CASE STUDY 2:
Carlos is a non-resident alien, residing in Brazil. He currently maintains a portfolio brokerage account in New York in the name of a British Virgin Islands (“BVI”) company. He is looking to purchase real estate in new york for his own use and potentially the use of other family members, with the potential to rent out the property.
In this situation, we recommended that the property be purchased in the name of a new york corporation wholly owned by his existing BVI company. He could utilize the funds from the BVI company to capitalize on the purchase by the new york corporation. The BVI company acts as a “foreign blocker” and as such protects against any potential estate tax. The new york corporation as the owner would be required to file annual franchise tax returns as well as federal corporate tax returns. In the event of a sale, the corporation could be dissolved, avoiding double income taxation on any net gains. Furthermore, the new york corporation is considered us person for FIRPTA purposes and thus would also avoid FIRPTA withholding at the sale.
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