Hot Topics: Foreign versus Domestic Trusts, US Trusts for ...

Hot Topics: Foreign versus Domestic Trusts, US Trusts for Foreign

Families, Migration of Trusts, FATCA Requirements, Investment in US Real Estate, and FIRPTA

ABA RPTE 2016 Spring Symposia Boston, MA

Presenters

Brian Tsu

Henderson, Caverly, Pum & Charney LLP

San Diego, CA

Phone: 858-755-3000 X130 Email: btsu@

Web:

Mary Akkerman Lindquist and Vennum LLP Sioux Falls, SD

Jeff Billings Godfrey & Kahn Milwaukee, WI

Phone: 605-978-5204 Email: makkerman@ Web:

Phone: 414-287-9615

Email: jbillings@

Web:

PART I ? FOREIGN VERSUS DOMESTIC TRUSTS

Nonresident Aliens (NRAs)

? Not a US resident ? Not a US citizen ? Must fail to meet both the

? Substantial Presence Test; and ? Lawful Permanent Residence/Green Card test

? Discussed in more detail, below

Substantial Presence Test

? The "substantial presence" test

? Physical presence in the US for 31 days in the current year; and

? Physical presence in the US for a weighted average of no less than 183 days in the current year and the two prior years, calculated by including

? All days in the current year ? 1/3 of the days in the prior year ? 1/6 of the days in the year before the prior year

? IRC ?7701(b)(3) ? Subject to certain exemptions for employees of foreign governments,

teachers or trainees with J visas, students with F and J visas, and professional athletes competing in charitable competitions during the actual event (IRC ?7701(b)(5)(A)-(D));

Lawful Permanent Residence Test

? Or the "lawful permanent residence/green card" test

? Considered a resident alien from the date admitted to the US as a lawful permanent resident (i.e., date green card is obtained)

? Continues until green card is revoked or abandoned ? Continues even while living outside the US

? IRC ?7701(b)(6)

NRAs

? Normally taxed only on "US source" income

? Income "effectively connected" to a US trade or business

? Salary or compensation

? US investment income

? Generally taxed at 30% flat rate ? May be reduced by applicable tax treaty

? Non-domiciliaries are only subject to US transfer taxes on US-situs assets

NRAs

? Green card issues

? Could cause a foreign national to be domiciled in the US for estate and gift tax purposes

? Could subject foreign national to US exit taxes under IRC ?877A expatriation rules

? If a "long-term" green card holder (i.e., 8 of the last 15 years)

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