Source: https://www.districtofcolumbiataxattorney.com/articles/whats-your-alien-tax-status-and-how-does-it-affect-investment-property/
Timestamp: 2020-07-07 19:56:49
Document Index: 189999116

Matched Legal Cases: ['§7701', '§7701', '§301', '§301', '§871', '§871', '§1', '§1']

What's Your Alien Tax Status and How Does it Affect Investment Property? | Frost Law | Washington DC
Home » Blogs » What’s Your Alien Tax Status and How Does it Affect Investment Property?
Eli S. Noff, Esq.,CPA, Partner
Additionally, if one is unable to leave the U.S. due to a medical condition, said person may fill out a Form 8843, ​Statement for Exempt Individuals and Individuals With a MedicalCondition,with their tax return to exclude those days from their day count. While qualifying for one of these exemptions may preclude U.S. resident qualification and the corresponding tax responsibilities of a U.S. citizen, there are still applicable non-resident tax laws.
Without an exemption, one would need an exception to the substantial presence test, in order to demonstrate nonresident alien status. There are two exceptions available, based on showing a closer connection to a foreign country, that may apply. One of the closer connection exceptions is available to all aliens that qualify,​1while the other exception is only available to qualifying students.2For both exceptions, there are numerous factors that influence whether or a person has maintained more substantial contacts with the foreign country than with the U.S.3Such factors include, but are not limited to:
The closer connection exception available to a foreign student applies if he or she does not intend to reside in the U.S. permanently; has substantially complied with the laws and requirements governing his or her student nonimmigrant status; has not taken any steps to become a permanent resident of the U.S.; and has a closer connection, as evidenced by the factors listed above, to a foreign country.
Finally, along with their tax return, one must file either Form 8840, ​Closer ConnectionException Statement for Aliens,or in the case of a student exception, Form 8843,​Statement for Exempt Individuals and Individuals With a Medical Condition.4
Significantly, non-U.S. residents who invest in U.S. property, may elect ECI treatment rather than subject themselves to FDAP treatment.5The choice between FDAP and ECI treatment may result in substantially different effective tax rates. Consider the following examples (which do not include depreciation):
A taxpayer makes the ECI election by filing a statement with their return. If the taxpayer fails to attach the statement with the original return, he or she may make the election on an amended return, so long as it is within the statute of limitations (usually 3 years).6The statement must include the following:
Failure to file and pay taxes as a visa or green card holder may lead to several penalties handed out by the IRS or the USCIS. These penalties may harm a person’s chances in being approved for adjustment of status, visa extensions or renewals, or the naturalization and citizenship process. Additionally, if deemed serious enough, deportation or removal from the U.S. may result. For these reasons, knowing your status and tax responsibilities that come along with your status is very important for all non-citizens. For a full list of visas and the taxes that apply to them visit ​here​.The election does not otherwise result in the property being treated as a trade or business for other purposes under the Code. For example, it does not convert the property from capital gain property to ordinary income property because of being used in a trade or business.
1I.R.C. §7701(b)(3)(B) and (C).
2I.R.C. §7701(b)(5)(D) and (E).
3Treas. Reg. §301.7701(b)-2.
4SeeTreas. Reg. §301.7701(b)-8(d)(2) for a very limited exception for failing to file Form 8840.
5I.R.C. §871(d).
6I.R.C. §871(d)(3); Reg. §1.871-10(d)(1)(iii). Note that once the taxpayer makes the ECI election, the taxpayer should notify the withholding agent on Form W-8ECI.
7I.R.C. §1.871-10(d)(1)(ii).