US: Foreign individuals, trusts face new U.S. tax on some income.

Added on 31/05/2019

As extracted from, published on Thursday 30th May, 2019.


Wealthy foreigners who live in the U.S. face the prospect of an unexpected new tax on non-U.S. income.

Drafters of the 2017 tax overhaul repealed a rule that kept some foreign-held assets outside the U.S. tax net, meaning foreigners who become U.S. residents now have to report the worldwide income of their families’ foreign businesses in the U.S. and pay tax on the income of each company and subsidiary.

The repeal of tax code Section 958(b)(4) not only affects multinationals and private equity firms that have foreign subsidiaries but also domestic trusts, partnerships, and estates in ways that leave the U.S. individual with tough options: pay taxes on more income, dispose of foreign shares, or leave the U.S—a move that could bring its own income and estate tax consequences.

“Wealthy individuals and families don’t realize yet that because there is a U.S. entity in the ownership chain, they have tainted the entire family empire,” said Richard LeVine, a wealth adviser at Withersworldwide, a tax and wealth advisory firm.

“Unfortunately, most people don’t come to the U.S. after they’ve figured this out. We have to undo the situation they’re in, and sometimes our best advice is to leave,” said Ian Weinstock, a partner at Kostelanetz & Fink LLP in New York.

The original intent of tax writers was to prevent large multinational companies from stashing profits offshore to avoid paying U.S. taxes. Now, with the repeal of Section 958(b)(4), privately held businesses will find themselves inadvertently caught within the same net.