Analysis

Wealthy Foreigners May Have Unexpected US Tax Connection

Law360 (November 1, 2019, 6:24 PM EDT) -- High-net-worth foreign individuals spending a lot of time in the U.S. may trigger taxable residency without realizing it, placing them on the hook for financial reporting obligations and potentially creating tax liability for any offshore companies they’re affiliated with.

Under the Internal Revenue Code’s substantial presence test, foreign individuals can establish U.S. residency — and therefore owe taxes on their worldwide income — if they spend at least 183 days in the country over three years. People who unknowingly pass this threshold can seek insulation from U.S. income taxes under their home country’s treaty with the U.S., but they’re still considered...

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