Matthew Ledvina

  N onresidents and residents face a different set of rules when filing their taxes in the United States than those who are citizens. Filers who are not citizens may be excused from declaring definite types of income, based on their circumstances. Resident aliens are not US citizens but they have green cards enabling them to work in the US or they have been in the country for no less than 183 days over a three-year period including the present year. Nonresident aliens are in the United States legally but do not have green cards. They may be tourists or other visitors.   Taxation of Nonresident Aliens Nonresident aliens are needed to pay income tax only on income that is earned in the United States or earned from a US source. They do not have to pay tax on foreign-earned earnings. Investment income comprehended in the US that is not from a US source is taxed at the rate of 30% usually unless otherwise specified by treaty. Nonresident aliens should keep records to show the...

  A U.S. person is entitled to a 100 percent estate tax marital deduction for assets left to his or her surviving spouse if the spouse is a U.S. citizen. This applies also to an NRA who leaves U.S. situs assets to the surviving U.S. citizen spouse. However, in either case, if the surviving spouse is not a U.S. citizen, the estate tax marital deduction is not available unless the assets pass to a qualified domestic trust (QDT). (IRC § 2056 (d)(2)(A))  To qualify, a QDT must meet the following requirements:   1.     The trust must pay all income to the surviving spouse for life. 2.     The trust may not permit principal distributions to anyone other than the surviving spouse during his or her life. Any principal distributions to the surviving spouse (except distributions for hardship) will be subject to estate tax at the time of distribution at the top bracket of the deceased spouse's estate. The remaining principal in the trust on the d...

A. NRAs Generally: Reducing U.S. Taxes  The three cardinal rules for NRAs who wish to minimize U.S. taxes are: 1.     Minimize contacts with the United States to avoid becoming U.S. residents for income or estate tax purposes. 2.     Minimize U.S. situs assets to avoid estate taxation. Typically, this means holding U.S. real estate, tangibles located in the United States and shares of stock of U.S. corporations through non-U.S. corporations (or entities that can elect to be treated as non-U.S. corporations). This step offers no protection from income taxes on U.S. source income; the income is still payable to a non-U.S. entity and thus subject to income tax withholding. Also, the transfer of U.S. real estate to the non-U.S. corporation may have income tax consequences. (In some cases, an irrevocable trust may be structured to serve as an effective estate tax blocker.) 3.     Minimize taxable U.S. source income to avoid U.S. inc...

E state planning for non-U.S. persons differs from domestic planning, not only in the specific rules that apply but also in the mental outlook that the planner must bring to the process. To put it simply, in planning for a U.S. person we begin with the assumption that all income and assets are subject to U.S. income, estate and gift taxes, and we then hunt for exceptions (aka "loopholes") that will shelter some income and assets from these taxes, e.g., municipal bond interest, charitable deductions, the estate tax marital deduction. Non-U.S. persons, on the other hand, start out in an environment in which no U.S. income or estate taxes are payable , and the planner's job is to keep an eye out for pitfalls (U.S. residence, U.S. source income and U.S. situs assets) that may create such taxes. WHO IS A U.S. PERSON? A.    Individuals, Corporations and Trusts. The term "U.S. person" includes U.S. individuals as well as domestic corporations and U.S. trusts. (IRC § ...