S-Corporation for International Real Estate

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Joined: Sat Feb 10, 2018 8:05 pm

S-Corporation for International Real Estate

Post by uhow7 » Thu May 10, 2018 4:25 pm

Hi -

I have always owned land in an East Asian country (inherited). Until 4 years ago, there was an old, unoccupied non-income generating house on the property. As the country has developed, the land prices soared and so in 2013, I decided to develop the property. I demolished the old house, applied for the needed permissions, hired an architect and general contractor, and built 8 apartments on the site. Over 4-5 years, I have spent about $700k on it, all of it from my savings in the US, and I am just starting to work on renting it out. I expect to generate about $4800 a month on it after accounting for rental maintenance expenses. I was wondering what the smartest way to manage the tax situation will be for me, in the US.

1. Should I create a simple corporation (S corp?) to manage the cash flow, and could I claim all the amount I put in from my savings (I have receipts) as incoming investment, even though it was distributed over the last 4 years? Can I offset the rental income I will now generate against this investment and the maintenance costs borne by me? The building is in my name, not the S corporation, so I am wondering if this is feasible.

2. Could I do the same thing (offsetting future income from rental vs my investment) without creating a corporation, treating it just like I would treat a rental property in the US?

3. Have I made a mistake by not figuring out the US tax structure before I plowed in the investment - have I lost the ability to do something smart about this. (I am aware of the tax situation in the Asian country and they have a tax treaty with the US - so I am not liable for double taxation on income generated).

Thank you!

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