Coming out from under questionable tax shelter

BY BARBARA FLOM

Back in the heyday of irrational exuberance, dot-com IPOs punctuated the business news like the sound of champagne corks popping.

Such an embarrassment of riches seethed around the marketplace that not merely CEOs and business owners but even software programmers and file clerks became independently wealthy. There was only one real problem with all this: taxes. No one wanted to pay them.

In this environment, tax shelter schemes proliferated faster than jackrabbits. An army of accountants, consultants, attorneys, banks and other advisers peddled a range of deals whose common themes were complexity, obfuscation and an element of legerdemain. Income vanished; losses sprang from nothing; tax basis multiplied — and taxes disappeared.

Although these deals weren’t cheap, thousands signed up. Some folks engaged in more than one shelter as they reaped repeated gains from an overheated stock market and sought offsetting losses to avoid paying capital gains taxes.

A lot has changed in the intervening years. The Internal Revenue Service, armed with new disclosure rules, has gone on the offensive: creating a list of suspect transactions, pursuing advisers (both for their own violations and for names of the taxpayers they represented), and opening hundreds of audits.

So, if you bought one of these deals, but the IRS hasn’t knocked on your door yet, what should you do?

Ten ways to tell that the “innovative tax strategy” you were sold is really an illegal tax shelter:

1. You first learned about the strategy when a financial adviser became aware that you were about to recognize an enormous capital gain.

2. Before anyone would divulge the details of this “proprietary” strategy, you (and perhaps your other advisers) had to sign a confidentiality agreement.

3. You heard that only highly sophisticated investors use it, but the strategy was identified by an overly cute name such as “Son of BOSS,” “FLIP/OPIS,” “COBRA” or “BLIPS.”

4. When you signed up, you were advised that the strategy was “bulletproof,” a “slam dunk,” and technically complied with the Internal Revenue Code. But afterward, the lengthy written advice (if you read it) concluded that it was only “more likely than not” that your position would be sustained if challenged.

5. The legal opinions also, if you looked closely, relied heavily on your statements that you were using the strategy for a substantial “business purpose” and planned to make a profit.

6. The strategy involved so many esoteric transactions (short sales, options and derivatives such as swaps and forward contracts) and domestic and offshore entities that you wouldn't have known how to make a profit if your life depended on it. Not to mention that it would have been quite difficult to earn a profit after paying the adviser's hefty fees (typically based on a percentage of your tax savings).

7. Your friends who recommended this adviser laugh nervously when you ask how things are going.

8. Your adviser's voicemail greeting now says that until further notice, he can be reached in his Barbados office. No one answers the phone in Barbados.

9. Your adviser's picture appeared on Page 1 of the Wall Street Journal, in an article outlining how the Internal Revenue Service is assessing substantial taxes, interest and penalties against several hundred taxpayers who engaged in transactions that sound just like yours.

10. Your name is mentioned two paragraphs below your adviser's sketch.

— Barbara Flom

First and simplest, if you value a good night’s sleep, you can file an amended return showing the gain you previously had “sheltered,” pay the tax and interest, and sit back. The IRS will probably send you a 20 percent penalty notice, and you’ll likely be audited once or twice just to make sure you’ve learned your lesson.

It’s painful — but peace of mind can be priceless.

But let’s say you’re not ready to put your head on a chopping block. What else can you do? One possibility is to wait until the IRS makes a “global settlement offer” for your particular shelter, and then decide whether to participate in it. The IRS has already made such offers for Son of BOSS and the Executive Option strategies, and taxpayers have been flocking to take advantage of them.

Just last month, the IRS announced that its Son of BOSS offer led to settlement with some 1,200 taxpayers and brought in receipts of $3.7 billion. The typical offer requires a taxpayer to pay all back taxes and interest, but frequently reduces or waives penalties. Note that these offers take a “carrot-and-stick” approach: The IRS makes it plain that taxpayers who do not take the offer will have to go to court to challenge the assessments.

Still not thrilled?

For those who are itching for a good fight, there are two other possibilities (not mutually exclusive):

uSue the IRS, in either Tax Court or federal district court, to overturn the tax assessment.

uSue the adviser(s) who got you into this mess.

Some taxpayers have sued everyone who had any role in advising them to use these strategies. Litigation being much slower than watching paint dry, most of those cases are still in the earliest stages, and it will be several years before we know whether any taxpayer will recover anything meaningful.

Nevertheless, the law firm of Jenkens & Gilchrist recently finalized an $81.6 million putative global settlement with taxpayers it represented in several types of tax shelter transactions. Although this settlement appears substantial, it shouldn’t raise anyone’s hopes too far. The amount is less than the total fees taxpayers allegedly paid the firm for working on the shelter transactions.

Of course, your best result would be not to have to pay the tax you thought you avoided. Currently, hundreds of taxpayers are attempting to challenge IRS tax assessments on Son of BOSS, “Midco” and numerous other “listed transactions” that the IRS has identified as abusive.

