The Florida Bar

Florida Bar Journal

Foreign Investment in U.S. Real Property: Navigating Through the Income, Estate, and Gift Tax Traps


The Florida real estate market is flooded with inventory — foreclosure sales, short-sales, straight sales, and any other creative concoction. Combining the distressed real estate market with the weakened U.S. dollar and a sluggish domestic economy, foreign investors are flocking to get their piece of the American pie. From multi-million dollar investment funds to Grandma and Grandpa looking for a warm escape, foreign investors’ interest in Florida real estate has never been greater. Although most of the multi-million dollar investors are sufficiently savvy to engage a tax attorney for the transaction to properly structure their investment, most individual investors — ones looking for a winter condo or just a couple of rental properties — are oftentimes unaware of the tax traps surrounding what otherwise may appear to be a perfect investment. This article sets forth the common pitfalls foreign investors in U.S. real property face and the techniques every advisor should consider when engaged by such clients. Note that this article is merely a simplified introduction to an extremely complex area of law; prior to engaging in any of the covered techniques, be sure to understand fully all of the implications associated with their implementation, or consult someone who does.

Taxation Regime

The Internal Revenue Code defines a “U.S. person” as a citizen or resident of the U.S., a domestic partnership, a domestic corporation, a U.S. estate, and certain trusts.1 The determination of when an individual is deemed a nonresident alien and a resident alien of the U.S. differs in the context of income taxation from the context under the estate and gift tax regime. When used in this article, the term “foreign” or “foreigner” refers to a nonresident alien of the U.S., both in the income tax and in the estate and gift tax context.

The federal tax implications of foreign ownership of U.S. real property can be divided into three main categories: 1) federal income taxation, 2) transfer taxation (estate and gift tax), and 3) Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) withholding requirements.

Federal Income Taxation of Nonresident Aliens

For U.S. income taxation purposes, the IRC provides that an alien individual is treated as a resident of the U.S. with respect to any calendar year if (and only if) 1) such individual meets the substantial presence test,2 2 ) is a lawful permanent resident of the U.S. at any time during such calendar year;3 or 3) makes a first-year election.4 U. S. resident aliens are taxed on worldwide income5 while nonresident aliens are taxed only on their taxable U.S. source income.6 Under most U.S. income tax treaties, green card holders are generally considered U.S. residents for income tax purposes as well. 7

There are, however, instances where an individual may be deemed an income tax resident of both the U.S. and another treaty country for a given tax year. In such cases, the tax residence is determined by the tiebreaker rules of the governing treaty, so that the individual would be taxed by only one of the two countries.8 Thus, an analysis of the applicable U.S. income tax treaty, if any, is necessary to determine the individual’s income tax residence for the given year.9 Note, however, that income tax treaties do not eliminate, but merely modify, taxation of income derived from U.S. situs property — an issue addressed later in this article.

The federal government taxes foreign investors under one of two tax regimes. The first is referred to as the “U.S. trade or business” income tax regime. When a foreign investor is engaged in a U.S. trade or business, any income effectively connected with such U.S. trade or business will be taxed on a net10 basis at the regular graduated tax rates (in the same manner U.S. persons are taxed).11 Although the IRC and Treasury Regulations provide no comprehensive definition for the term “trade or business,” the determination of what activities give rise to such classification has developed through case law and IRS rulings and depends heavily on the facts and circumstances of each case.12 The courts apply a qualitative (the nature of activity) and quantitative (the amount of activity) analysis for determining whether the U.S. activities constitute engagement in a U.S trade or business.13 Generally, a U.S. trade or business exists when the taxpayer is engaged in “considerable, continuous and regular” economic activities within the United States.14 However, a single or isolated transaction will not rise to the level of being deemed “engaged in a U.S. trade or business.”15

The second regime is referred to as the “passive income tax” regime. When the foreign investor’s U.S. activities do not rise to the level of a U.S. trade or business, the income is deemed “passive” (also known as “fixed, determinable, annual, or periodic” income, or “FDAP” income). FDAP income that is paid to the foreign investor is generally subject to a 30 percent tax on the gross amount of such income.16

