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Mail Bag #16: Delaware Partnership,  ​State tax obligations, German with US K-1, Pension on FBAR, Retirement rollovers, US Visits 35

Mail Bag #16: Delaware Partnership,  ​State tax obligations, German with US K-1, Pension on FBAR, Retirement rollovers, US Visits 35
Ines Zemelman, EA
21-Sep-18

Delaware Partnership

I have the opportunity to invest in a Delaware limited partnership that will in-turn invest in a Swedish corporation (a tech startup). The DE partnership will have a minority stake in the business (I'm not sure how much) and a board seat on the Swedish co. But me, personally, I will have no control, will be a tiny indirect investor in the Swedish co (less than 5%) and my investment in the DE partnership is completely passive (I have no control rights)

As a limited partner in DE LP you will receive Sch K-1 like from other partnership and will report it on your annual tax return. The fact that DP partnership invest in a foreign company will be reflected on partnership tax return but you personally are not responsible for that filing.

Delaware Partnership

State tax obligations

I am an American living permanently in NZ . I have no financial or property connection in my former state of Colorado. All my finances and property are in NZ. I am choosing to ignore the possibility of owing state taxes there. I haven't lived there for over 18 years. I am about to retire this year and plan to stay in NZ. I filed tax returns with your company for the streamlining process a couple of years ago to get caught up on my previously non filed federal tax returns. I am up to date with my federal tax filing. Am I at risk of penalties with Colorado, considering my circumstances?

From the CO Dept of Revenue:

Living Out of the Country

Individuals who abandon their Colorado domicile and become permanent residents of a foreign country no longer have to file Colorado returns. However, they would have to file a Colorado tax return as a nonresident if they had Colorado-source income (e.g., rental income). Such individuals bear the burden of proving their abandonment of Colorado residency. Continued Colorado residency will be presumed if the individual has not severed all Colorado connections; for example, if the individual still carries a Colorado driver license, votes in Colorado by absentee ballot, and/or still owns a home in Colorado, or returns to Colorado. Thus, you may not file CO state return yet be prepared to provide the proof your abandonment of CO residency should the CO state tax department ever contact you. 

State tax obligations

German with US K-1

I am a German national and UK Resident who receives income and capital gains from a partnership in the US (and therefore receives the K1s). Could you clarify whether these would be subject to taxation in the US?

If a non-US person receives K-1s from the US, they will have to file US tax returns to report that income.

We will be able to determine whether income from K-1 is taxable in the US or not when we see the forms. It depends on the type of partnership and income categories included.

German with US K-1

Pension on FBAR

Pension on FBAR? It is a final salary scheme pension and therefore has no stated value. So it is similar to a social security type pension. It currently pays me a sum of 1500 GBP every month and for the year 2017 I received 17,000 GBP.

I am confused on what to put for FBAR - I cannot give a value of the account, because there is not a value in this kind of pension and it is not in a classic bank account.

If this is true Social Security benefits paid from public funds then it is not reportable on FBAR. If this is a defined benefits employer pension then is is not exempt from FBAR filing. In the unfortunate event of your passing, your next of kin would receive X value from this pension. That is the value to report on FBAR.

Pension on FBAR

Retirement rollovers

I've recently retired and superannuation rollover to new fund .. is the rollover considered a qualified rollover there for not taxable?

Rollover by definition is transfer of pension funds to the equivalent pension fund within the same country.

If you consolidate your Super plan to another Qualified Super plan this is not a taxable event.

If you make a transfer of any other kind (i.e. transfer your Super to the name of your spouse) - this is not a rollover.

If you transferred the plan into a US IRA for instance, or to a French pension fund, that would be taxable - see our article on moving pension plans. If you move within the country to the equivalent fund this is not taxable.

Retirement rollovers

US Visits 35

I am always cautious about how many days I spend in the USA, so that I don’t go over 35 in a 12-month period by mistake. But, I have just been reading about this Bona Fide Foreign Resident Status/Test? The truth is that I left the USA in 1992 to live with my British partner in the UK - and have lived, worked and paid taxes in the UK ever since. So, I am really very well and truly a British resident and even have a British passport - and have no plans to return to the USA to live? So do I still need to worry about the Physical Presence Test, e.g if I want to visit a bit more often to see my (ageing) parents??

Yep - if you meet the Bonafide test, you can go over the 35 days. Note, however, that the judgment of BF is subjective as opposed to PPT which is objective, so keep that in mind to spend too much time in the US (and if you work in the US, this will not be covered by the foreign earned income exclusion). Multiple visits to see the parents will not break the Bona Fide residence qualification.

US Visits 35

Ines Zemelman, EA
Ines Zemelman, EA
founder of Taxes for Expats