Seems like everyone has been off Island, in one form vacation or another, during the dog days of August. You've probably had such a good time, you'd rather be there than here. Thought processes are churning, perhaps planning for the next trip with a bit more permanence at the end.

Anecdotal conversations are out there about enterprising Bermuda residents shopping for distressed real estate property deals in the United States. And why not, the real estate markets in the US are still sluggish, if not downright still. Prices there compared to here for tangibility and real ownership are incredibly tempting. It may be the only opportunity for some to enjoy home ownership, even if it is part-time.

For the foreign national, purchasing and owning property abroad can bring with it more paperwork and responsibilities than originally imagined. Each decision made during the enjoyment, life of, and use of the property has current and future consequences, both from a United States immigration, Federal and State tax, legal, and risk management perspective as well as for the foreign national's home country.

Starting at the beginning.

You are ready to make an offer on the property; it is a steal at 50 percent of original sales. The real estate agent is anxious to close the deal - the push is on. How will the property be titled? Where is the cash coming from? Where will it go? What kind of a bank account will you use? Who will be the account holder(s)? Who is contributing the money - you, your spouse, your family? Who originally earned the source funds? Is there a loan, who will be the guarantor? If you are a couple, is this a dual status (US and Bermuda) citizenship transaction? How will you get there? How much time will you spend in the US? How will the property be used: by the family, as a part-time vacation enterprise, as a full-time US source rental income-lease driven business?

Opening a bank account.

You aren't allowed to walk into the United States with a bucket loader full of cash, at least not legally. You will need a bank account, at some point, even if you originally can send your purchase deposits directly to the escrow agent. Further documentation required to open your account will depend upon the area you've selected for investment purchase and the financial institution's updated compliance procedures. We've noted that old US bank accounts held by foreign nationals, opened without a social security number or an ITIN number years ago - are now being asked to provide this documentation for various income producing activities. This will require additional work on the part of the foreign national, though some institutions appear to be lending a helping hand.

Real estate property titling.

The most familiar ways used to structure foreign ownership of US real estate is by direct individual ownership, or indirectly, by the use of a corporation, or a trust, or a partnership. Individual ownership has subgroups of classifications. You can own it

• As an individual. Where is your tax and estate planning for when you become incapacitated, and when you pass on? Will the property and your other assets be subject to US probate? Will your foreign will be honored (if you have one), or could your foreign assets be brought into the US estate tax calculation? If you are a US citizen, US tax rules will come into play, but additional income, gift and estate planning will be needed if yours is a multi-national family. If you are a foreign national, you may need to apply for a special registration number (see ITIN above) with US Internal Revenue Service.

• As joint tenants with rights of survivorship, meaning that the property goes to the surviving spouse. Foreign national couples, owning property jointly, will be treated separately for US estate planning purposes. The premise is that the first to pass away provided all funds to purchase the assets, thereby possibly doubling up the estate tax liability. Keeping very good records can mitigate that premise under the so-called tracing rules. Are you a dual status couple? US citizens/foreign nationals owning assets jointly, such as property, investment and bank accounts may inadvertently trigger US gift tax issues during life. US Federal and State estate tax law also treat US citizen estates very differently than foreign national estate ownership at passing.

• As tenants-in-common - the property will be conveyed to designated beneficiaries other than the surviving spouse, a planning strategy for extended family situations. All of the above may apply.

• As community property (there are a number of states that have community property regulations) which brings an entire new set of rules and issues to add to the complexity.

If ownership is indirect, that is by owning shares of a foreign corporation or a foreign trust purchasing the property, a different viewpoint toward taxes is achieved. Foreign Individuals holding shares in a foreign corporation that owns the real estate, may avoid filing US individual income tax returns and avoid US estate tax. Corporate income is taxed at a higher rate, if the property becomes a business income producer. If the shareholders wish to sell the underlying real estate, they, in effect, have to sell the shares; a US domestic buyer may be reluctant to own such a structure (a private foreign corporation). The foreign company shareholders may be faced with figuring out how to get rid of the corporation in order to effect the sale, probably not accomplished without cost and possible tax impact.

If the US real estate is owned by a foreign trust, there are new deemed benefit rules recently passed that view the use of the property by US citizens or residents as a taxable event.

No matter your choice of state, town, property, and price range, always clarify your decision with the titling agency or bank handling the sale. First, though, if you have beneficiaries and assets that you wish to protect, planning with a competent US international financial planner and attorney is a must. It may require additional paperwork to implement a US or foreign incorporation, or trust, or other structure, but your ultimate goal is to obtain tax efficiency and seamless ownership.

Readers have made on comments on other articles about foreign nationals owning US real estate, including relevant advice provided on the right way to handle these transactions. "What if I rent my condo, or if I open a business? They want to operate appropriately in their new fun place to be. It is the only way to operate. Besides, it is easy today to find out who owns what, when, how much and where situated. Most deed registries in the United States are fully computerised. Searches for site plans, ownership, and real estate tax assessments are available with an electronic click. Coupled with Google GPS mapping, the powers-that-be are becoming the knowers of all things about residents in their country. The Service can cross reference registry of deeds for asset ownership against lifestyle income stated on taxpayer's annual tax returns (or never reported). Financial institutions report a regular roster of account activity to US Internal Revenue Service and other agencies.

Border crossing debacle - you can't get there from here.

Besides the US income, gift, estate, and commercial business implications, there is the immigration/customs factor. You've got this lovely condominium on the beach. You've been renting it seasonally by the week. What a great investment! With those profits, now, it is your turn to kickback and relax, only you can't get there. Not this week, next week, and maybe not until next year. The days of wafting to and from Bermuda onshore / offshore as a foreign national are over.

"Entry into the United States is not just a casual encounter. It would be responsible to state that entry into any other country is not casual, far from it. Borders and crossings are controlled these days more tightly than ever, except when they aren't - as in those where illegal aliens seek constantly to embrace freedom. With that admittance comes a very tacit understanding: you are receiving the right to reside in the country (even temporarily) in exchange for adherence to the laws of the land, including filing and paying US taxes if your business endeavors require you to do so." Source: Tom Spott

Be very clear; no matter how much property you own and investments you have made, unless you are able to navigate the immigration maze to become a lawful resident of another country (or are fortunate to be married to a citizen, you are a guest, only a guest.

Second most important fact. Keep very, very good records.

Next article - October - we look at some composite cases.

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP - Bermuda is an international Certified Financial Planner™ practitioner in a multi-family office for private wealth management. She specializes in independent fee-only cross border investment, tax, estate, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or 296-3528 at Patterson Partners Ltd.