Taxation of FDAP income, which is based on the gross income, is to be distinguished from the taxation of “trade or business” income, which is based on the net amount. If the foreign investor is engaged in a U.S. trade or business at any time during the taxable year, it is possible for the net-basis tax to apply.17 Furthermore, in the case of any income of a foreign investor

which is taken into account for any taxable year but is attributable to a sale or exchange of property or the performance of services (or any other transaction) in any other taxable year, the determination of whether such income or gain is taxable under [the net-basis tax regime] shall be made as if such income or gain were taken into account in such other taxable year and without regard to the requirement that the taxpayer be engaged in a trade or business within the U.S. during the taxable year.18

Rental Income of Nonresident Aliens

To the extent it is not effectively connected with a U.S. trade or business, rental income received by a foreign investor from sources within the U.S. is classified as FDAP and is generally subject to a 30 percent withholding tax on the gross rent received.19 Furthermore, there are no allowances for deductions based on such income since the activity usually is not deemed a U.S. trade or business.20 However, two tests exist under which the rental income may be deemed effectively connected with a foreign investor’s U.S. trade or business (thereby subjecting the income to the 35 percent withholding on the net rent received).21 First is the “asset use test,” which provides that rental income is effectively connected if it is derived from assets used in the conduct of a U.S. trade or business.22 This is designed to include income that is derived from assets used in the foreign investor’s trade or business, but that typically is regarded as investment income. Second is the “business activities test,” which provides that the rental income is effectively connected if the foreign investor’s U.S. trade or business activities are a material factor in realizing the rental income.23 This is designed to capture income that, due to the direct relationship between the foreign investor’s business activities and the realization of the income, is more properly regarded as business income, even though it would typically be regarded as investment income.

Notwithstanding the foregoing, a foreign investor can achieve certainty as to the trade or business status of rental income from a U.S. real property interest by making an election on behalf of the U.S. entity (that holds title to the real estate) to treat the U.S. rental activity as effectively connected to a U.S. trade or business.24 This would in turn subject the rental income to a 35 percent25 net withholding tax on taxable income and will then enable the U.S. entity to take business deductions before paying the tax.

Gain from the Sale of U.S. Real Property Interests

The income tax rate applicable to the gain from the sale of U.S. real property by a foreign investor depends on the form of holding and the type of ownership. Once determined, the gain (or loss) will result in either the ordinary income tax rate (currently up to 35 percent) or capital gains tax rate.26

The first step is to determine the form of ownership. In the case of direct ownership by a foreign individual,27 trust, or pass-through entity, gains from the sale of U.S. real property are treated as capital gains (subject to the type of ownership, discussed below).28 As long as the interest had been held for at least a year, the applicable rate will be the preferential long-term capital gains rate (currently at 15 percent);29 However, corporations are ineligible for the preferential long-term capital gains rate and the gain will, therefore, be taxed at the corporate income tax rate (currently at 35 percent).30

Once the form of ownership is determined to be eligible for capital gains treatment on the sale of the interest, the second step is to determine the type of ownership. This depends on whether the U.S. real property interest is “effectively connected with a U.S. trade or business” or FDAP. When the U.S. real property interest is effectively connected to the foreign investor’s U.S. trade or business, or when the interest is held as inventory, gains from the sale thereof will be subject to the ordinary income tax rates.31 If the income is deemed to be FDAP (and was held for at least a year), the gain will be subject to the preferential long-term capital gains rate.32

Accordingly, from a pure income tax perspective, ownership through a corporation (rather than a pass-through entity) is the less tax efficient approach.

Federal Estate and Gift Taxation of Nonresident Aliens

As noted above, the determination of “nonresident alien” status under the estate and gift tax regime is different from the determination under the income tax regime. Under the estate and gift tax regime, an alien is a nonresident of the U.S. if his or her domicile is outside the United States. Domicile is acquired through residence with the intent to remain in the U.S. indefinitely, and, thus, is a factual determination.33

Foreigners are subject to the federal estate and gift taxation only to the extent of their interests in U.S. situs property.34 Furthermore, each state has its own laws governing estate taxation of foreigners and, therefore, the laws of each state in which a decedent owns property must be examined to determine applicability (Florida does not have a state estate tax).

In general, U.S. situs property includes property physically located within the U.S., subject to a number of exceptions.35 Although a precise definition of “U.S. situs property” is not provided by the IRC, suffice it to say that, for the purposes of this article, real property located within the U.S. and stocks in a U.S. corporation are deemed U.S. situs properties. However, gifts of U.S. situs intangible property, except in the case of a U.S. expatriate or long-term resident, are not subject to the gift tax.36 That is, if the foreign investor titles the U.S. real property in his or her individual name and subsequently gifts the ownership interest, the transfer is subject to U.S. gift taxation. However, where the foreign investor titles the U.S. real property interest in the name of an entity, such as an LLC or a corporation, a transfer of his or her interest in the entity will be deemed a transfer of an intangible asset and, therefore, will not be subject to the gift tax.

