Nov 1, 2008 12:00 PM

By Dina Kapur Sanna

Many clients think the foreign trust tax and reporting rules can be circumvented by using non-U.S. persons as nominees. But the United States has rules to prevent potential abuse of tax law by U.S. persons who receive indirect transfers from foreign trusts: the inbound intermediary rule of Internal Revenue Code Section 643(h).¹ Indeed, even innocent clients can be caught in this rule's web. And the Internal Revenue Service is looking hard for culprits — because officials believe it's common in offshore financial secrecy jurisdictions to interpose entities, individuals or both as stated owners when the beneficial or true owner is contractually acknowledged in side agreements, statements or other devices.

Clearly, U.S. practitioners need to be aware of the nuances of the intermediary rule, that is, what triggers its application and what exceptions exist. Also, if a non-U.S. relative wants to give your U.S. client a gift and there is any cause to believe the money might somehow be attributed to a family foreign trust arrangement, be sure to know all the facts before counseling about potential tax obligations.

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

Poll

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

Click here to download the 2011 Trust Glossary

50 Years Ago This Month

Click here to read the issue.

50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

Click here to view the most up to date guide (September 2011)

Press Releases