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TJ, Esq.
TJ, Esq., Attorney
Category: Real Estate Law
Satisfied Customers: 12205
Experience:  JD, MBA
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I've decided to buy a small property that I would like to

Customer Question

Hello
I've decided to buy a small property that I would like to keep for my 2 kids.
I am not a US Citizen or a Resident.
I live in a different country.
For personal reasons, I prefer to purchase the new property under a newly established LLC.
No loan will be needed.
Planning to buy in NJ.
A family member who already lives in NJ would move in to it, pay me rent / taxes...
I have a few questions.
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  P. Simmons replied 1 year ago.

Hello! My name is ***** ***** I am a licensed attorney with more than 18 years of experience. I am here to assist you with your questions. Please understand that if I ask you for additional information, you are NOT charged again and our communications are NOT timed. So please see this as a relaxed conversation between friends. I am here to help

Also, if you would like to chat on the phone, let me know and I can make that happen.

Tell me, what are your questions please?

Customer: replied 1 year ago.

Thank you Mr Simmons

Well, basically I will need to know if I will be able to purchase a Co-op or Condo ( Knowing that Board Associations usually need to see Tax documents / Income verification / salary .... ) something that I cannot provide or maybe I can provide but from a foreign country.

I live in a country where I am required to report any foreign accounts / foreign property... ( Tax reasons ) so I though it would be better to have the property registered under an LLC.

Is Property tax / Income Tax from rental... any higher if it's owned by an LLC or is it same ?

What documents would be required to be able to purchase a new Property. There will be no need for a Loan.

Thank you

Expert:  P. Simmons replied 1 year ago.

Thank you

If you are paying cash? Frankly that will solve most, if not all, of the board of directors concerns.

SOME (not all) associations require prospective purchasers provide information, such as tax and income documents, in order to screen applicants. The idea is you do not want to allow someone to purchase property if they will not be able to pay the costs associated with maintaining the property. MOST folks who purchase are forced to obtain a mortgage loan...this means they have to pay the association dues as well as the mortgage payment.

Put yourself in the shoes of a director of the association...if you know that an applicant has limited income, and they have to pay a mortgage and association dues? It may cause you to consider if they can make the payments each month.

In your case, if you are paying cash for the property? You do not have to worry about a mortgage payment. I would expect that you would be a very low risk for defaulting on the association dues...so I would expect they approve the application.

You can put the property into an LLC...but frankly that is not going to matter from the standpoint of the board of directors. The tax rate is the same...but if you want to go this route for your own income reporting purposes? YOu can...just have a local attorney (an attorney licensed in the state where you plan to purchase the property) help you create the LLC.

As for documents required to purchase the property? You need a purchase contract. The real estate agent who you use to help you purchase the property can provide this to you.

Please let me know if you have more questions. I am happy to help if I can. Otherwise, please rate the answer so I may get credit for my work.

Customer: replied 1 year ago.

Not done yet ! :)

I have a different question but related to this purchase.

I started an Online business ( Business registered outside the US ), most of the Income is from overseas and very few from US customers. I had to open a US Bank account to be able to get paid Online...

Do I have to worry about US Income tax ? From my knowledge, since I am not a resident or a US Citizen / no local business / warehouse... I should not worry but I always think about: What if IRS thinks I have to pay any Tax...

After buying the property under the LLC, The LLC is under my name. Would I be still liable, can they do anything to make me pay... ?

Expert:  TJ, Esq. replied 1 year ago.

Hello. Different attorney here, as the prior attorney who responded has opted out. This happens occasionally if the attorney cannot continue with the customer for some reason. In any event, I will attempt to help with your follow-up questions:

Since you are not a US citizen or resident, you would not have to worry about US income tax unless you earned income in the US. Accordingly, it doesn't sound like you would need to pay US income tax with regard to the business, but you would with regard to the LLC because the LLC will own property in the US and collect rental income from your relative. So, the LLC will have income and will need to pay taxes.

If you refused to pay, and if the IRS found out about the income, then it could put a lien on the property and eventually sell it to pay for the taxes that you owe. So, there is risk. My suggestion would be to retain a CPA in NJ to handle the tax returns and reduce taxes as much as possible through deductions.

Does that answer your question? Please let me know if you need clarification, as I am happy to continue helping you until you are satisfied.

Customer: replied 1 year ago.

Thank you very much for your answer.

The question now is: Some of my customers are from the US, do I need to pay Tax on these sales ? even though I am not a citizen or resident in the US ?

I never worried about this until I decided that the business should buy a property to be used as an office...

If I start paying Taxes now for US Sales through the newly established LLC, (LLC Sole ownership is me). Will IRS question about the previous 2 or 3 years unpaid Taxes ?

I am sure PayPal reports the sales reports. ( PayPal and US bank account, both have my SSN and my Foreign Passport ).

Anyway I can find out if anything was reported ?

Is there a way to know if I owe any Taxes without raising any flags ?

I don't want to have to go through the hassle of proving that I don't live in the US....

Expert:  TJ, Esq. replied 1 year ago.

Hi again.

Q: The question now is: Some of my customers are from the US, do I need to pay Tax on these sales ? even though I am not a citizen or resident in the US ?

A: Not if your income is obtained outside the US. For example, let's say you own a pub in Germany. If a US citizen visits that pub and buys dinner and drinks, do you have to pay US income taxes? Obviously not! So, the issue is "where is your income generated?" If you and your business are outside the US, and you are not a citizen, and the servers that host your website are located outside the US, then I submit that you wouldn't owe any US income taxes at all.

Q: If I start paying Taxes now for US Sales through the newly established LLC, (LLC Sole ownership is me). Will IRS question about the previous 2 or 3 years unpaid Taxes ?

A: The income would belong to the LLC. If it's newly established, then there wouldn't be 2 or 3 previous years. So the answer is likely no. And it's probably irrelevant anyway because of my answer above.

Q: Anyway I can find out if anything was reported ? Is there a way to know if I owe any Taxes without raising any flags ?

A: The only way to know for sure would be to contact the IRS. But in my experience, the fact that you used PayPal is irrelevant. The IRS does not review PayPal reports. Further, for the reasons stated above, I don't think you'd owe taxes.

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