Unless modified37 by a transfer tax treaty,38 a foreigner is subject to the same estate and gift tax rates as a U.S. person, with a few differences.39 The most significant of the differences relates to the allowable exemptions and deductions. Where, for 2011 and 2012, a U.S. person is allowed a $5 million unified estate and gift tax exemption and an unlimited marital deduction for transfers to a U.S. spouse, a foreigner is limited to a $13,000 estate tax credit (based on a $60,000 estate tax exemption) and no estate tax marital deduction to a foreign spouse,40 Although the foreigner may utilize a qualified domestic trust to transfer U.S. situs property to the foreign spouse in order to take advantage of the full marital deduction.41 Nonetheless, a foreigner is allowed the same annual gift tax exclusion as a U.S. person (currently $13,000 per person) and a gift tax deduction for gifts to a foreign spouse (currently $133,000).42

Stock in a foreign corporation, however, is not deemed to be U.S. situs property and, therefore, is not subject to estate or gift taxation when transferred or bequeathed by a foreigner.43 Accordingly, as opposed to the outcome under the income tax regime, from a gift and estate tax perspective, ownership of U.S. real property interests through a foreign corporation is the more tax-efficient approach.

Planning Techniques

A number of planning techniques are available to foreign investors in U.S. real property that provide both income tax efficiency and estate and gift tax inapplicability. That is, certain structures may be used to provide capital gain treatment of gains from the sale of the U.S. real property interest and no estate tax inclusion of the U.S. real property in the foreigner’s estate. Although a seemingly contradictory feat, the following techniques (and combinations and modifications thereof) — each with its own benefits and drawbacks, depending on the facts and circumstances — offer the best results.

Ownership Through Irrevocable Trusts

settling an irrevocable domestic (U.S.) trust, a foreign investor may be able to both exclude the U.S. real property interest from his or her U.S. estate, as well as be taxed at capital gains rates on the gain from the ultimate sale of the interest (so long as the property was held for at least one year).44 Therefore, from a pure income tax perspective, this holding structure provides the desired tax results.

This technique is most appropriate when the foreigner is willing to part with control of some portion or all of the interests held by the trust. As long as the foreigner did not retain any interests therein, assets contributed by a foreigner to an irrevocable trust should not be included in the foreigner’s U.S. gross estate.45 Furthermore, by contributing cash (preferably from a non-U.S. bank account) to the irrevocable trust for the purchase of the U.S. real property, the foreigner will not be subject to U.S. gift taxation on the cash contribution (as opposed to a transfer to the trust of U.S. real property already owned by the foreigner).46

It is this author’s experience that foreign investors prefer to maintain anonymity. For this reason, and only when appropriate, foreign investors may choose to hold their interest in their business entity ( i.e., the LLC’s or U.S. partnership) through a nongrantor trust.47 Although the implications of using this approach are beyond the scope of this article, it is nonetheless important to note that close consideration should be given to the matter.

When creating an irrevocable trust for the benefit of a third party (including the investor’s family members), no gift tax liability arises upon the initial transfer of cash to the trust. Furthermore, since the U.S. real property is owned by the trust upon the death of the investor, no estate tax inclusion arises. As an aside, this structure offers the added bonus of eliminating the need for probate.

As noted earlier, the downside to this structure is the investor’s inability to retain an interest in the trust or the underlying property. However, some practitioners draft provisions in these irrevocable trusts that empower the trustee to make discretionary distributions to the investor (referred to as the “settlor” of the trust). Where laws of the trust situs permit the settlor’s creditors to reach the trust assets during the settlor’s life, the estate of the settlor will include the trust principal.48 This is because such jurisdictions deem the settlor to have reserved the power to alter, amend, revoke, or terminate the trust under I.R.C. §203849 and, therefore, the settlor is deemed to have “retained an interest.”50 Furthermore, the IRS has taken the position that such “arrangements” will, in fact, cause inclusion “if there was an implied understanding that the settlor would have continued enjoyment of the assets transferred in trust or their income,” even if the trustee is unrelated to the settlor.51

