.
- U.S. Income Tax.
(a) Same as if the U.S Residential Real Property was held by Foreign Holding Company (see Item No. 3 dealing with the Federal and California U.S. Income Tax consequences).
(b) Need to pay California minimum franchise tax (currently minimum $800 per year) and file LLC return.
- Company Costs. Need to pay to form and maintain foreign holding company along with the additional costs to form and maintain a California limited liability company.