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LOWTAX
OFFSHORE
Partnership Tax Deferral U.S. and Foreign Based Income
My licensee client has purchased a U.S. patent invented by NASA scientist (2007, 24 claims) for the marketing and manufacture of breakthrough state of the art radiation detection technology (lab report, field test, Scientific Evaluation) and has entered into a JV with certified U.S. defense contractor. Worldwide market has been established by INSEAD at $25 billion over next 10 years. Amortization of license cost will provide tax deferred partnership losses at 5:1, with economic substance and substantial expectation of profits. What EU countries other than U.S. and Italy allow partnership tax losses against other income? (Seems Germany, France, Belgium and Sweden do). We also need a private placement agent in EU. Michael
REPLY:
I can answer you for France which i know well: Yes, you can deduct partnership tax losses against other income, but not every income. It must be the "same sort" of income (For example, gains from another partnership are ok, but real estate income wouldn't !) Wouldn't it be better to have a company in a country which allow you to carry forward losses indefinitely (until you finally do profits) ? And even better, with a low corporate tax ? lowtax@live.fr
REPLY:
You can deduct partnership tax losses against other income in Bulgaria.
If my best guess about what you are trying to achieve is correct, there may be a much more efficient solution to the problem. A registered finacial institution (not to be confused with banks or licensed financial brokers), allowed to trade everything, and mark-to-market just any asset, could give you all the flexibility you need. The registration requirements are as low as a limbo bar, and the registration costs are around EUR 5 000.
A private placement agent is readily available, but again, it may be wise to consider some more creative options. Cato, www.marketvectors.bg
REPLY:
In the U.S. partners (or LLC members) may use a portion of partnership debt to increase capital account tax basis, thus to take a greater loss pass through than their contributed capital, caused by amortization of an intangible asset. In this case the license cost is so substantial that the only feasible way for licensee to purchase was promissory note, making a share of that debt available to members to increase tax basis. This is a legitimate (not abusive) tax deferral, much like films or forestry deferrals (also referred to as shelters), where the original tax breaks are so substantial that the investment becomes palatable to "carriage trade" investors in this horrible economy for tax savings. Conversely, equity capital is most difficult today even for the most palatable business opportunity in state of the art technology. Michael
REPLY:
Unfortunately, under the current market conditions, tax breaks, no matter how generous, may not be enough of an incentive. In early June, the private equity guys had an investable $830 billion worldwide, and most of the money outside the US was in Japan and the Middle East.
I would imagine that Mrs. Vatanabe would be of greater assistance than continental Europe.
Good luck Cato
REPLY:
Cato, thanks for that. Wish we had some Japan connections. Michael
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