IN FOCUS: Cross Border Tax Planning Multiple investors? Time to plan before you purchase!

The adage “there is safety in numbers” usually holds true, but when it comes to a number of individuals pooling their money to buy U.S. properties as a group, there are significant implications that many investors simply don’t consider.

“The structuring when there is one owner of a U.S. property is very different from the structuring where there are multiple owners,” Robert E. Ward, J.D., LL.M., of Ward Chisholm P.C. “So where you have investing collectively, often as a partnership, all of the planning opportunities that we’ve discussed in the white paper and in previous articles – the ability to compute your U.S. income tax, the liability on a net as opposed to a gross basis, the ability to avoid U.S. estate taxation, the ability to get preferential treatment for capital gains realized on the sale of the property – all of those opportunities are still available.

“But, there is another layer of complexity and planning that is necessary given the presence of multiple investors,” he cautions.

That complexity extends not just to tax issues, says Ward, whose background of expertise includes tax law, business planning, estate planning, international taxation and tax planning and foreign trusts, but to business issues and governance issues as well; because the decision-making process changes as investors die in that type of collective investment environment.

“As an example: you and I are investing in U.S. real estate, and you die; now, am I in business with your wife, your children? Do I now get to control all of the business decisions, or do I have to get their consent?” asks Ward. “So that in a sense is succession planning – and these things need to be thought through.”

The biggest mistake Ward sees investors making is to fail to retain competent counsel, to fail to anticipate changes in circumstances, and to fail to plan for their own success – something that proper succession planning can correct.

“Because all of these problems are best addressed at the beginning, before the investment is made,” says Ward, “and as they are delayed, it is like any other maintenance: you pay the price by putting it off.”

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