Defer U.S. Tax

by | Oct 11, 2002 | Archives

I have heard from many readers that they are using foreign trusts to defer U.S. tax and this important tax tip comes from attorney and eclub advisor Carlos Kepke.

“For those Americans fortunate enough to be beneficiaries of a foreign trust (“FT”), there is a potential pitfall if the FT owns (as istypical) a foreign corporation (“FC”). The pitfall lies in the fact that the Internal Revenue Service (“IRS”) might one day attempt to assert that the American beneficiaries of the FT (rather than the(foreign) grantor of the FT or the FT itself) are the shareholders of the FC.

If the IRS were to prevail in this assertion then the FC would be classified as a Controlled Foreign Corporation ('CFC”) and the American beneficiaries would have to pay tax on the CFC's investment and passive income.

The way to avoid this potential problem is to make sure that the FC is a Limited Liability Company (“LLC”) (rather than an ordinary corporation or an International Business Corporation (“IBC”)), and that the LLC has certain specific features built into its incorporation documents to require the IRS to look to the (foreign) grantor of the FT or the FT itself as the shareholder of the FC. To my knowledge Nevis has the best LLC law for this purpose.

Space does not allow for a discussion of the specific features that should be built into the incorporation documents of the LLC, nor does it allow for a more complete explanation of why such features will remedy the problem. Also space does not permit for a more elaborate explanation of why the IRS might make the abovementioned assertion.”

For those who have questions on this Carlos can be reached at (Carlos E.Kepke).

Until next message may all your investing be good!


P.S. Tax attorney Joe Cox was here at the farm last weekend speaking with our International Business Made EZ delegates. He will also join us at our upcoming course in Orlando. Joe is the tax attorney who shredded the IRS when they claimed (after two years of intensive digging) I owed them an extra $400,000 + in tax. I received a $79,000 refund after Joe was finished with them instead! He will review seven structures for reducing tax including one of the niftiest brand new concepts called personal income replacement insurance that can wipe out tens of thousands of dollars of tax liabilities (even if you are a salaried employee)and even if you discover them at the last minute. Why not join Merri, me and Joe plus our other business and investment speakers in Orlando? See