Under U.S. law, a trust is a foreign trust unless both of the following conditions are satisfied:
(1) a court within the U.S. exercises primary supervision over the administration of the trust; and
(2) one or more U.S. persons have the authority to control all substantial decisions of the trust.
General Tax Reporting Rules
In general, the reporting rules apply to a U.S. person who:
- Creates a foreign trust
- Transfers any money or property to a foreign trust
- Receives a distribution from a foreign trust
- Is treated as the U.S. owner of a foreign trust.
- Tax consequences can apply to the U.S. owners and U.S. beneficiaries of foreign trust, and to the foreign trust itself.
This information is not intended to provide a recommendation on how to structure an interest in U.S. real property. The final decision must be based on what works best given the specific facts. Any decision must also take into consideration what is important to the investor(s), taking into account their different objectives, risk tolerances and sensitivities with respect to the various issues involving U.S. income tax, estate tax, confidentiality and domicile taxation. Additional treaty benefits may apply depending upon the domicile of the client. No purchase or investment structure should be implemented based solely on information provided in this article and, in addition, home country tax advice should also be obtained before selection of ownership structure.