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Does a non-resident alien need to file a tax return on

interest income received from a...
Does a non-resident alien need to file a tax return on interest income received from a US business loan?
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Answered in 7 minutes by:
11/6/2017
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,973
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Can you tell me more about what you mean by "business loan?"

..

If the loan was made as an individual TO a business, and the individual hasno US. Presence or other nexus that would say this is a lending business that has U.S. presence (therefore ECI) this would simply be portfolio interest and be exempt.

...

But if the individual is IN the business of lending OR lends as trade receivables and has U.S< . resence, this would be taxable.

...

Can you provide more detail?

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Customer reply replied 1 month ago
A client formed an LLC. His father (non US person) has been contributing funds into the company. We would like to create a loan agreement between the non US person and an LLC. The father is not on the operating agreement and does not have to do anything with the business.

This is not taxable to the father. Personal portfolio interest (personal loans, dividends, depository interest) is exempt for NRA's

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Customer reply replied 1 month ago
Can a loan be zero interest between a non us person and an LLC?

As far as IRS is concerned, yes, becasue, again, this is not taxable income. I the US person were the lender, then (1) the interest would be taxable and (2) the US person lender would have to charge at least the Applicable Federal Rate (AFR) so the loan wouldn't be characterized as a below market loan, with te interested imputed (tax charged as if the rate WERE sufficient)

...

But here U.S has no jurisdiction to tax the Non-Resident Alien, so this doesn't apply in this situation.

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,973
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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