Estate Planning Considerations for Dual Residents: Passive Foreign Investment Companies
Make sure your dual resident clients are aware of potential tax issues when it comes to transfers of appreciated property to foreign entities.
A foreign corporation is a PFIC if 75% or more of its gross income is passive income or at least 50% of the average value of its assets are of a type that produce passive income. Common examples of PFICs are foreign mutual funds and shares in foreign holding companies that hold stocks and bonds. Passive income means foreign personal holding company income which includes interest, dividends, rents, royalties and annuities, among other sources of income. This white paper reviews why dual residents need to be aware of taxation of PFICs and potential CFC overlap concerns and discusses how transfers of appreciated property to a foreign entity by a U.S. person may result in adverse income tax consequences to a dual status client; thus, such transfers should be carefully evaluated.
Partner and chairman of the Taxation and Estate Planning Group of Connell Foley LLP (Resident in the Roseland, NJ office)
Practice is dedicated to sophisticated tax planning for individuals, businesses, estates and trusts, with a particular emphasis on national and multinational estate planning, as well as as-set protection planning
Lectures extensively and frequently publishes in legal and business journals on a variety of tax and estate planning issues, including those related to federal estate, gift and income tax issues, wealth preservation, trusts, and a multitude of other planning techniques
Admitted to practice in six states, the District of Columbia and United States Tax Court
Recognized for the past 10 years in “Best Lawyers in America” in the areas of trust and estates, trust and estates – litigation, and tax litigation and controversy
LL.M. degree in taxation; J.D. degree, New York University