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Written by Thomas Azzara
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Tuesday, 06 March 2007 |
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Word Count: 573 U.S. capital gains taxes exempted by law
Non-resident foreign companies, trusts, banks and individuals can trade
stocks, bonds, commodity contracts and options 100% free from U.S. capital gains
taxes.
Under the U.S. Tax Code, only when a foreign company, foreign trust or
nonresident alien individual takes up permanent residence within the United
States will he be subject to U.S. capital gains taxes in the same way as
domestic taxpayers. For a corporation permanent residence would be a U.S. office
or warehouse. Capital gains realized by foreign corporations and other
nonresidents "not engaged in a trade or business within the United States" are
exempted from tax under IRC Section 871 and IRC Section 881 & IRC Section
897(c)(3). Moreover, U.S. Treasury Regulations Section 864-2(C)(1) & (2)
provides an exception for what embodies being "engaged in a trade or business
within the United States". Under U.S. regulations, a nonresident's Stock Market
transactions carried-out through a U.S. stock broker, independent agent, or an
employee are not considered to cause the nonresident to be "engaging in a trade
or business within the United States".
Publicly traded stock market gains (from NYSE, NASDAQ or AMEX listed stocks and
bonds) accruing to an offshore company are free of US capital gains taxes by the
Internal Revenue Tax Code's statutes, but "US Shareholders" can have a tax
liability (indirectly) if the offshore company is a "Controlled Foreign
Corporation (CFC) (i.e., "more than 50% of voting and non-voting stock is owned
by US SHAREHOLDERS). See sections 951 thru 958 of the IRC. See especially
Code-Section 951(b) for the definition of US SHAREHOLDERS.
American taxpayers that use tax havens are taking more risks (generally) than a
foreign non-resident alien (not a US citizen). Whether an American citizen
taxpayer will have a tax liability on the offshore company profits depends on a
lot of things - including what kind of income is produced by the company (i.e.,
Subpart F or non-Subpart F) and how many shares in the company you own, and
whether the offshore company is a CFC - as defined in the Internal Revenue Code
in Sections 957 and section 958.
Disclaimer: Pursuant to Internal Revenue Service guidance, be advised that any
federal tax advice in this communication, including any attachments or
enclosures, was not intended or written to be used, and it cannot be used, by
any person or entity for the purpose of avoiding penalties imposed under the
Internal Revenue Code.
Tom Azzara
New Providence Estate Planners, Ltd.
(Lawyers and Consultants)
54 Sandyport Drive
P.O. Box CB 11552
Nassau, Bahamas
Fax/phone: (242) 327-7359
email:
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• $1.2 trillion dollars on deposit in Cayman Banks - up 10% in 2005 says Cayman
Government?
• Sixty percent of these monies comes from US investors says Manhattan District
Attorney Robert Morgenthau.
• Did you know there are two online stock broker firms located in a no tax haven
(offshore) - and both are 100% owned by the Bank of New York?
• Did you know that non-resident aliens (including foreign companies) can trade
"publicly traded stocks" (i.e., NYSE, NASDAQ, AMEX) under the tax code and not
owe capital gains tax?
• "One of the most effective applications of offshore trusts is in an ownership
combination with a limited company." - Richard Graham-Taylor, partner Ernst &
Young, Grand Cayman (January 1990).
• 2005 revenues for Ernst & Young worldwide were $19 billion.
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