The Potential Adverse Consequences Associated with the Transfer of Property to Foreign Entities by U.S. Persons
By Anthony Diosdi Over the past couple of decades, there have been substantial changes to the U.S. tax law which can adversely affect any U.S. citizen, U.S. income tax resident alien, or domestic corporation, partnership, estate, or trust (hereinafter “U.S. Person”) that transfers assets to a foreign entity such as a foreign corporation, a foreign partnership, or a foreign trust. This article will briefly describe the U.S. tax consequences that could result from such transfers and the forms that must be filed with the Internal Revenue Service (“IRS”) as a result of such transfers. This article will also discuss the potential reporting consequences of such transfers. General Rules of TaxationIn general, contributions to a corporation, transfers to “controlled” corporations, certain reorganizations, and contributions to partnerships are tax-free events for federal…