EXPERIENCE SUCCESS US REFORM. By: Kurt Rademacher WEDNESDAY, 21 NOVEMBER 2018 THAT S LAW ELEVATED

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1 EXPERIENCE SUCCESS ON EXPERIENCE A HIGHER EXPERIENCE LEVEL SUCCESS SUCCESS ON A HIGHER ON LEVEL A HIGHER LEVEL THAT S LAW ELEVATED THAT S LAW ELEVATED THAT S LAW ELEVATED US REFORM IMPACT UNITED ON STATES THE UNITED PRIVATE REAL STATES ESTATE WEALTH REAL INDUSTRY ESTATE By: Kurt Rademacher OWNERSHIP OWNERSHIP (POST-TCJA) (POST-TCJA) By: Kurt Rademacher By: Kurt Rademacher WEDNESDAY, 21 NOVEMBER 2018 WEDNESDAY, 21 WEDNESDAY, NOVEMBER NOVEMBER 2018

2 CONTACT DETAILS: FOCUS. VALUE. BUTLER SNOW (HONG KONG) LLP UNIT 6, 20/F THE CENTRIUM 60 WYNDHAM STREET, CENTRAL success HONG by KONG yours. TEL: SOME TAKE CREDIT. WE TAKE INITIATIVE. Our approach allows us to anticipate challenges and find creative solutions. After all, we measure our

3 OVERVIEWUS INBOUND STRUCTURING: FOREIGN INVESTMENT INTO THE US 1. Setting the Traditional Scene Structuring Options Direct Ownership a. Income Tax Indirect Ownership Through an LLC b. Estate Tax Indirect Ownership Through an Irrevocable Trust c. Gift Tax Indirect Ownership Through a non-us Corporation Indirect Ownership Through a Two-Tier corporate Structure 2. US Real Estate Ownership Structures a. Individual/LLC With the reduced US corporate tax rate of 21%, holding structures for investments b. Irrevocable in US real Trust property should be revisited c. Double Company For example, the two-tier structure may now be more attractive: 3. Leverage Issues US estate tax protection Lower US federal income tax on rental income and capital gain on sale 4. New LLC Reporting Requirements

4 SETTING THE US SCENE INBOUND STRUCTURING: FOREIGN INVESTMENT INTO THE US 1. Income Tax Traditional Structuring Options Direct Ownership a. Rental Income Indirect Ownership Through an LLC b. Gain on Indirect Disposition Ownership Through an Irrevocable Trust Indirect Ownership Through a non-us Corporation Indirect Ownership Through a Two-Tier corporate Structure 2. Estate Tax a. 40% Federal Rate (Plus State) With the reduced US corporate tax rate of 21%, holding structures for investments b. $60,000 in USExemption real property should be revisited 3. Gift Tax For example, the two-tier structure may now be more attractive: US estate tax protection a. 40% Federal Rate (Plus State) Lower US federal income tax on rental income and capital gain on sale b. No $60,000 Exemption

5 US INBOUND US STRUCTURING INBOUND STRUCTURING: OPTIONS FOREIGN INVESTMENT INTO THE US 1. Traditional Structuring Options Traditional Structuring Options Direct Ownership Indirect Ownership Through an LLC Indirect Ownership Through an Irrevocable Trust Indirect Ownership Through a non-us Corporation Indirect Ownership Through a Two-Tier corporate Structure a. Direct Ownership b. Indirect Ownership Through an LLC c. Indirect Ownership Through an Irrevocable Trust d. Indirect Ownership Through a Non-US Company With the reduced US corporate tax rate of 21%, holding structures for investments in US real property should be revisited e. Indirect Ownership Through a Two-Tier Corporate Structure For example, the two-tier structure may now be more attractive: US estate tax protection Lower US federal income tax on rental income and capital gain on sale

6 CASE US INBOUND STUDY STRUCTURING OPTIONS TCJA IMPACT US LLC US Property John Non-US Compa Trust ny US C Corpor US LLC ation US US Propert y Irrevocable Property John S$ Irrevoc Non-US able Company Trust US US C Corporation LLC US Propert US Property y

7 LLC LEVERAGE FILING REQUIREMENTS ISSUES UPDATE 1. Impact What on Estate forms are Tax involved? Burden Who is affected? 2. Deductibility of Interest What is reported? a. Earnings Stripping Rules What other data points are required? b. Fund Investments

8 LLC NEW FILING REPORTING REQUIREMENTS REQUIREMENTS UPDATE 1. What Forms What forms are are Involved? involved? Who is affected? 2. Who is Affected? What is reported? 3. What is Reported? What other data points are required?

9 LLC NEW FILING REPORTING REQUIREMENTS REQUIREMENTS UPDATE

10 LLC QUESTIONS? FILING REQUIREMENTS UPDATE What is the deadline? Points to consider Definition of Reportable Transaction Definition of Related Parties Analyze alternatives to Reportable Transactions