The main pitfall of owning a property located in the US is
the potential exposure to the onerous US federal tax system. Using
a structure can help in this regard. This brief article suggests
different structures that may assist the non-US tax resident in
protecting their US real property from the Federal Estate Tax, and
how to minimize exposure to the Federal Capital Gains Tax on the
disposition of US real estate. We do not cover in this article how
to minimize exposure to US Income Tax on US rental income, which is
also of great importance to a non-US tax resident.
What are the applicable US taxes?
The key US federal taxes to be aware of are:
Federal Estate Tax ("FET"):
up to 40% above the exemption of US$60,000 for non-US persons.
Non-US persons are liable to FET on assets situate in the US, such
as US real estate or US shares (e.g., Apple, Google shares). In
recent months, there has been discussion of repealing the FET by
the US Congress.
