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Category: Tax
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Experience:  over 40 years experience in tax matters
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Im thinking about moving my 35% interest/shares in a Dutch

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I'm thinking about moving my 35% interest/shares in a Dutch company currently under my name to a WA state LLC. I've recently setup the LLC and elected to tax myself as an S-corp.

The reason for this, LLCs incur a 5% withholding tax in Holland vs. 15% currently as an individual. I'd rather take a 5% foreign tax credit vs. 15% and have at least 10% of my money go to IRS. Also, there are some nice liability protection.

I've read there are two ways of doing a transfer, 1) Capital contribution. 2) Sale

The way dutch authorities do the transfer they label it a share purchase (vs. capital contribution) and have to value the shares when I received it as an individual and what it is worth now during the transfer to my WA state LLC. This may incur capital gains taxes according to the Dutch accountants, as a US resident due to the tax treaty I don't owe any dutch taxes but they state that I may have to pay capital gains taxes in the United states.

Since I have a pass through entity, if it is done as a sale (assuming they value it higher, since the company has done well in the last year) will I be made to pay US capital gains taxes?

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.


Since you own the security in your own name now and will own 100% of the LLC when the security is transferred there is no US "sale". No sale = no capital gain = no capital gains tax. Basically you have this in your right pocket and move it into your left pocket. The nature of the item does not change nor does your ownership. You are the LLC.

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