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Rn Introduction to the Reluctant RmericanTerminologyLET US DISCUSS terminology at the onset. If at any time you see aword you don't recognize, go to Appendix A for assistance. I usethe terms foreign, offshore, transnational, worldwide, global, crossborder,international, transworld, and multinational, in this book,but I'm not yet ready for the term global village. My preference isthe modern term offshore (os), a word being used by most of theglobal community. 0s is an international term meaning not only outof your country (jurisdiction), but possibly out of the tax reach ofyour country of residence, domicile, or citizenship. The term foreigncarries confusion, and I avoid it-except in Chapter 11, whereit is appropriate in the context of U.S. taxation and IRS reporting.For example, a Delaware corporation operating in California is characterizedby the State of California as a foreign corporation doingbusiness in California. The Internal Revenue Service uses a numberof tests to label a trust as a foreign trust. Some of the tests are:I. Under 1996 tax laws, a domestic (onshore) trust is onewhich is subject to the jurisdiction of a U.S. court.
2 THE OFFSHOR,t HOHEY BOOK2. It is a domestic trust where the primary supervision andcontrol is by one or more U.S. persons who have authorityto control all substantial decisions of the trust.3. Every other trust is a foreign (offshore) trust. Elsewhere inthe book I refer to a foreign trust as an asset protectiontrust (APT).All the IRS forms for reporting transfers offshore, parties to anoffshore trust, or offshore ownership of corporations are couched interms of foreign trusts. The terminology is inconsistent: the meaningsof some words differ depending on with whom you are speakingand the subject at hand. I will use the word foreign whenreferring to IRS tax forms and U.S. taxes for consistency with theInternal Revenue Code (IRC).Further compounding the terminology problem is the U.S.mutual fund industry's use of the terms global fund and internationalfund. A global fund is defined as a fund that invests in the U.S.and offshore, while an international fund invests only offshore.Offshore doesn't necessarily refer to some tropical island jurisdiction.Austria, Liechtenstein,' Ireland,z Monaco, the U.S;, Switzerland,Luxembourg, the Netherlands, ~ibraltar, and Andorra, toname a few, are considered to be offshore and, by some, to be taxhavens. It depends on who you are; your citizenship, residency, anddomicile; your source of income; your objectives; and favorable taxtreatment under double-tax treaties.The IRS has labeled numerous jurisdictions as being used primarilyto reduce tax liabilities and restructure income. In additionto the more commonly known or high-profile tax havens, the IRSincludes Bahrain, Grenada, Nauru, the ~urks and Caicos Islands(TCI), and Vanuatu.Are You a Reluctant American?You are a reluctant American if one or more of the following itemsapplies to you:
Page 1 and 2: 1 Holu to Noue Rssets OffshoreYand
Page 3 and 4: To JUDIE, MY WIFE.MY THANKS FOR YOU
Page 5 and 6: Basic Offshore EntitiesWhat Can an
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Page 31 and 32: 6 THE OFfSHORE ROHEY BOOK8. You can
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thanshariden54
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offshore trusts carrone or more ent
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58 THE O F F S ~ O R E HOHEY B O O
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60 THE OFFSHORE HONEY BOOKTax Regim
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62 THE 0fFSH.ORE HOHEY B O O KPriua
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64 THE OfFSH.ORE HOHEY B O O K2. Su
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66 T H E OFFSHORE HOHEY B O O KFigu
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68 T H E O F F S H O R E I O H E Y
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The O f f F e Asset Protection Trus
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THf O f f S H O R L I S S E T P A O
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THEOFFSHORE ASSLFigure 7.1: Der Aff
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T H E O f F S H O R L R S S E T P R
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It enablesin investmcitizens. Tearl
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T H E O f f S H O R ~ A S S E T P R
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THannual reports to thetrust is req
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T H i O F F S H O A E A S S E T PAO
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IHE O F F S H O R i ASSET PROTECTIO
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THE OFFSHORE flSSFT PROTECTIOH TRUS
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T H EO F F S H O RDuress PYour well
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94 T H E O F F S H O A E B O H E Y
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96 T H E O f F S H O R b H O H E Y
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98 THE"legal" settlosettlor," sompe
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O F F S H O R I B A N K S R H D R I
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OFFSHORE B A H K S AH0 RELATED BANK
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108 THE O F f S H O R E M O N E Y B
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Your bank's letterheadJanuary 12, 2
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O F F S H O R E B A N K S A H D R E
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O f F S H O R E B R H K S A N D R E
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124 THF OFFSHORE H O H E Y B O O Kn
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126 T H E O F F S H O R E HOHEY B O
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ThisthanThecapiaddicomHonothewithUn
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132stanResresijuricenusuamayandDomh
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O T H E R S T R U C T U R E S R H O
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PoliliveStatProxandoveYoulangreligt
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140 THE O F F S H O I f ROHfY B O O
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144 THE 0FFS.HORE H O H E Y BOOK5.
