1. U.S. Estate and Income Tax Issues for the EB-5 Investor Paula M. Jones, Esquire Domestic and International Estate Law Philadelphia, Pennsylvania, U.S.A. paula@paulajoneslaw.com

2. U.S. Taxes Federal Income Tax – tax on money you earn Federal Estate Tax – tax on the transfer of assets from you to your beneficiaries at death Federal Gift Tax – tax on the transfer of assets from you to your beneficiaries during life

3. Basis for Income Taxation in the U.S. U.S. citizenship – worldwide income, wherever individual located U.S. residency – worldwide income, wherever individual located Non-U.S. residency – U.S. source income

4. Residency for Income Taxation in the U.S. Lawful Permanent Residents – anyone with a green card is a U.S. income tax resident Substantial Presence Test – presence totals 183 days over 3 year period. (100% of days in current year + 1/3 of days last year + 1/6 of days in preceding year = 183) Closer Connection – even if you meet the substantial presence test, but are present less than 183 days in the current year and tax home, center of vital interest, etc. are in another country Treaty Provisions

5. Basis for Estate Tax in the U.S. U.S. citizenship - gross estate, wherever situated U.S. residency - gross estate, wherever situated U.S. situs property Expatriates and former U.S. residents prior to June 17, 2008 Expatriates and former U.S. residents after June 16, 2008

6. U.S. Estate Law Non-Citizens Non-Residents Any non-resident alien with an estate over $60K must file Form 706-NA Beware of overlooking non-citizens, non- residents for federal estate tax purposes Gross estate of $300,000, $100,000 located in the U.S. $100,000 is over $60,000 exemption amount and Form 706-NA must be filed

7. U.S. Estate Law Citizens and Residents Federal estate and gift tax exemption amount of $5.45 million in 2016

8. Residency for Estate and Gift Tax Purposes A resident is a decedent, who at the time of death, was domiciled in the United States Domiciles of the U.S. are those who live there with no definite present intention of leaving Lack of intent to leave evidenced by own home, personal ties, burial site, passport, tax return filed, legal documents listing domicile, etc.

9. Basis for Gift Tax in the U.S. U.S. citizenship - gross estate, wherever situated U.S. residency - gross estate, wherever situated U.S. situs property

10. Citizens and Residents - Gift Tax Both have annual exclusion of $14,000 in 2016 Citizens and residents have unified transfer tax system with lifetime exemption amount Unlimited transfer of gifts to citizen spouse Annual exclusion of $148,000 in 2016 to non- citizen spouse

11. Non-Citizens Non-Residents Gift Tax U.S. situs property Annual exclusion of $14,000 afforded to non-citizens non-resident; also exclusion for tuition and medical care Gifts to non-citizen spouse of U.S. property limited to $148,000 (indexed) annual exclusion Only applies if never citizen or resident of U.S.

12. Citizens and Residents – Asset Situs Real estate located in the U.S. has a U.S. situs Tangible personal property located in the U.S. has a U.S. situs Intangible personal property wherever situated deemed to have U.S. situs Real estate located outside the U.S. has a foreign situs All property subject to FET wherever situated

13. Estate vs. Gift and U.S. Situs Property Estate – U.S. situs property is real estate, tangibles stock in U.S. corporation Gift – U.S. situs property is real estate and tangibles

14. Pre-Residency Planning for U.S. Estate and Gift Taxation Gift tax exempt transfers for non-U.S. situs property Estate tax exempt transfer for non-U.S. situs property

15. Attributes of U.S. and Foreign Trusts Generation-skipping transfer tax Brief review Gift tax-free transfer is GST tax-free transfer Dynasty trust provisions can avoid GST

16. Attributes of U.S. and Foreign Trusts Asset protection from creditors Self-settled trusts generally available to creditors Favorable U.S. jurisdictions such as DE, NV, SD, etc.

17. Attributes of U.S. and Foreign Trusts Dynasty trust provisions Rule against perpetuities abolished or limited Favorable U.S. jurisdictions such as DE, NV, SD, etc.

18. EXEMPT DYNASTY TRUST ILLUSTRATIONS 75 Years GST75 Years100 Years100 Years Exempt Trust No Trust 3% $ 9,178,926 $ 1,527,144 $19,218,632 $ 1,758,625 4% 18,945,255 3,152,017 50,504,948 4,621,518 5% 38,832,686 6,460,788 131,501,258 12,033,187 6% 79,056,921 13,153,095 339,302,084 31,048,261 7% 159,876,019 26,599,373 867,716,326 79,401,467 8% 321,204,530 53,440,404 2,199,761,256 201,291,904 9% 641,190,893 106,678,135 5,529,040,792 505,941,789 10% 1,271,895,371 211,611,592 13,780,612,340 1,261,012,158 Note: Computations assume $1 million initial gift and 45% tax imposed on assets owned outright or held in Nonexempt Dynasty Trust every 25 years.

19. Offshore Account Compliance FBAR – Report of Foreign Bank and Financial Accounts (Form TDF-90.22.1) Form 3520 Form 3520-A Form 8938

20. FBAR Reporting form for foreign financial accounts Required when a U.S. person has a financial interest in or signature authority over one or more foreign financial accounts with an aggregate value greater than $10,000 Governed by 31 U.S.C.A. 5314 (Banking) Civil enforcement authority for the FBAR delegated to the IRS in April of 2003

21. Form 3520 Purpose is to report transactions with foreign trusts, report ownership of foreign trusts under grantor trust rules and to report receipt of certain large gifts or bequests from foreign persons Filer: responsible party for reporting a transaction, grantor of the foreign trust, U.S. person who received a distribution from a foreign trust, U.S. person received more than $100,000 from foreign person or estate

22. Form 3520-A Purpose is the annual information return of a foreign trust with at least one U.S. owner