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New York Insider Tips – March 2016

Foreign buyers must be mindful of “local liquidity” when considering popular properties. Cash totaling more than 10% of your budgeted purchase price should be moved to a US-domiciled bank or attorney escrow account with a week to spare before contract signing. Sellers won’t wait long for monies to be moved onshore, and a delay will lose you the property.

Serious estate issues may develop for foreigners who don’t plan for gains taxes during inheritance in the event of death. Purchasers should coordinate with counsel and local and foreign accountants to structure a domestic will, and discuss relevant ownership structures.

Many foreigners purchase through both an LLC and an offshore ownership entity. A purchaser owns the offshore company, which will in turn own the US LLC, which will in turn own the real estate, and as a result, the owner will shield his or herself from the highest taxes due from future sales. Consult your attorney and CPA for details prior to executing a contract.

Condos boards can be invasive during the application process. While flexibility for ownership and renting make condos preferred over co-ops, foreigners should consult their brokers to prepare for what will need to be provided – statements, taxes, etc. Further, a savvy buyer broker can set a seller’s expectations as to where the buyer will draw the line in their disclosure for the contract, avoiding a default of obligations.

Capital gains tax deference benefits available through 1031-exchanges are also available to foreign owners when selling residential property owned for investment purposes. Consult your CPA and broker to structure your sale, and subsequent purchase, under proper federal guidelines.