Postby DavidTreitel » Sat Mar 07, 2015 10:43 am
So currently your son is US resident and a US citizen. He reports the rental income and expenses on his annual US return and if there are losses he is potentially setting these against his other income (subject to passive activity loss limitation rules).
You are thinking that he should create a Controlled Foreign Company; and potentially find himself within Subpart F on the income in future. This will not avoid US income tax on the growth in value when the property is sold, so I am not sure that I understand the advantage for your son. I can see a potential advantage for his accountants, because the new company will have annual UK and US accounting fees to be paid; so the accountants will win here; but this seems poor tax planning as it would save no tax at all unless UK tax rates on the eventual gain were to be significantly greater than US rates.