All Forum Posts by: Vikram C.

JM, is it that hard for your dad and your friend to wire the money back to their foreign banks and then start all over again the correct way? This should be very easy, to be honest. If their country makes it hard to send the money back out, then have them open bank accounts in Canada, Singapore, the U.K., or any country other than the U.S. Have them send the money to that new account. And then start the right way as I have explained earlier.

Is that going to be a problem for your dad and your friend?

Jason, banks are only required to report cash transactions (or cash equivalents) of $10,000 or more. A wire transfer or check does not have to be reported. Banks also have to report other suspicious activities to FinCEN, but a gift from a foreigner, by itself, is fairly common in the immigrant communities and will not raise suspicion.

There is no gift tax on a gift from a non-resident alien to a U.S. citizen if the gift is made outside the U.S.. This means a foreigner can give you as big a gift as he wants. The gift has to be of property outside the U.S. though, which means a wire from abroad (or foreign check given to you when you are abroad) of any amount will be fine.

It is really important that you pay attention to the place of the gift. In this thread and your other thread, I get the feeling that you are not understanding the important of that.

I don't want to substitute for a CPA or attorney. You really need to consult a good one to make sure everything is done well.

1. Your dad already has money in a bank account in the U.S. under his name.

2. You should open one under your name as well.

3. Set up your LLC and open a third bank account under the LLC's name.

4. Your dad makes a declaration of gift to you and wires the money to your personal bank account.

5. You then wire the money to your LLC's bank account as your equity contribution.

I am assuning you are a U.S. taxpayer. If not, you have more complications, such as FIRPTA. You really need to consider paying a lawyer to help you. Most lawyers and CPAs are not good, so you need to find a good one in your town.

It depends on your goals. My father would not give me $100K.

In your case, your dad's bank is correct with respect to the interest they pay him. But the interest that your company pays him is subject to different rules.

In any event, you have stated that he wants to make a gift to you, so all you need to do is to have a document stating the gift so that there is no issue with that in the future. In addition, certain gifts and bequests from non-resident-aliens, although not subject to taxes, need to be reported to the IRS. Please check form 3520.

Have your dad make the gift to you, not your company. Then you invest the funds into your company as your equity contribution.

I do agree with Bill that charging a fee for something makes it different in the eyes of the law. You could potentially expose yourself to liability so I would suggest that anyone offering this service have a fairly clear disclaimer that he is not providing home inspection service and his client should engage the services of a home inspector prior to acquiring the property.

This is the most misspelled word in the whole country. Drives me nuts!

J.M., I need to start by saying that what I say is neither legal nor tax advice. You should consult a good lawyer or a good cpa for expert advice. I should also mention that the U.S. has tax treaties with various countries and what I am about to say may not apply to you, a Canadian.

You mention that your goal is to buy an REO and then flip it. Do you plan to do just one deal or are you planning to make a business out of it? If I were to do just one deal, I would probably not focus very much on the entity structure and just do it under my name and avoid the costs and complications of a business entity.

But, as is more likely, you are probably planning to do many transactions and not just one. In this case, it is best to have an entity that limits your liability. If you are planning to do all your flips in one state, then your decision is easy - create your entity in that state. If you plan to flip in several states, you may wish to consider a holding entity in Delaware or Nevada with subsidiaries in each state. Or you can register your holding company in each state as a foreign entity, but I do not recommend that approach. One other option, if you plan to do only one transaction in a state, is to consider doing it from your out-of-state entity. Most people on BP do not recommend that option because it can run afoul of the "doing business" laws of the state. But I have done it before and think that a one-off transaction can be claimed not "doing business", although I admit it is risky.

Now, regarding your dad and his money.

You may recall that I had mentioned that interest on a registered portfolio debt is exempt from U.S. taxes. You will encounter two problems with using that exemption. First, that exemption is only available to a loan that has no U.S. connection - the foreigner will have to wire it from his foreign account to the borrower's U.S. account and the interest has to be wired back out of the U.S. As the money has already been wired to the U.S., you guys have screwed things up a bit. Of course, you can undo the whole thing by reversing the flow of money, but you have one more problem to deal with: The exemption is only available to loans from third parties. Your father is considered a "related party" and therefore a loan from him to you is not considered a true loan. (Father-in-law is not related, but father is.)

Regarding the documentation, I always like to have loans documented. This prevents future misunderstandings between the parties. Even if you are unlikely to have a misunderstanding with your dad, others could create problems for you. For example, someone could sue your dad, if he has other assets in the U.S., in the claim that he is the de facto owner of your company. Or some government entity may try to impose withholding taxes on the profits with a similar claim. Or someone may do due diligence on your company and find that it is lacking paperwork on some critical transaction.

Obviously, if your father lends you money to flip houses, he will expect you to pay him interest on the loan. Based on what I have seen, loans to flippers secured by a first position deed of trust are often earning interest of around 18% or so, after accounting for the costs of points. If your dad is giving you an unsecured loan, I would not be surprised if he were to expect a higher rate of interest from you. Obviously, he will want to lend you money from an entity in a tax-free state so that he does not have to pay both federal and state income taxes on the money. Since your dad is a related party, be careful to document the justification for the interest rate on the loan by contacting HML and unsecured lenders in your area and getting rate quotes from them.

These are just some thoughts that come to my mind and I am by no means an expert on these subjects.

Various home inspectors' associations have been lobbying the various states to require licensing. This is fairly normal practice in the U.S. where different trade or professional groups lobby the states to make entry into their trade difficult for others so that supply is limited. The net result of all this has been a highly regulated and bureaucratically bloated system that causes prices to go up. It is one of the reasons for our low rate of sustainable GDP growth.

Now that I am done with my rant, let me address Bill's posts. Some states have licensing for home inspectors while some don't. Among the ones that do have licensing for home inspectors, there are very few cases that interpret the licensing requirements or discuss the unauthorized practice of home inspection. I could not spend much time on this project because I have better things to do with my time, but in the interest of saving Bryan's dignity, I spent half an hour on some research into the case law. Pretty much all the case law is at the administrative level (ALJs, etc.) and you can expect them, as government employees, to interpret the law broadly so that the maximum number of people are required to be licensed. In spite of this bias, pretty much all the decisions only stated that a person could not present himself as a "home inspector" without a license. There was not a single ruling that a person who does not present himself as a home inspector, but provides information, pictures, etc. about a property, needs to be licensed.

One of the things about the law is that we have to interpret them with some common sense. Otherwise, we will take things out of their natural context with weird results. I think Bill took both the OP's posts out of context and also the vetoed GA law out of context and came to his conclusions.

Disclaimer: Nothing contained in this post is a legal opinion or intended to be one!

It sounds to me like your husband perhaps threatened them with a suit or other such consequences? It is best to pick fights with people after you get your money back.