Legal Question in Tax Law in Florida

Re: Offshore Protections

If you are a US citizen (or otherwise qualify as a US taxpayer), you are obliged to pay taxes on your worldwide income, howsoever derived. There are intricate provisions of the Internal Revenue Code relating to off-shore corporations principally owned by US taxpayers, such corporations being known as Controlled Foreign Corporations, or CFCs. The general regime of tax treatment of CFCs resembles that of a US corporation under Subchapter S -- that is, income of the corporation is attributed to the stockholders when earned, irrespective of whether the profits are actually paid to the owners.

There are a few exceptions to the above regime, but none would apply to US-source income. You do not provide enough facts for a more detailed analysis, but I am sure that a qualified lawyer with international tax experience could give you specific advice on your idea.

Beware of many outfits that promise ways to set up structures to "avoid" (really, evade) US income taxes. They tend to be costly in two ways: first, to set them up; second, when the full arsenal of the IRS comes down on you on audit. I'm going to suggest that you look at Prof. Jim Maule's Web site for broader treatment of tax "avoidance". http://vls.law.vill.edu/prof/maule/taxprotfr.htm

Best wishes,

LDWG

Re: Offshore Protections

Based on the information provided, I cannot advise you to pursue offshore, or Controlled Foreign Corporation, status to avoid or minimize U.S. taxes. Be wary of those who promise such benefits. The I.R.S. is well aware of such devices. Often such CFC's may be used for other reasons: creditor avoidance, avoidance of U.S. regulations, secrecy, etc. Remember the Enron debacle. And unless your anticipated income is substantial, the costs of setting up such complicated legal entities is just not justified on any basis.