All Forum Posts by: Javier S.

Hi,

I am trying to understand member loans to an LLC that will contain a rental property. Let's say the member's loan is to buy 50% of the property, and that the member will be paid back principal and interest over time. Does the member own 50% of the property or the LLC? Once the loan is repaid back to the member fully, then does it mean he does not own any part of the property or has 0% membership in the LLC? I guess I am just trying to understand this concept of loaning to the LLC instead of outright buying the rental property in the LLC. Thanks.

Hi,

I was planning to send some money to my Costa Rican parents to buy my share of a rental in Costa Rica.  The money will be sitting in my parents' bank account until it is used for the closing (let's say a couple of weeks or a month).  Are there any restrictions from the US government or IRS or anything I have to be aware of?  It is not a gift to them, they will just hold the money until we close on the rental.  

Thanks.

Thanks @Al Wilson  I am definitely going to talk to a CPA versed in international tax.  I will just do a little more research before doing that to get my bearings.

Thanks @Linda Weygant for the example.  It seems like the rental SAs my parents have, they have little expenses (which is good because it is more income but also more tax), and also they do not have much savings kept in the SA (probably due to little expenses) which again means more tax.  

I am seriously exploring having them change from 'sociedad anonima' to 'sociedad de responsabilidad limitada' which I think is a LLC US-equivalent. If it can be classified as a partnership for US tax purposes, then I think I will be able to deduct the Costa Rican taxes (taken as foreign tax paid) against my individual US income tax. This would help with the double taxation. Also, I read somewhere that it is also favorable when selling because it is taken as capital gains tax instead of ordinary income tax. It would be great if someone can confirm this or comment on this.

This is what I researched so far, but it would be good for someone to confirm.  So a sociedad anonima in Costa Rica is basically a C corporation US equivalent.  It will pay its own Costa Rican taxes (e.g. 10%, 20%, 30%), and not subject to US taxes.  However, when I get money from the rent then this will be taxed again and treated as a qualified dividend (15%).  And I cannot use the foreign tax credit for the taxes the company paid in Costa Rica to offset my individual US taxes.   So I guess this is basically the double taxation a C corp is subject even though we are talking about a foreign entity.  Now since the money received is from rentals, it is not taxed as ordinary income but as qualified dividends, so there is no deductions like depreciation, rental expenses that can be made, right?

Hi,

I live in the US but am interested in purchasing a Costa Rican rental (for rent and eventual sale) with my parents who are Costa Rican.  They have done this before and they establish a company as a 'sociedad anonima' (or SA) which I think is a C Corp equivalent.  So the idea is I pay for a third of the property and I will receive a third of the rent after expenses and Costa Rican taxes.  I want to start understanding what this implies in terms of US taxes I have to pay.  Since this company is a Costa Rican entity, will it have to pay US taxes (it already pays Costa Rican taxes which is like 20%)?  or do I only have to worry about paying my individual US taxes when I receive my portion of the rent?  Can I use the Costa Rican taxes that the entity pays (e.g. 20%) and use it for my individual taxes as foreign tax paid?

Thanks,

Javier

Thanks Scott.  I will look form 1116.

Thanks.  I was looking in the wrong place.  There is a foreign tax credit that one can take for the federal income tax.

Hi,

I am a US citizen that was interested in investing in a rental property in Costa Rica.  I am also a newbie investor.  I am wondering if anyone would know if rental income taxes I pay in Costa Rica can be taken into account when I file the US taxes?  I am not aware that there is a double taxation treaty between US and Costa Rica.  i.e. would there be a double taxation?

Regards,

Javier  

Thanks for the replies. I did contact the agent for a listing and was told that it was a for sale by owner that wanted to concentrate on fewer bigger properties.  That kind of fits in with what @Ned Carey mentioned.  So it is more like an easier way to sell in this case.  

Thanks for your response and for the welcome.