Pre-Immigration
TAX PLANNING
by Jacob Stein
The recent decade has seen a significant inflow of wealthy EB-5 immigrants to the United States. The
move to the United States exposes these immigrants to the U.S. tax system, which taxes them on
worldwide income and imposes an estate tax on their worldwide assets. With proper planning U.S.
income and estate taxation of wealthy immigrants can be significantly minimized.
Overview of U.S. Taxation
There are three ways a country can define its tax borders:
citizen-based, residence-based and territorial. A citizen-based tax
system taxes all income earned by a citizen, regardless of where
the citizen lives or where the income is earned. The residencebased model taxes worldwide income of those individuals who
are resident in the country. The territorial system taxes only the
income earned within that country.
The United States uses both the citizen-based tax system and
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the residence-based tax system. U.S. citizens and U.S. income
tax residents are subject to U.S. taxation on their worldwide
income (net of deductions) as well as reporting requirements on
certain foreign financial assets. Conversely, nonresident aliens
(non-U.S. citizens and non-U.S. tax residents, “NRAs”) are
subject to U.S. income tax only on their investment income
from U.S. sources and income from a U.S. trade or business.
Similarly, the United States imposes an estate tax on the
worldwide holdings of its citizens and tax residents.
EB5 INVESTORS MAGAZINE