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Before we can determine how the distributions will be taxed we need to determine how the U.S. is going to classify the trust (i.e. what is the entity's classification like corporation, foreign trust, partnership, etc.) This will drive how the unit trust will be taxed.
Can you give me the name of the prospective Unit Trust investment you are looking into?
The main thing I need to determine is whether or not the Unit Trust will be deemed a PFIC.http://en.wikipedia.org/wiki/Passive_foreign_investment_company
hmmm - the Australian Unit Trust is a private investment trust so knowing the name won't help. Let me look at the wiki and get back to you.
Some investment trusts may have "U.S. tax considerations" in their prospectus or offering memoranda - if you have access to something like that it would be an excellent starting point.
The Aussie Unit trust is a small private trust and does not have the broad multi-country tax disclosures you would be thinking of for a retail investment offering. I think maybe we need someone who has experience with Australian Unit Trusts and US tax law?
Yes, we need to know how the entity will be classified. I am 80% sure it will be "corporate" classification but it is not a desirable result for you so we need to be sure.
I will continue to research and see if I can find something. If you can give me the weekend I should be able to confirm the classification by then.
Let me know.
Seems that you may not be able to provide much help on this question as it really requires someone with an understanding of both Australian Unit Trusts and the IRS.
If you don't think you can sort this out, please release my deposit.
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