QUESTION: Panama seems to be the hot topic these days. As a US person
I have investigated 2 companies that offer forestry investments in
Panama. These investments include title and deed to the land the trees
are planted on. One company offers a more private and expidited route
that involves being a director of a Panamanian company. The other
company titles the land directly in my name. I have read the
requirements of the IRS concerning involvement in offshore companies
and I don't think I want to go there. If the land (investment) is
titled in my name would their be any necessary filings with the IRS?

REPLY: Direct ownership in your name would be less complicated and
would require less reporting for U.S. tax purposes. However, if you
own the land in your name, your heirs may be subject to some Panama
transfer taxes or estate taxes upon your death. In addition, the
property might be more easily attached by an unexpected judgement
creditor.

On the other hand, a U.S. person who is a director and/or owner of a
Panama company will probably have to file a Form 5471 each year and a
Form 926 for any year when funds or assets are transferred to the
company. As mentioned in many previous memos, the tax rules for a
controlled foreign corporation (CFC) can be complicated and sometimes
can be unfavorable. To avoid the tax treatment of a CFC, a U.S. owner
can usually elect to have the CFC treated as a foreign partnership
(more than one owner) or as a proprietorship (one owner).

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

Vern Jacobs