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