Several states (most notably Alaska, Delaware, and Nevada), as well as numerous foreign jurisdictions, have laws protecting this type of “self-settled discretionary” trust from the settlor’s creditors. Accordingly, the initial gift to the discretionary trust in those jurisdictions should be deemed “completed” for gift tax purposes and thereby remove the assets from the settlor’s gross estate.52

Ownership Through Partnership

Alternatively, when the foreign investor does not wish to relinquish control (retained interest) over the assets, ownership of the U.S. real property through a partnership (or other pass-through entity) may be appropriate. As is the case with trusts (and individuals), the sale of U.S. real property by a partnership is treated as the sale of a capital asset and is eligible for the preferential rate when held for over a year.53

The estate tax implications, however, are somewhat uncertain. Although corporate stock, debt obligations, proceeds of life insurance, and bank deposits are all clearly designated as U.S. situs property under I.R.C. §2104(a),54 The statute fails to address specifically other forms of intangible property such as goodwill, trust interests, patents, judgment debts, and — more relevantly — interests in a U.S. partnership.55 Accordingly, a risk of inclusion in the foreign investor’s (in this case the “partner’s”) gross estate exists.

Although not yet legislatively or judicially settled, the IRS may attempt to assert through a broad interpretation of case law and Treasury Regulations56 That a foreigner’s interest in a partnership is “U.S. situs” when the partnership owns U.S. real property.57 Accordingly, this would cause the interest to be included in the foreigner’s gross estate.

Nonetheless, many practitioners in the field believe that such a position would be an overbroad interpretation and would reach beyond the scope of the Treasury Regulations and case law. Accordingly, with the necessary disclosures, of course, a foreign investor may choose the ownership structure of U.S. real property through a partnership as the most appropriate approach, relying on the position that should this matter be contested, the weight of the law would support exclusion from the foreign partner’s U.S. gross estate.

FIRPTA Implications

The Foreign Investment in U.S. Real Property Tax Act of 1980 (FIRPTA) was enacted to ensure that foreign investors are taxed on the gains from the disposition of their U.S. real property investment.58 Under the FIRPTA regime, a person purchasing U.S. real property interests (the “transferee”) from foreign persons must withhold 10 percent of the amount realized ( i.e., the entire purchase price, not just the gain).59 This is to differentiate from ownership through a foreign corporation, which requires a withholding of 35 percent60 ( which is yet an additional factor making ownership through a foreign corporation less attractive). In such a transaction, the transferee/buyer is considered the withholding agent and has the responsibility to determine whether the transferor is a foreign person; otherwise, if the transferor is a foreign person and the appropriate amount is not withheld, the transferee/buyer may be held liable for the tax.61 For cases in which a U.S. business entity, such as a corporation or partnership, disposes of a U.S. real property interest, the business entity itself is the withholding agent.62 For this reason, many foreign investors utilize a domestic partnership63 to hold the U.S. real property interest. Recall, though, that an interest in a domestic partnership may be deemed as U.S. situs property and may, therefore, be included in the foreign investor’s U.S. gross estate. To address this concern, the foreign investor may consider utilizing the so-called “two-tier partnership structure,” under which the U.S. real property is owned by a U.S. partnership (the lower tier), which is in turn owned by a foreign partnership (the upper tier), which is owned by the foreign investor.64

Under the FIRPTA rules, rental income is addressed differently. Treatment of the rental income depends on whether it is FDAP income or income effectively connected with a U.S. trade or business. This determination for FIRPTA purposes is made in the manner discussed earlier in the article. If the income is deemed FDAP income, it is subject to the FIRPTA withholding rules on the gross income.65 If the income is determined to be effectively connected with a U.S. trade or business, it will be subject to the ordinary income tax rules on a net basis.66


Although this article attempts to simplify a very complex area of law, it is by no means a comprehensive explanation of the discussed transactions, nor does it address all of the issues inherent therein. The noticeable increase in foreign investment in U.S. real property requires us, as practitioners, to be aware at least of the attendant issues in order to either address them appropriately or engage someone who can. The opportunity for new business in this area is immense, but with this opportunity comes the responsibility to advise our clients as to the tax implications of the transaction — that way, very costly mistakes are avoided.

1 I. R.C. §7701(a)(30). A trust is deemed a “U.S. person” if a court within the U.S. is able to exercise primary supervision over the administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust.

