Structure for purchasing in the US

Hi guys, looking for a bit of guidance on this one. I'm looking to purchase in the US in the very near future and I'm struggling to make a decision on my structure. I have been in consultation with Terry and even set up a couple of trust funds and an Australian company, this all being done on the basis I invest in Australia. He's been an extraordinary help thus far, but unfortunately for me, foreign investment is not his field of expertise.

My primary concern at the moment is tax minimization. My day job sees me in the upper end of the 37% tax bracket, and with the income from the US investments, this will push me into the top tax bracket. I also want to reinvest all of what I make in more property over there, I don't want to start spending the cash elsewhere.

I have an LLC set up in the states, in my name. This seems to be the conventional approach, but will likely result in me paying the most tax.

I was considering purchasing through my Australian company, paying 21% corporate tax in the US, making up the difference here, presumably a further 9% in Australia, then claiming a franking credit and distributing the funds through my trusts in small amounts to family members who don't receive any income elsewhere, hopefully clawing back some of the tax already paid.

I had considered setting up a foreign company in the states (or even the Cayman Islands), but from my reading, it seems as though if I hold a significant number of shares or am the director of a FOREIGN company, that does foreign business, with foreign money in a foreign bank account and that doesn't actually pay me anything, the ATO can hold me accountable to pay income tax on that companies profits as if they were my own...?

Any hints or tips would be greatly appreciated. I am happy to pay a professional if anyone can recommend somebody that isn't going to treat me like the bad guy from 'Silence Of The Lambs' would. I rang one accountant this morning, ideally looking for somebody to handle both my US and Australian taxes, he told me it was possible but just a basic US tax return starts at $3000 but it would be more in my case because "it's more complex"....

Cheers! Ben.

 

unfortunately once you involve foreign entities and local entities and residency issues. Cfc and fif issues. Thin capitalisation rules to consider. Yes expensive and complex. Had a potential client ask a question re cfc issues. My contact said rules all changed and quoted me 5k for advice. I left it alone.

 

LLC mate - to be honest, unless you are buying several, don't waste your time. You get smashed with state/federal and foreigner tax when you sell.. Most importantly, before you buy, try to establish 'property management' it doesn't exist over there, so you have to organise yourself, which, from a far.. is very very hard....

 

Thanks for the prompt reply, guys.

I am planning on buying several, probably 4 initially with more to come later on. Plan is to buy and hold long term, so tax at time of sale hasn't been a big consideration for me.

Property management will be handled by a forum member from here.

 

Good luck mate - I had a property in Atlanta - purchased for $28k (post GFC) and sold a couple of years later for $70k - ended up pocketing around $25k, but I had bought at 1.08 and sold under 1, so shows what the taxes did.

If you have a property manager that's great. Biggest issue is tenants (as everywhere, but magnified in the US)

 

@jaytee
Did you set up an LLC as a corporation or disregarded entity? I understand corporations don't get as favourable tax treatment for long term capital gains.

 

LLC, given everyone in American is suing someone else - make sure you have an LLC with the appropriate insurances.. Hence, why it's only worth while if you are buying several houses.. To be honest through, not sure why you would be looking at buying in US unless you wanted to move there? too much of a headache. look for a splitter somewhere in Aus