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Copyright (c) 1996 University of Miami Law Review
University of Miami

ARTICLE: Structuring Foreign Investment in United States Real Estate

April, 1996

50 U. Miami L. Rev. 517


William H. Newton III *


I. Introduction

Structuring foreign investment in United States real estate requires collective consideration of United States income, estate, and gift tax consequences. In analyzing appropriate foreign investment structures in this context, the ultimate beneficial owner is by definition a foreign individual - one who is neither a citizen, resident, nor domiciliary of the United States.

A foreign individual investing in United States real estate may utilize any one of a series of alternative investment structures components of which may be organized either in or outside the United States. These components may include corporations, partnerships, or trusts. Selection of the appropriate components and their classification as foreign or domestic may have a significant impact on the overall level of taxation.

II. Overview of United States Taxation of Foreign Investment in RealEstate

Choosing the appropriate structure for foreign investment in United States real estate initially requires an analysis of United States taxation, as it impacts both on disposition and retained ownership or holding of realty. Disposition principally involves issues relating to income taxation, while retention or holding of realty may also involve estate and gift tax considerations as well.

A. Disposition of United States RealEstate

Gain derived by foreign investors from disposition of United States real estate is subject to income taxation. 1 The approach treats gain from disposition of a United States real property interest as effectively connected with a United States trade or business, and correspondingly subjects that gain to taxation.

A United ...
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