Avoiding U.S. Controlled Foreign Corporation (CFC) status using Nominees? You're at risk with the IRS.





So often I speak with clients who were advised to use nominees to conceal their status as the UBO - ultimate beneficial owner.

I cannot say this often enough.  It's dangerous and it's dangerous.  Banking is problematic, what if the nominee passes or becomes incapacitated, and most importantly - the IRS sees right through it.  You will get caught and we avoid these arrangements like a plague.

This is what the IRS relies on -
  • Garlock v. Commissioner, 489 F - .2d 197 (2d Cir. 1973) and
  • Treas. Reg. 1.951- 1(g)(2)

Have a look at this deck from an IRS presentation. It's from the LB&I International Practice Service Transaction Unit -

https://drive.google.com/open?id=1fPgxBBVjClOzYlKeEnhnRm_mF3JhJ8GO

Someone recommended using nominees for tax purposes?  Run.....

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