Parsing Tax Treatment Of Foreign Investors in US Real Estate

Law360 (July 27, 2018, 1:53 PM EDT) -- The Tax Cuts and Jobs Act changed the law on the deductibility of interest expense for foreign inbound investors in United States real estate. Prior to the TCJA, the tax law had a provision called the earnings stripping rules. These were intended to prevent related parties from using excess leverage to convert what should be taxable dividends into tax-free interest. The earnings stripping rules accomplished this by limiting the amount of interest a U.S. blocker C corporation was allowed to deduct. It applied to direct loans from the foreign lender and unrelated party loans guaranteed by the foreign related party to...

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