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I have found a gold mining company in Africa that pays 80…

Hello, I have found...

Hello, I have found a gold mining company in Africa that pays 80 percent return on your investment on your investment. I did a little research and found that Kenya's #1 economic growth was in gold mining. Additionally, I plan on going to Kenya and Ghana this year to check it out. My question is what tax implications does this have and what type of income is this treated as for IRS Purposes. Thanks so much Manny

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

I am a disabled man and I know that Social Security allows me to retain my benefits on stocks because it is considered passive income not treated as substantial gainful activity. Please Advise

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Answered in 5 hours by:
3/12/2018
taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,029
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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Welcome to Just Answer! Thank you for giving me the opportunity to assist you! I will do my best to help!

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First of all, I need to warn you to do your homework with more than just the Internet. There are a NUMBER of gold and oil scams out of Africa. I had a client recently who actually worked as an engineer with an oil services company and he invested in a Nigerian oil company that paid huge returns on investment. He lost it all because it was a type of Ponzi scheme. I have read about similar scams using gold and silver.

There are experts, Warren Buffet, for example, who would have bought this company long ago if it was such a great investment. So please be careful!

That said, the character of the income would depend on the vehicle you invest through. If you simply purchased stock on the foreign stock exchange, then the income would be dividends. There would likely be a withholding tax when the company paid the dividend, but you would be able to take a credit for this tax against the US tax on the dividend income. As you stated, dividends do not affect your SSDI.

If you purchased it through a LLC or other type of partnership arrangement, it would likely be a passive investment, as you would likely be a limited partner. Passive investments do not affect your SSDI.

In either case, there would be additional reporting information required when you file your US tax return (possibly a Form 5471, or a Form 8865, possibly others).

I hope this answers your question. Please let me know if you have any more and I will be happy to answer.

Thanks! Have a great week!

Roger

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Customer reply replied 1 month ago
Thank You Roger for your helpful insight to my question. Lastly I want to ask you about your comment "Do Your Homework" answer. I have the name of the Company and the name of their stock in the Johanesburg Stock Exchange. What type of professional do you recommend I get in touch with. Also if I were to invest in this venture will the other party have to pay taxes in Africa? Should I be concerned with the other party's paying of taxes? Thanks Manny

I would first of all he stock through a US broker if you can. There is no SIPC insurance outside of the US. I had several clients buy stock when they were working abroad through the Budapest exchange. The local broker they used gave them statements, and they saw their investment value rise. When they tried to cash out, they found out that the broker was fraudulent and never invested the money, and stole it. They had no recourse. They lost hundreds of thousands of dollars.

Stocks that are available on the Jo'Burg exchange can be purchased through US brokers. Do not buy them through a "friend" or local contact. That is one of the first signs of trouble.

I have been working in international taxes for over 31 years, overall 33+ years' tax experience. I have seen LOTS of fraud. When I hear of good people down on their luck getting opportunities like this, my radar goes up. I hope I am wrong, but I can count on one hand the number of times I have been in situations like this. And I would still have fingers left.

Who is the other party? Again, depending on the structure, they may have to pay tax. Without knowing I can't say.

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Customer reply replied 1 month ago
Okay Roger I will check with a US Stock Broker to check weather the company is valid. Also I want to let you know that as long as I receive my dividend I am not too concerned with losing 20 percent because I am gaining 80 of my investment. The minimum to invest is 3K a month and I would be paid 5k a month how long do you think I should invest the minimum for until I raise my investment. Finally which do you think is better forming a LLC or a partnership with the company. Thanks

I am not concerned with the company itself. You mentioned that you would be investing through a partner. This is the party that I am concerned about. How well do you know him? Has he been vetted? Does he have reputable, verifiable insurance?

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Customer reply replied 1 month ago
I 've known him for over a year through Facebook and messenger. He worked for this company for many years and now he is in charge of marketing. He is not the owner but the company has a Facebook page. My Facebook friend and I share 72 friends in common. I have checked our mutual friends and found out that one is into selling gold coins and another is an investor in the company. I can do a background check on my Facebook friend contact because I have his picture and date of birth but of course all of this info is through Facebook messenger Caller ID on my phone and through HANGOUTS. He has sent me a video of onsite work and continues to tell me that he would like me to go visit the company in Ghana.
Customer reply replied 1 month ago
By the way I do not understand the term you used vetted
Customer reply replied 1 month ago
I also have his gmail and cell#

Please be careful. I just worked with a woman who lives in Australia who got engaged over the Internet to another Austral***** *****ving in Singapore. She said she knew this guy well, they chatted for over almost two years. She was in love with him. Then he told her he wanted to come to see her, but he could not unless he paid a "clearance tax" in Singapore. She said he was self-employed and working there, but was a nonresident. Singapore does have clearance taxes, but only for nonresidents. If he was required to pay it, then he was nonresident. The problem is that you need a work permit to work in Singapore, and they are only granted if you are sponsored by a Singapore company. They do not allow nonresidents to be self-employed. She then learned he was a fraud.

I had another guy who met a woman over the Internet, and they had been "dating" for over a year. He sent her little things, nothing substantial. Then she said that her father, who worked for a gold company (in Ghana, coincidentally) had passed away, and left her with millions of dollars worth of shares in the gold company, and actual physical gold, and that she needed a large sum of cash to pay for the inheritance tax. The problem is, there is NO inheritance tax! This was another scam.

Yet another customer met a girl from Texas. He called her on the phone, Skyped with her, exchanged photos and had a long-term relationship with her. She sent him pictures where she held signs saying that she loved him, and sent some revealing pictures. She received a large inheritance from Africa, and needed cash to pay taxes and exchange fees. She promised him $500k if he advanced her $50k. He had questions, I did a bit of research, and it turns out that she was actually a porn actress, and this was all a scam. And they talked on the phone all the time!

I have several more examples that are similar. I guess I am old school. I do not like to do business with someone I do not know. Until I can look them in the eyes, and shake their hand, I won't do business with them unless I know someone very very well who has met them in person and can vouch for them.

And vetting means investigating, doing background checks, researching, confirming.

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Gmail accounts are phony all the time. And I can buy a cheap cell phone from WalMart, give a phony name, and I am in the fraud business.

taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,029
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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