Thomas C. Roberge & Company

TAX PLANNING FOR

MORTGAGE INTEREST DEDUCTIONS

ON U.S. REAL ESTATE OWNED BY FOREIGN PERSONS

May 15, 2007

Thomas C. Roberge & Company

St. Petersburg and Sarasota

Telephone: (727) 822-9393

The weakening U.S. dollar has increased the demand for U.S. real estate by foreign nationals. Many of these investors are borrowing against the equity in their foreign residences to increase the size of their U.S. investments. Part of the reasoning process in borrowing overseas is that many countries have lending rates that are even lower than interest rates here. Also, with their home country currency being stronger, it takes less funds to borrow to acquire their investment in the U.S.

Many of these foreign investors ask us if this mortgage interest is deductible against their U.S. real estate investments to reduce any U.S. income tax payable.

The answer is two-fold. First, the property has to be rental property and they have to file a U.S. nonresident income tax return each year to report the rental income and expenses. In case you are not aware, our firm has a department that prepares and files over 1,200 income tax returns each year for foreign nationals with U.S. rental properties.

Secondly, the mortgage has to be secured by the U.S. real estate for the interest expense to be deductible against the rental income. We have assisted many of our clients in taking the necessary steps to secure their foreign mortgages against their U.S. real estate to preserve this valuable tax write-off.

Please contact us at (727) 822-9393 or (941) 952-5848 if you have questions.

Internal Revenue Service Circular 230 Disclosure – You are hereby advised that any tax advice contained in this newsletter is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or to support the marketing of any tax transactions or matters addressed herein.