Your IBC problem

13 Feb

United States of America bald eagle - IBC problemYour International Business Company (IBC problem) needs immediate attention from a U.S. Tax Attorney or experienced IRS Enrolled Agent. There is NO deferral of income in your current structure.

Here is your IBC problem:

1) Your BVI, Seychelles or Anguilla IBC (an IBC from any foreign jurisdiction) is a Passive Foreign Investment Company (PFIC) 100% of income into your foreign LLC is taxed annually at the highest tax rate. Your IBC deals in capital. There is no deferral of income when dealing in capital.

Reference: IBCPFIC02122016 Read the attached.

2) Are you certain your Self Directed IRA is not in violation of Prohibited Transaction Rules?

Prohibited Transaction Code Section 4975

a) investors using retirement funds to make the investment will not borrow any funds to make the investment.

b) investors using retirement funds must not operate as the custodian Unrelated Business Taxable Income (UBTI)

c) To prevent tax-exempt entities from competing unfairly with taxable entities, tax-exempt entities are subject to unrelated business taxable income (UBTI) when their income is derived from any trade or business that is unrelated to its tax-exempt status.

Income taxable to an IRA (or other tax-exempt entity) because it is “unrelated” to the IRA’s tax-exempt purpose.

Typical examples are income from a manufacturing, sale or service business operated by an IRA or a partnership or LLC in which an IRA is a member, as well as unrelated debt-financed-income. The tax on this income is called unrelated business income tax, or UBIT.

d) Unrelated Debt Financed Income (UDFI) Income taxable to an IRA (or other tax-exempt entity) which is attributable to borrowing, either by the IRA directly or a partnership or LLC of which it is a member. Typical examples are income from real estate purchased with borrowing and securities bought on margin. Unrelated debt-financed income is a type of unrelated business taxable income.

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