International Topics

by her parents ) was born in the United States and moved with her non-U . S . parents to Belgium when she was less than a year old . Charlie , now 24 , has recently inherited the family ’ s chocolate factory worth 18 million Euros . Charlie earns a moderate income as a medical resident . She has several European bank and investment accounts ( which include significant holdings in European exchange traded funds ) and is unaware that she has any U . S . filing requirements . Charlie is unmarried , but mentioned that her fiancé loves chocolate and has expensive tastes .

Notwithstanding the obvious income tax reporting requirements and compliance issues , what do you tell Charlie ?

First there will be the reporting of the inheritance , and while not taxable in the United States , the gift itself will require disclosure . Other conversations should be held regarding whether the chocolate factory constitutes a controlled foreign corporation and the accompanying reporting requirements . You may also want to mention your concern over potential PFIC holdings in ETFs .

From there I might shift the conversation to some forward-looking estate planning ( and asset protection ) with the idea that a gift to properly structured irrevocable trust would provide benefit on multiple levels .

Situation No . 4 Lawrence is a non-U . S . person and a citizen of Hong Kong . In 1992 , he purchased a house in Massachusetts for $ 250,000 , expecting that his then-teen children would attend Harvard . Sadly , Lawrence passed away in 2022 . His only U . S . sited asset was this house , worth $ 5 million at date of death .

You can see several issues have come up here for both income tax and estate .

The first is that the property itself , if sold , would be subject to the Foreign Investment in Real Property Tax Act . It ’ s not the end of the world , but something to consider . More daunting is that in 2022 a non-resident alien of the United States was entitled to a $ 60,000 estate exemption ( on U . S . sited assets ), leaving $ 4,940,000 of estate tax exposure . How would you have advised the family ? Given enough runway , perhaps we would have considered use of a blocker corporation , or even the sale of the asset .

The Takeaway The purpose to this article is to raise awareness of issues that we may see on a regular basis as we work with cross-border taxpayers . Although the names are made up and the facts simplified , each of the situations described are real , frequent and often come as a surprise to the client . It is up to us as practitioners to listen carefully .

Steven Geller is a CPA , TEP and senior partner at Morris + D ’ Angelo headquartered in Silicon Valley . You can reach him at steven @ cpadudes . com .

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