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Financial Planning / Tax Strategies


Subject:  Re: Investing from offshore accounts Date:  11/22/1998  10:39 PM
Author:  galeno Number:  6443 of 127613

You are absolutely correct!! There are far better ways to be tax efficient in the US than to go offshore. Theoretically, it is easy to go offshore. But like anything else, the details and the penalties for Americans makes it not worth the effort.

I have the opposite problem. I'm a non-US citizen who would like to invest though an inexpensive US discount brokerage. I wouldn't get taxed on my capital gains and the IRS would withhold only 30% of my dividend and interest income.

For me, that would be a GREAT deal since I basically live off capital gains. My effective tax rate would be less than 10% of income. Many people pay money managers or mutual funds 1% or more of assets to manage their investments. In my book, every 1% of assets paid to these intermediaries is equivalent to a 10% rate in income tax.

As I understand it, my problem is the US policy of only exempting $60,000 from US inheritance taxes. American citizens and legal aliens get to exempt $600,000. If I died suddenly, my kids would loose a lot of $$$.

You wrote:

1. All U.S. citizens are taxable on income from whatever source earned, regardless of country in
which assets are located.

2. If you want to cheat, you may or may not get caught, but if you do, the IRS is out to make
examples of people who do this (makes for good press for them, and they need it right now).

3. There is a box on your 1041 which you must check if you have control over an offshore
account, or are a beneficiary of an offshore trust. If you don't check it and you have gone through
the trouble of establishing offshore accounts, it is pretty easy to prove deliberate fraud, and yes,
incarcerate you.

Bottom line: unless you either (1) renounce your citizenship and move offshore, or (2) are currently
not a U.S. citizen, and are willing to spend less than half the year in the U.S., then you are playing
with fire.
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