I have land in a foreign country which I'm planning to lease it to the solar developer. It's going to be a 20-year lease which I'll be receiving the payment in advance. This foreign country allows the lessor to pay the income tax over 20 years. However, it seems like in the US, it is accrual-based meaning I have to pay the income tax once I receive the payment. My question is, is it possible to use future unpaid foreign tax credit? If not it's going to be double taxation on my income so I'm trying to see if there are any other options out there. It also seems like it is common to do long term lease for solars here in the US as well. I'm curious how they structure the deal to lower the tax burden.
Also, there might be cases where we might have to cancel the contract and return the money. Then, is there a way to receive back the paid tax?
I have land in a foreign country which I'm planning to lease it to the solar developer. It's going to be a 20-year lease which I'll be receiving the payment in advance. This foreign country allows the lessor to pay the income tax over 20 years. However, it seems like in the US, it is accrual-based meaning I have to pay the income tax once I receive the payment. My question is, is it possible to use future unpaid foreign tax credit? If not it's going to be double taxation on my income so I'm trying to see if there are any other options out there. It also seems like it is common to do long term lease for solars here in the US as well. I'm curious how they structure the deal to lower the tax burden.
Also, there might be cases where we might have to cancel the contract and return the money. Then, is there a way to receive back the paid tax?
Thanks
Daniel,
What you would want to consider is accelerating the income in the other country and reviewing the tax implications of that credit all at once. We also would look at your overall strategy with any other property to see if we could offset the income with other rental losses. That is correct an advance payment of rent is considered income all at once.
This is an item that requires some significant tax planning across both countries. Sometimes even though it is allowed to be taken over multiple years it could be advantageous to take a larger tax bill and therefore a larger foreign credit at the current time.