foreigner partnering with a US citizen

[Shahriar K.]

Hi Everyone
I wanted to run this idea by the BP experts that someone gave me. If me a canadian citizen partner with a family member who is a US citizen to buy rental properties, I am providing all the funding and he will be taking care of paperwork's and looking after the properties. My question is if we buy a property with my cash can we then refinance with a US bank and buy second rental property and keep repeating this step.

[Dion DePaoli]

Slow the roll here a bit.

In the United States, we have tax treaties with other counties which essentially state that US sourced income is taxed at 30%. That is before any taxation of the domicile country of the foreign investor. There is also a Portfolio Tax Exemption which can be structured to the foreign investor. Rules and restrictions apply to the exemption on the direct ownership of assets in order to be considered exempt.

The point here is that a straight forward approach to joining a US based LLC and making investments may very well be the worst tax idea that you could come up with, considering the available family member willing to do business with you.

Clearly the knowledge of PTE is not widely known by domestic investors since they are domestic. I ran a blind pooled mortgage fund which was capitalized from foreign investors and it was structured to accommodate the PTE. You will want to find an attorney in the US or Canada that is familiar with the law and they should help you setup the investment.

None of the questions around bank ability will apply since the borrower to the loan would, when properly setup, be a US entity.

I recently typed some information around the rule, you can read the thread HERE.