Galia Antebi recently spoke to Natalie Olivo of Law360 to discuss the tax and reporting woes that can accompany high-net-worth foreign individuals when they (or their family members) spend a lot of time in the U.S.

In Wealthy Foreigners May Have Unexpected US Tax Connection, Galia highlights the "closer connection" exception that may help individuals avoid accidental U.S. tax residence:

‘You essentially have to show that your center of life is outside the U.S.,’ said Galia Antebi of Ruchelman PLLC, noting that individuals have to answer a list of questions to determine the country to which they have more significant ties.

People who flunk the closer connection test or who spent more than 183 days in the U.S. during the current year must resort to their country’s tax treaty with the U.S., Antebi said.

Recalling a recent matter, Galia noted the complexity that can arise when multiple shareholders have cross-border ties:

Antebi said she recently encountered a situation in which two siblings owned stock together in a foreign corporation. One of them was a green card holder, which meant he was treated as a U.S. shareholder, but the entity was never a CFC because his ownership was less than 50%, she said.

Then his sister became a U.S. resident — not intentionally, but because she met the substantial presence test — and ‘all of a sudden that year we found that they have a CFC,’ Antebi said.

This, she said, means the brother picks up income under the tax code measure for GILTI and also potentially Subpart F, which is the long-standing CFC rule that immediately taxes the global passive income of U.S. corporations.

For more on the U.S. tax challenges facing wealthy foreigners traveling to the U.S., read the full article →