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uo = uni6corporatedBusiness Organiz
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O T H F R S T R U C T U R E S A H D
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O I H E R S l R V E l U R E S RHO S
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154 THE 0FFSHORE.HOHEY BOOKtime of
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property, it can avthe normal indic
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I58 T H E O F f S H O R F HOHEY B O
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160 THE OFFSHORE I O H E Y BOOK,, 1
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are pratefees.A faibasisdischagainI
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I. Bona fide residence test. To sat
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166 IHEU.S. compprovidingtest and p
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Tax Treatment, Ramifications, and D
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TThe IRS presumeneutral flow-throto
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I R X TREATMENT, RRMIFICATIONS. A H
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T A X TREATREHT, A A H I F I C R T
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WiTsnatnyNm
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T A X TRtflTMLHT, R R H I F I C A T
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T R X T R E A T I E H T . A A I I F
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T R X T R E A T H ~ N T . R R M I F
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T A X T R F R T H F H T , R A H I F
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188 T H f O F F S H O R E M O H f Y
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puzzle, but it can bemine told me t
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192 T H E O f f S H O R f MONEY B O
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194 THE OFFSHORE HOHEY R O O Koffsh
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196 T H E O F F S H O R E H O N E Y
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198 T H f O F F S H O R E M O N f Y
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Applying Ulhat You Have learnedSucc
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204 THE O F F S H O R E MONlY B O O
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R P P L Y I H C UlHtlT Y O U H A U
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RPPLYIHC U I H R T Y O U H A U L II
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RPPLYIHG UlHRT Y O U H R U [ LERRHE
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APPLYIHC W H A TPitfalls of Brib(In
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lPPlYlHC UlHAT Y O U HtlUE L f R R
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APT = Asset protupon the haveBWI =
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4 Antigua has a hisuccessful 1998 d
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a guarantee up to rois essential fo
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226 T H E O f F S H O R E M O N E Y
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228 THE O F F S H O R F H O H E Y B
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judge held, the Cook Islandssaid to
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T A X HflUfHS O F THE WORLO 233.;er
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8 Jersey is c~nmany. It is an excin
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T R X H R U E N S 01: THf UIORLO 23
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242 T H E O f F S H O R F H O N E Y
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Clossar yabusive tmsts. A sham comb
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APT. Seearticlescles of inration ar
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that failed spectdle Eastern oilinf
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Nevis, St. Lucia, St. Vincent, Suri
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consol. An obligation that has no m
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ectly to the regulation (including
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flight capitallikely never retical
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I. Shareholders' liabguaranty.2. Pe
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264 THE OFFSHORE M O I E Y BOOKIRC.
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266 THE O f F S H O R E HONEY BOOKL
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voting and nonvoting, unnumbered, c
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trading program. The bankavoided, a
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PublicationsDISCLAIMER: 1 HAVE no f
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Bulletproof Offshore Asset Protecti
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Legal InfOffsHague Academy of Inter
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ISPI Clips is a free E-mail service
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Asset Protection and Offshore SeruP
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E-mail: richard@assetlaw.comWebsite
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APPEHMoney-Laundering Compliance Ul
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Internet ResourcesDisclaimer. The f
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Barbados lnvestrnent and DeE-mail:
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CubaInternational Trade & Investmen
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of the Eura coins and banknotes. In
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E-mail: fiducia@ekvWebsite: www.lol
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E-mail: siba@seycheWebsite: www.sib
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Abusive trust, 247Accbmmodation add
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Swiss, 105-7breaches of secrecy, 10
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Commercial trustee, 72Committee of
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Exit strategy, implementing,135-36E
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Hybrid annuity, 261Hybrid company,
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Limited liability limitedpartnershi
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Offshore financial industry,extraor
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Restricted business activities, 62R
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British Virgin Islands as, 173,185,
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United States grantor, tax on,172-7
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