Thomas C. Roberge & Company

CAPITAL GAINS TAX RATE CONSIDERATIONS

FOR FOREIGN INVESTORS

November 12, 2005

St. Petersburg and Sarasota

Telephone: (727) 822-9393

We want to share some often over-looked considerations to be aware when U.S. real estate is sold by foreign persons.

The U.S. only imposes a 15% capital gains tax rate on real estate gains realized by individuals. This rate is one of the lowest in the world. Believe us, real estate is one of the best tax shelters there is! We have clients from countries that impose capital gain rates of 40%, 50% and higher! Furthermore, most of these countries allow their residents to claim relief against their home country capital gains tax for the amount paid to the IRS. For example, Canada imposes a maximum capital gains tax rate of about 23% and allows a credit for the Canadian dollar equivalent for the 15% tax paid to the United States, leaving a net tax payable of about 8%.

You should obtain tax advice from your home country tax adviser before consummating a real estate sale here. We frequently communicate with our client’s home country tax advisors to achieve the optimum tax results in both countries. With computerization and exchange of information by the IRS and the tax authorities in tax treaty countries, there is considerable likelihood that your real estate sale here will be known by the tax authorities in your home country.

Many people advise foreign real estate sellers to use what is referred to as a “Section 1031” tax-deferred exchange to avoid paying U.S. taxes currently without considering the tax impact in the seller’s home country. This can create a significant tax problem in the seller’s home country for various reasons. Canada and the United Kingdom are examples. You should contact us whenever you want to structure a “1031” exchange.

Numerous tax changes affecting foreign investors are in process. We will discuss them in future newsletters.

In the meantime keep your questions coming.

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.