2 I. R.C. §7701(b)(3)(A). Subject to certain exceptions, an individual meets the substantial presence test for any calendar (current) year if 1) he is present in the U.S. on at least 31 days during the year and 2) the sum of the number of days he was present in the U.S. during the current year and the two preceding calendar years, when multiplied by the applicable multiplier (1 for the current year, 1/3 for the first preceding year, and 1/6 for the second preceding year) is at least 183.

3 Once an individual obtains green card status, the individual continues to be a lawful permanent resident until this status is either revoked or administratively or judicially determined to have been abandoned by the individual.

4 I. R.C. §7701(b)(l)(A). An alien who does not qualify as a resident alien for a calendar year under the green card test or the substantial presence test may elect to be treated as a resident alien for such year (provided certain qualifying tests are met).

5 I. R.C. §61.

6 I. R.C. §871.

7 The United States has tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income. Under these same treaties, residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries. Many of the individual states of the United States tax income which is sourced in their states. Therefore, you should consult the tax authorities of the state from which you derive income to find out whether any state tax applies to any of your income. Some states of the United States do not honor the provisions of tax treaties.

8 See generally Convention Between the Government of the United States of America and the Government of the State of Israel with Respect to Taxes on Income, U.S.-Isr. art. 3, para 4 (Jan. 1, 1995), available at

9 The factor most commonly determinative of an individual’s tax residency under the tie-breaker provisions of U.S. tax treaties is the location of the individual’s permanent home. Of course, this is a fact intensive determination. In the event that both the U.S. and the treaty country equally weigh as the individual’s permanent home, then the second evaluation is based on the individual’s personal and economic relations. This too a fact intensive determination, requires an evaluation of which country hosts the individual’s “center of vital interests,” such as the individual’s family, social relationships, occupations, political involvement, cultural involvement, etc.

10 That is, after deductions are taken. Examples of deductions typically taken with real property are taxes, operating expenses, ground rent, repairs, interest on any existing mortgages, and insurance premiums paid by the lessee on behalf of the foreign owner-lessor.

11 I. R.C. §871(b). Currently the highest applicable rate is 35 percent. See I.R.C. §1(i)(2).

12 See, e.g., Treas. Reg. §1.864-2(e) (as amended in 1975).

13 InverWorld, Inc. v. Comm’r, T.C. Memo 1996-301 (T.C.M. 1996).

14 See generally Lewenhaupt v. Comm’r, 20 T.C. 151 (1953), aff’d per curiam, 221 F.2d 227 (9th Cir. 1955); Pinchot v. Comm’r,
113 F.2d 718 (2d Cir. 1940); Piedras Negras Broadcasting Co. v. Comm’r, 43 B.T.A. 297, 309-13 (B.T.A. 1941); Rev. Rul. 73-522, 1973-2 C.B. 226.

15 See, e.g., Linen Thread Co. v Comm’r, 14 T.C. 725 (1950).

16 I. R.C. §871(a)(1). FDAP income includes items such as interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emolument, and other fixed or determinable annual or periodical gains, profits, and income.

17 I. R.C. §871(b).

18 I. R.C. §864(c)(6).

19 I. R.C. §881(a)(1).

20 I. R.C. §871(a)

21 I. R.C. §871(b). See also I.R.C. §1(i)(2); I.R.C. §864(c)(2).

22 I. R.C. §864(c)(2)(A).

23 I. R.C. §864(c)(2)(B).

24 I. R.C. §871(d).

25 I. R.C. §1(i)(2).

26 The “long-term” classification requires that the interest be held for over a year.

27 Another pitfall to individual ownership of U.S. real estate by a foreigner is that the foreigner’s estate must be probated. Probate is a public process (taking six to nine months at best) whereby assets are frozen as title is transferred from the decedent to the one who inherits from the decedent. Quite likely the foreigner will not have a Florida will, and it is possible that the foreigner’s foreign will, if one exists at all, will not comply with Florida statutes. Thus, a situation can arise where the foreigner’s Florida condo passes at death as per Florida intestate laws, which could be contrary to the foreigner’s wishes. Furthermore, since foreigners only have a $60,000 estate tax exemption, it is likely that estate tax will be due upon the death of the foreign owner. If the foreigner does not have available liquid funds to pay the estate tax, the real estate will probably be sold at a “fire sale” to pay the taxes. Thus, even though there are tax reasons why a foreigner should not own U.S. real property directly, there are also non-tax reasons ( i.e., avoidance of probate) not to own U.S. real estate in one’s individual name.

