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Investor in U.S. Holdings: Tax Liability Turned to Tax Refund

Posted by Ann Irons, CPA

Jan 27, 2016 8:45:37 AM

A client story about how an incorrect tax filing resulting in a tax liability that should have been a tax refund.


The Client

I do the tax work for a client of mine who is not a resident of the United States. The client came to me from a client referral.

My client has a investment portfolio in U.S. holdings primarily consisting of LLC Partnership types of companies. My client does not spend any time in the U.S., restricting his interactions with the U.S. through investments only.

What happened?

He filed his tax return and in the process, because of an error, the pages related to the Swiss Treaty, which exerts his treaty rights got lost. As a result of the lost treaty papers, he got a notice from the U.S. indicating that he owed close to $300,000 in U.S. tax liabilities.

The nature of his investments were the cause of the erroneous calculation of tax liability in that his investment portfolio includes ownership in partnerships who have investments in other partnerships.

This is actually a fairly common occurrence for international investors who own this type of investment. The common cause is when the partnership they partially own has an ownership interest in a partnership that is sold at a huge gain, resulting in a huge capital gain.

The Solution

Ultimately, I created the original tax return and attached the proper treaty papers to it. The tax return was then filed by my clients accountant from his country of residence. Somewhere along the way, the IRS detached the treaty papers. 

I had to contact the IRS on behalf of my client, explain the situation and ultimately correct the error made by submitting the proper treaty paperwork.

What was at stake?

Had I not been involved, my client would have be held liable for a close to $300,000 tax liability. Because I was involved, and had correctly produced the tax return in the first place, I was able to secure a refund for my client for close to $100,000. 

So, in aggregate, a total of close to $400,000 was at stake for my client.


The importance of understanding the tax law as it pertains to international investors investing in U.S. holdings cannot be overstated.

Every tax payer has rights based on their native countries agreements with the United States. In this case, absent the attached papers, the taxpayers rights were ignored, resulting in what could have been a gross miscalculation of my clients liability.

Are you concerned you might be paying too much tax?

If you are an international investor who invests in the United States and want to be sure you don't overpay your fair share of taxes, or that you only pay what you owe, please feel free to contact me for a consultation. 

Topics: Client Stories

About Ann M. Irons, CPA LLC

ann_irons_head_shotAnn spent over 25 years in the financial service industry, gaining knowledge and experience that allows her to provide an array of tax, bookkeeping, and accounting services for her clients. Relying on a stringent code of ethics and a dedication to maintaining the highest industry standards, Ann works hard to ensure her clients receive the quality service they’ve come to expect. A member of AICPA and MSCPA, Ann has also had an article featured in the renowned publication, Banker and Tradesman. 

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