QUESTION # 1 - I have a book entitled "Tax Havens of the World"
written by Thomas Azzara. The book was published in 1993. It states
"with proper planning a foreign corporation organized with foreign
shareholders can trade in U.S. stocks and securities 100% tax free."
Would you be able to confirm that current tax law still permits an
offshore IBC to invest in the U.S. with the profits being tax free as
long as there is no U.S. benficiary?

REPLY # 1 - I have a copy of that book but have not read it recently.
If you check Amazon.com you will find a copy of the book that was
published in 2003. However, the reference to foreign shareholders
means non-resident aliens who are not U.S. citizens, nor U.S. green
card holders (permanent residents of the U.S.) and are not resident in
the U.S. Corporations don't have beneficiaries under U.S. tax law. If
any entity does have beneficiaries, it will most likely be treated
as a trust by the IRS. A foreign person is not subject to U.S. taxes
on gains from the sale of U.S. securities. However, different rules
apply to the U.S. shareholders of a foreign entity (trust,
corporation, partnership) that has any U.S. owners.

QUESTION # 2 - Tax law permits a U.S. foundation to be be funded with
pre-tax dollars. Is this also the case if one funds a foreign foundation?

REPLY # 2 - No. A U.S. charitable foundation can be funded with tax
deductible dollars, but the deduction is limited in a variety of ways.
Contributions to a foreign charity are not deductible, unless there is
a treaty that permits residents of each country to deduct
contributions to charities in the reciprocal country, The U.S. and
Canada have such an arrangement, but there are significant limitations
and restrictions.

Also, it is important to distinguish between a family foundation that
functions like a trust and a charitable foundation that must operate
as a charity in order to be treated as a charitable foundation by the
IRS.

QUESTION # 3 - Do you possibly have a web site that would explain the
benefits of an IBC, foreign foundation and U.S. foundation?

REPLY: See http://www.offshorepress.com/vkjcpa/articlesindex.htm for
a variety of articles about offshore tax matters. However, there
aren't any articles about foundations. You can do a search on the
Jacobs Report Yahoo Groups site to find some previous comments about
foundations and in particular the Panama foundation.

Vernon Jacobs

The comments in this memorandum are not intended to constitute an
opinion regarding any specific tax issues because additional tax
issues may exist that could affect the tax treatment of the tax issues
addressed in this memo. This memorandum does not consider or reach a
conclusion with respect to those additional issues and was not written
and cannot be used for the purpose of avoiding penalties under code
section 6662(d). For further details see
http://www.offshorepress.com/vkjcpa/disclosurerules.htm