Best Structure for Investment in U.S. Real Estate

1. Best Structure for Investment in U.S. Real Estate from Guangzhou… … to San Francisco Cindy Hsieh Brian Rowbotham chsieh@rowbotham.com [email_address]

5. CN BVI U.S. Properties U.S. & Non-U.S. Stocks & Bonds Typical “One-Stop Shop” Solution Ownership of U.S. real property by non-U.S. person + Estate tax protection + No gift tax on transfers of non-U.S. stock – U.S. real estate gains in BVI taxed at combined federal and state income tax rate of 40% – Possible “branch profits tax” on “dividend equivalent”

6. U.S. Gift & Estate Taxes Gift Tax U.S. Property $13,000 per year per donee Property outside U.S. -0- Estate Tax U.S. Property $60,000 Property outside U.S. -0- U.S. Real Estate Gift Tax Estate Tax Direct ownership X X Ownership of U.S. Corporation -0- X Ownership of Non-U.S. Corporation -0- -0- Ownership Interest in Partnership -0- * * Not clear in law Chinese Nationals Not Resident in U.S.

7. Compare Sale of Investment Property Buy Property $100 Sell Property 200 Gain $100 A) Individual Tax Federal State Total Tax Gain of $100 15% 6% $21 ******** Compared ******** B) Corporation Tax (1) Income Tax Gain of $100 34% 6% $40 (2) Tax on Dividend Distribution Balance after 40% tax 30% -0- Withholding tax x 60% 18% $18 Total Tax (40% + 18%) = $58 Example of Individual vs. Corporate Tax Rates

8. Federal Tax Operating Income Sale of Property Personal Tax Returns Due 35% 35% 35% 35% 35% 15% 15% 35% 35% 35% Yes Yes No No No CN USRP CN CN USRP USRP U.S. Inc. Non-U.S. Corp. U.S. Inc. CN USRP Non-U.S. Corp. Ownership Structures for U.S. Real Property CN USRP LLC

10. Real Estate Investment Fund Structure U.S. Withholding Taxes GP CN CN Separate LLCs Limited liability Federal Withholding Taxes 35% on operating income Sale by Partnership – withholding tax 15% Individuals, 35% Corporations U.S. Fund Non-U.S. Corp USRP USRP USRP Management Fees Cayman LLC Partners Withholding tax paid on income U.S. LLC U.S. LLC U.S. LLC

11. Avoiding Transfer Taxes by Selling Property to Relatives CN Parents Prop 1 Prop 2 Prop 3 Sale To Children C1 C2 C3 U.S. or Foreign Cost $100 FMV 101 Gain $ 1 - Sale at depressed values avoids - gift tax - estate tax [for generations] - Minimizes income tax [15% rates today] - Dynasty trusts avoids tax for future generations

13. Gift & Estate Tax Rates 2011 FEDERAL ESTATE AND GIFT TAX RATE SCHEDULE