The Four Questions: Answering Foreign Investors’ Most Frequently Asked Questions on the Founding Principles behind the United States System of Taxation

By Jack Brister EA, MBA, TEP

T H E F O U R Q U E S T I O N S is written to answer foreign investors’ most frequently asked questions on the founding principles behind the United States’ system of taxation.

These are the four questions I have been asked again and again in my 25 years of serving wealthy international families, high net worth individuals, foreign trustees and business looking to expand into the United States market:

(1) What is it about Americans that keeps them moving forward regardless of their situation and circumstances? (2) How does the U.S. justify the implementation of a world- wide tax regardless of where a U.S. person resides? (3) Why and how does substance dictate the taxation of a transaction or structure?
(4) How is it that the U.S. government requires so much disclosure on tax returns and at the same time has other laws protecting privacy rights?

The U.S. federal income tax system is unique compared to the rest of the world, because it employs a citizenship-based taxation system where the government’s right to tax is based on a taxpayer’s citizenship status.This is colloquially known as worldwide taxation. Almost every other country employs a residence-based taxation system where the right to tax is based on a taxpayer’s residence in the country. This is colloquially known as territorial taxation. The tax systems of many countries have evolved through a patchwork of additional disclosure requirements for international transactions. This has been — and continues to be — a challenge because of the purpose served by territorial tax systems implemented by the majority of the world.

Territorial tax systems act as a complement to civil law (Napoleonic law based on the Roman legal system) and Sharia law systems (religious-based legal systems). These legal systems make it difficult to implement tax rules based on the substance of a transaction versus the form of the transaction. But where does the value lie in these systems? The principal value of a territorial tax system is to fund government services whereas the primary value of the U.S. tax system is something more intangible. It is citizenship : the benefit of association with the seat of world economic power.

This e-book also answers several specific cross-border tax questions that International Wealth Tax Advisors clients have routinely asked over the years. For example, clients have a lot of interest in foreign trusts: what are they and how do they operate? They have similar questions about FATCA: what is it and what are my reporting obligations? They also have many questions about FBAR reporting.

As a bonus to the ebook, this afterward will list some of the most popular client questions we receive, along with Jack Brister’s short answers to each and web links to related content.

• Language: English
• Publisher: Jack Brister EA, MBA, TEP
• Release date: Mar 15, 2023
• ISBN: 9798215053140

Jack Brister EA, MBA, TEP

Jack Brister has over 30 years of experience in forensic accounting, international tax and tax law consulting. He founded International Wealth Tax Advisors (IWTA) in 2015 to specialize in servicing international private clients, foreign businesses desiring to do business in the U.S., and individuals working and living abroad. IWTA is headquartered on Avenue of the Americas in New York City.Jack started his career embedded in the U.S. Internal Revenue Service’s Criminal Investigation Unit. He worked on a variety of multi-jurisdictional cases in cooperation with federal, state and local law enforcement agencies that investigate and prosecute tax evasion, as well as white collar crimes and violent crimes with a financial and tax component.Since moving to the private sector, Jack has been servicing and advising international families, investors and foreign businesses with U.S. inbound income and estate tax matters for over 25 years. He also advises individual clients working and living outside their home country. Jack’s extensive experience working with the IRS along with his almost encyclopedic knowledge of complex tax codes and tax laws enables him to help clients turn potential problems into opportunities and mitigate financial risk.Jack specializes in integrated income and estate tax planning. He consults extensively for global clients on the state and local tax implications arising when foreign businesses establish operations in the U.S or plan on selling their products to U.S. consumers. He works closely with clients and their legal team to anticipate and plan for maximizing wealth and minimizing U.S. income, estate, gift and State excise taxes that apply to foreign businesses selling their products or services to U.S. customers.His clients include multinational families, investors, international businesses and U.S. taxpayers working and living abroad. His clients are from and live in various regions of the world such as Western Europe, Singapore, India, Australia, New Zealand, Brazil, Peru, Ecuador, Mexico and the Middle East .Before founding International Wealth Tax Advisors for the purpose of servicing clients with U.S. inbound transactions and those individuals working and living abroad, Jack was the international tax group leader for two large national CPA firms. He also assisted and advised other international clients while at CPA firm Deloitte & Touche.He has served and continues to serve as the U.S. tax counsel to the Brazilian international passenger airline Azul Linhas Aereas Brasileiras . In 2021, Jack became a regular contributor to JD Supra , the daily business-to-business publication for breaking news and expert information in legal, financial, business and tax news and compliance for the C Suite. In addition, Jack has been a contributor to Lexis’ FATCA & CRS Guide, edited by Professor William Byrnes, Executive Professor of Law – Texas A&M University Jack penned the article, Foreign Trusts: The Capital Loss Debate, published by the professional journal Trust & Estates, cited by the legal community as the leading authority specializing in international trust and estate matters. Jack Brister is a regular speaker and presenter on international tax matters.JACK R. BRISTER EA, MBA, TEP MANAGING MEMBER & FOUNDER

Book preview

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