Given the worldwide reach of the US income and transfer taxes applicable to US citizens, residents and domiciliaries, the most effective tax planning must be effectuated prior to immigration to the U.S. and there are a number of techniques that can be utilized to do so.
For example, when an EB-5 investor moves to the US and becomes a resident, any sale of a capital asset thereafter is taxed based on the difference between the sale price and its cost basis. A capital asset owned by an EB-5 investor prior to a move to the U.S. may have a low cost basis which would result in a large capital gain tax upon sale, if the underlying asset successfully appreciates. Proper planning should be utilized prior to a move to the U.S. to reduce future capital gain taxes.
An NRA who anticipates a substantial future influx of income or has substantial built-up earnings & profits from his corporations could accelerate the recognition of such income and distribution, thereby avoiding the imposition of income tax in the US. Similarly, unrealized losses may also be deferred until after the NRA moves and becomes subject to U.S. taxation.
The careful review of an NRA’s corporate ownership prior to immigration could also help an NRA minimize their exposures to many intricate parts of the tax law dealing with US persons’ ownership of foreign corporations. Generally, these issues are better resolved prior to an NRA becoming a US tax resident.
From the estate and gift tax perspective, EB-5 investors may conduct pre-immigration estate planning to reduce future US estate tax exposures. There are a number of techniques that may be utilized to properly shelter assets and reduce tax liabilities, such as gifting non-US situs tangible personal property and gifting shares of stock in US corporations. In addition to making gifts, there are also significant transfer tax advantages for NRAs in making foreign property gifts to foreign trusts prior to immigrating to the US, as long as such trusts are structured properly.