Showing posts from August, 2019

Strategies that Partners or LLC Members use to Avoid Self Employment Tax

Ambiguity in the tax law often provides opportunities for taxpayers. For nearly three decades, how earnings of a limited liability company (LLC) are reported for self-employment tax purposes has been unsettled. (LLC in this article also refers to limited liability partnerships (LLPs) and professional limited liability companies (PLLCs).) This uncertainty has created a divergence in practice that has gone relatively unchecked until recently when the IRS started using legal action to clarify the application of self-employment tax laws to LLCs. Sec. 1402(a)(13) provides that a guaranteed payment, under Sec. 707(c), to an LLC member for services rendered is subject to self-employment tax. A significant number of taxpayers have claimed that none of the residual profits after deducting guaranteed payments, or so-called distributive earnings, are subject to self-employment tax even if those earnings were allocated to a managing or otherwise actively working member. To be fair, some taxpayers …

Pre Immigration Tax Planning - Trust structures and other options

Pre Immigration Tax Planning for US Immigration is a huge part of our practice.  The US remains an attractive destination for high net worth Asian families.

Thanks to movies (I think), most believe that a Trust is the panacea to all pre immigration planning needs.
Unfortunately this is far from true.  
Plan with trusts:Before becoming a U.S. resident, a taxpayer can make irrevocable gifts to non-U.S. persons in trust where  (1) the trust document indicates that it is not permitted to have U.S. beneficiaries, and  (2) the trust is not otherwise considered a U.S. grantor trust.  By doing so, the taxpayer may avoid U.S. income taxes on future income earned by the gifted assets and may also avoid later U.S. gift and estate taxes on the transfer of those assets, simply because the now-U.S. resident no longer owns the income-producing assets for U.S. tax purposes.
As a precautionary note, nonresidents who create foreign grantor trusts that have (or may have) a U.S. beneficiary are subject to U.S. …

Pre Immigration Tax Planning - Trust+PPLI structure

Many of our clients moving from Asia to the US, tend to split their family in two. Some family members (especially the father) remain in Asia and others (particularly the mom and kids) make the move to the US.  

Regardless, it is important for them to understand the definition of residency from a tax perspective.  I previously wrote on this here -

PPLI or Private Placement Life Insurance is emerging as a great tax planning tool for pre-immigration planning

Here are some more thoughts on how it works -


Step 1
Step 2