Miami Real Estate and the Panama Papers

06 Jun

Miami real estateMiami Real Estate Expert Ross Milroy explains why creating shell companies is no “Game” and vital to the very people who sparked Miami’s resurgence

MIAMI – In light of the recent Panama Papers leak, offshore shell companies are receiving unprecedented attention, and more often than not, portrayed as this years Ponzi scheme.

Real estate and finance expert Ross Milroy of Ross Miami real estate explains that offshore shell companies are not only legal, but also a vital part of attracting foreign investors to the Miami market.

Due to the current U.S. estate tax laws, Milroy explains, it is basically ‘badbusiness’ for a foreign investor that purchases real estate to record a title in their personal name.

If a foreign individual dies owning U.S. property titled in their individual name, they are generally subject to U.S. estate tax on the entire fair market value of the property. While U.S. residents are entitled to a $5.45 million federal estate tax exemption, foreign investors are only entitled to a $60,000 exemption.

The second reason why foreign investors take title in a corporate name is to avoid serious complications dealing with FIRPTA (Foreign Investors Real Property Tax Act). While all foreign investors are still subject to capital gains taxes, the investor must wait until the following tax filing year to file a tax return at which point they can begin the process to receive any credit withheld from FIRPTA, a timely and costly process that can take many years.

If a married couple, especially those who have separate last names (as is common for those from Latin America,) it can further complicate matters with the IRS and take the many years to receive a refund of any over payments – and often thousands of dollars in lawyers and accountant professional fees.

“If these same buyers were to register their investment in a purchasing limited liability company owned by an offshore company and if both were to die, there is no U.S. estate or death taxes due. If this was a $2M home purchased with hopes to pass it down to their children, they would be faced with approximately $800,000 in estate taxes; making it practically an unworthy investment,” said Milroy.

There are many other reasons that it just makes sense for a foreign national who has a certain net worth to take title through a LLC that provides them with a level of liability protection. There are also more extreme reasons for anonymity such as privacy and in some extreme cases personal safety and security.

“There are certainly crooked individuals, drug money or other activities being hidden by offshore companies, but such is the case in every industry and every market in America,” said Milroy.

“Since the market crash in 2008, foreign investors have been a lifeline keeping the economic engine of Miami moving forward. To portray these very investors as crooks or to dissuade future foreign investors is what is scandalous here.”

“To label them as tax evaders when they are simple protecting their assets through legal structures and still paying their due capital gains taxes is completely unfair,” Milroy concluded.

Photo credit: Denis Messié via Visualhunt / CC BY-NC-ND

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