home owned in Mexico

[winnie]

Situation:

Client has bought their third home in sunny Mexico. We will not be trying to deduct any interest expense. My client was told by several expatriates that he should not let the IRS know of his home ownership down there. Obviously, I am not in the business of hiding information from the IRS, but we have no reason to report anything since they don't have a mortgage on the house and don't have a bank account out of this country.

Is this like the plumber giving my clients tax advice?

Or is there some line of reasoning that I have never heard of? Maybe someone closer to the border has more experience with south of the border vacation home ownership?

[Kram BergGold]

my opinion

I would deduct the real estate taxes for the house in Mexico, END OF ISSUE.

[BOB W]

I have a client that suprised me last year when the told me they purchased a vacation home in Panama and they were advised to purchase it through a new corporation that they formed in Panama.

All activity, at this point is excluded from personal 1040 but what would I do when the property/corporation is sold/dissolved?

My confusion comes in since this is not a business. It could be viewed as an investment.

[erchess]

I would do what my client asked me to do on this issue.

I know of nothing that would require the deduction of the real estate taxes on the home in Mexico.. I can actually think of what are to me is a valid reason for not wanting the IRS to know about a home in Mexico. Any government can at any time turn tyrannical and it is prudent for a person of wealth to have resources out of the country that do not have to be reported to the IRS such as real estate and stashes of cash or gold that are not earning interest. For similar reasons, I tell my clients not to deduct their safety deposit boxes so that when they die the boxes are often not sealed when their financial accounts are.

[JoshinNC]

He must figure Obama's already won

Situation:

Client has bought their third home in sunny Mexico. We will not be trying to deduct any interest expense. My client was told by several expatriates that he should not let the IRS know of his home ownership down there. Obviously, I am not in the business of hiding information from the IRS, but we have no reason to report anything since they don't have a mortgage on the house and don't have a bank account out of this country.

Is this like the plumber giving my clients tax advice?

Or is there some line of reasoning that I have never heard of? Maybe someone closer to the border has more experience with south of the border vacation home ownership?

I keep telling my wife that the moment he's sworn in (God forbid) we're heading to Baja. I saw an episode of House Hunters (HGTV freak, I admit it) where you can by an ocean front house in the $150k range. 30 minutes to the CA border. Stay there for 4 years and then come back when the nation gets it's hands around what it's really like to live under socialist rule.

[erchess]

To Josh

As US Citizens living abroad, you would continue to be subject to US Income tax so I'm not sure what you would be accomplishing for yourself by temporary exile. In my fantasies where I do anything of the kind I renounce my US Citizenship which I assume would mean I could never come back here.

[JoshinNC]

I would accomplish not having to live under the thumb

As US Citizens living abroad, you would continue to be subject to US Income tax so I'm not sure what you would be accomplishing for yourself by temporary exile. In my fantasies where I do anything of the kind I renounce my US Citizenship which I assume would mean I could never come back here.

of an avowed Marxist. And yes, I could avoid US tax if I didn't have any US sourced income.

[erchess]

wow ok

I have never made a thorough study of the foreign income exclusion but I was under the impression that it doesn't greatly benefit most taxpayers living abroad.

[JoshinNC]

Ttb14-13

I have never made a thorough study of the foreign income exclusion but I was under the impression that it doesn't greatly benefit most taxpayers living abroad.

A US resident can have earnings of up to $87,600 (TY 2008) excluded from US taxation if resident satisfies the requirements for the exclusion, one of which is that the TP meets the substantial presence test, being defined as being physically present in a foreign country (Mexico) for at least 330 full days during a 12 month period. If Obama is inaugurated on 1/20/09 that leaves me 15 days to pack my s**t and get to Baja.

[BHoffman]

Don't forget to pack the blender for the margaritas!

[JoshinNC]

Just got a brand new one

Don't forget to pack the blender for the margaritas!

made by margaritaville, selling them on QVC. made some strawberry one's Friday night and they were GREAT!

[Burke]

A US resident can have earnings of up to $87,600 (TY 2008) excluded from US taxation if resident satisfies the requirements for the exclusion, one of which is that the TP meets the substantial presence test, being defined as being physically present in a foreign country (Mexico) for at least 330 full days during a 12 month period.

This is true, but it does not apply to any other kind of income, including investments, pensions and I would assume that means any Social Security benefits received as well.

[erchess]

Investents

Burke has raised a good question.

Could Josh get around the problem by taking possession of his investments (no longer holding them in street name) and taking them to Mexico or would the fact that many of the investments were in US Companies mean that he had US income?

If that wouldn't work perhaps he could liquidate at least the US based investments, take the one time tax hit, and invest in companies where he liked the tax consequences better.

And of course Josh is a financial adviser here so it might be possible for him to practice that trade in Mexico even if there was little call for advice on US tax law.

[DonPriebe]

He is a US Citizen

Could Josh get around the problem by taking possession of his investments (no longer holding them in street name) and taking them to Mexico or would the fact that many of the investments were in US Companies mean that he had US income?

It doesn't matter if his investment income is US sourced or not. A US citizen is taxed on all world-wide income EXCEPT those earnings that may be excluded by the foreign tax exclusion. So if he moves to Mexico and puts all his investments in a Swiss Bank that doesn't report the interest to anyone, he still owes US taxes on that interest. If he opens up an office in Mexico he may exclude his business income (if he meets the criteria) but will still owe the SE tax.

[OT] What's the game plan if a McCain/Clinton ticket wins?

[Bees Knees]

Situation:

Client has bought their third home in sunny Mexico. We will not be trying to deduct any interest expense. My client was told by several expatriates that he should not let the IRS know of his home ownership down there. Obviously, I am not in the business of hiding information from the IRS, but we have no reason to report anything since they don't have a mortgage on the house and don't have a bank account out of this country.

Is this like the plumber giving my clients tax advice?

Or is there some line of reasoning that I have never heard of? Maybe someone closer to the border has more experience with south of the border vacation home ownership?

My guess is that if the home is ever sold, these expatriates don't want to pay tax on the gain. Anytime someone tries to hide information from IRS, they are usually trying to evade taxes.