By Brad Wagner (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 the extent a related foreign lender did not incur U.S. taxes on the interest income earned. The limitations on the amount of interest was triggered when the debt to equity ratio exceeded 1.5 to 1 and the debtor's net interest expense exceeded 50 percent of its adjusted taxable income (taxable income before net operating loss deduction, interest expense, depreciation and amortization). A related party was defined as a person or entity that owned more than 50 percent of the borrower. Any disallowed interest was carried forward indefinitely subject to these rules....