28 I. R.C. §871.

29 I. R.C. §1231(a)(1). To the extent I.R.C. §1231 losses exceed I.R.C. §1231 gains, the losses are treated as ordinary losses. See I.R.C. §1231(a)(2).

30 I. R.C. §881.

31 I. R.C. §897(a)(1)(A). See also I.R.C. §871(b)(1).

32 Id.

33 I. R.C. §2001;
Treas. Reg. §20.0-1(b)(1) (as amended in 1994).

34 I. R.C. §§2101 and 2103.

35 For a complete definition and exceptions, see Treas. Reg. §20.2105-1 (as amended in 1974).

36 I. R.C. §2511.

37 The modification may be in the form of an increased exemption amount and/or an exemption of certain assets.

38 The countries with which the U.S. has estate tax treaties are Australia, Italy, Austria, Japan, Canada, Netherlands, Denmark, Norway, Finland, South Africa, France, Sweden, Germany, Switzerland, Greece, United Kingdom, and Ireland.

39 See I.R.C. §2001(c)(2).

40 I. R.C. §2102(b)(1).

41 I. R.C. §2056A.

42 The rates provided are for 2011 and are adjusted annually for inflation.

43 I. R.C. §2104(a).

44 I. R.C. §1222.

45 See I.R.C. §§2036, 2037, and 2038. Where a transferor retains certain rights in the transferred property, such as a right to income, a right to designate future beneficiaries, etc., the transferor shall not be deemed to have made a completed gift of such property and the value of the retained interest is included in the transferor’s gross estate. Consideration should be made to use a domestic self-settled trust in jurisdictions such as Nevada, Alaska, Delaware, and South Dakota.

46 I. R.C. §2501(a)(2).

47 Thus, estate tax avoidance can be achieved strictly through domestic entities. Consult with a qualified attorney to implement this strategy as it can be easily mishandled.

48 Rev. Rul. 76-103, 1976-1 CB 293 (ruling that creditors could reach the trust funds, so property was included in gross estate under I.R.C. §2038).

49 Id.

50 Id.

51 I. R.S. Priv. Ltr. Rul. 2009-44002 (October 30, 2009).

52 Note that if the settlor is not seeking estate exclusion, the transfer to the trust can also be structured as an “incomplete gift” and, thus, only provide asset protection benefits ( i.e., no estate exclusion).

53 I. R.C. §1222.

54 I. R.C. §2104(a).

55 I. R.C. §875(1); Sanchez v. Bowers, 70 F.2d 715 (2d Cir. 1934);
Rev. Rul. 55-701, 1955-2 CB 836 (ruling that a partnership’s place of business determined its situs for estate tax purposes under a treaty).

56 See Rev. Rul. 91-32, 1991-1 C.B. 107.

57 Id.

58 I. R.C. §1445.

59 I. R.C. §1445(e)(3).

60 I. R.C. §1445(e)(1).

61 I. R.C. §1441(a).

62 Id.

63 or other pass-through entity, such as a limited liability company. In the case of an LLC, an election must be made (the “check the box” election) in order to have the LLC treated as a pass-through entity.

64 A detailed explanation of the two-tier partnership structure is beyond the scope of this article. For a comprehensive detailed explanation, see Robert F. Hudson, Jr., Presentation to the 29th Annual International Tax Conference: Tax Efficient Structuring of Foreign Corporate Investment in U.S. Real Estate and Business (Jan. 14, 2011).

65 I. R.C. §871(a)(1).

66 Id.

Datan Dorot is the principal of Dorot Law, P.A., in Aventura. He practices in the fields of estate planning, asset protection, and international taxation. He is a graduate of the University of Florida Levine College of Law and earned his LL.M. in estate planning from the University of Miami School of Law. Dorot is the recipient of the 2009-10 New Tax Lawyer Fellowship of the Tax Section of The Florida Bar and serves as the vice chair of the Estate & Gift Taxation Committee of the Federal Tax Division of the section. The author thanks Jennifer Wioncek of Baker & McKenzie for her input and assistance and Michael Sneeringer for his assistance in editing.

This column is submitted on behalf of the Tax Section, Guy E. Whitesman, chair, and Michael D. Miller and Benjamin Jablow, editors.