It remains to be seen whether the courts will agree with the IRS that any particular transaction is truly unlawful. In recent years, the IRS has both won and lost some very high-profile cases of this type, and several of those decisions are on appeal.

The IRS has done its best, with disclosure rules and penalties, to discourage shelter activity by altering the cost-benefit analysis of both shelter participants and their advisers. But at the end of the day, whether anything has really changed depends on what you do the next time someone offers to show you how to make income disappear.

Barbara Flom is a principal in the corporate, securities and tax group for the Chicago-based law firm Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz Ltd. She can be reached at barbara.flom@goldbergkohn.com.

KPMG faces high price for US government row

KPMG faces fine of up to $500m and restrictions on its US tax practice, as a result of tax shelter row with US government.

Speculation is mounting that KPMG may face a fine of up to $500m (£280m) as well as restrictions on its US tax practice, as a result of its tax shelter row with the US government.

US reports suggested the Big Four firm could face the higher penalties, up from earlier estimates of around £50m-£150m, as a result of its sale of abusive tax shelters.

KPMG is being investigated by US authorities over shelters that allowed around 350 wealthy clients to avoid up to $1.4bn in tax, according to data from US Senate investigations.

There have been suggestions more recently that the firm could face criminal charges, raising the prospect of an Andersen-style collapse.

The partners who sold the shelters have since left the firm, but are still at risk of criminal charges, though the firm itself is thought likely to escape prosecution, according to reports.

The tax shelter investigation refers to tax plans sold between 1996 and 2002. Sources close to the Big Four firm have said that the avoidance schemes were merely part of the culture of the time, in which huge amounts of money were being made on financial markets, and tax advisers in the US and the UK were helping to shield the proceeds from tax.

http://www.financialdirector.co.uk/2141048

Encryption Guru Returns With VoIP Software

'Zfone' encryption program designed to prevent snooping.

John E. Dunn, Techworld.com
Wednesday, July 27, 2005

The man who almost single-handedly invented desktop encryption, Phil Zimmermann, brought his new telephony-oriented encryption program to this week's Black Hat security event in Las Vegas.

The new encryption software--currently known only by its internal development moniker "Zfone"--is designed to stop Voice-over Internet Protocol (VoIP) traffic from being snooped on, especially across broadband links. It sits on top of the open-source Shtoom VoIP client software, with Zimmermann's encryption integrated into the program.

Zimmermann told Techworld that the software uses a Diffie-Hellman-based public key design. This method is session-based, with keys generated for exchange between clients on a per-call basis. Both VoIP clients would need to run the program to set up such a secure link, which makes Zfone similar in principle to the famous PGP desktop encryption program Zimmerman wrote in the early 1990s.

In contrast to emerging VoIP encryption protocols, Zimmermann's scheme rejected a full Public Key Infrastructure (PKI) approach to security, fearing it would add layers of complexity to the software.

Your Digits or Mine?

The current prototype also includes a simple form of authentication, whereby callers exchange a short series of digits with one another. If the two sets of digits don't match, then the call has likely been intercepted by a third party.

It is not the first time Zimmermann has used encryption with VoIP. Nearly a decade ago, he created an application called PGPfone, though it achieved only modest success and is no longer current. "Nine years ago...the Internet hadn't taken off and there was no broadband," he said. Now, however, VoIP is booming, with the conversion of domestic voice calls to the medium looking to be only a matter time.

The product is in its early stages, and Zimmermann is currently in discussion with potential investors for further development funds. To this point, he has created the program using his own money and some from VoIP expert Jeff Pulver. He did not give any timeline for the release of a beta version, but was considering making it available to developers who want it.

"I didn't have any money when I wrote PGP, so hopefully [development] won't take very long," he said.

There is some disagreement about whether VoIP applications currently need encryption security, with a recent Gartner presentation pointing out that few known tools allow for eavesdropping with this form of communication. However, history demonstrates that this will change as VoIP gains popularity.

PCWorld.com - Encryption Guru Returns With VoIP Software

Taxman targets offshore accounts

By Rebecca O’Connor

WEALTHY individuals with offshore savings accounts are being targeted by Revenue & Customs in a crackdown on tax evasion.

Some of the 500 individuals in the Revenue’s sights will receive letters today telling them that they face investigations into their tax affairs and possible criminal prosecution if they do not comply with the Revenue’s demands.

More high-net-worth people will be contacted later, as the Revenue attempts to recover unpaid tax of up to £1 billion.

In the letter sent out yesterday, the Revenue asks for a response within 30 days that justifies why the account- holder believes that no tax liabilities arise from their accounts. If they fail to answer, or their response suggests that they might be liable for tax, there will be an inquiry into their latest tax return. Prosecution will be considered “in the most serious cases”.

UK taxpayers are liable for income tax on interest earned on offshore accounts, including those in the Channel Island and Isle of Man subsidiaries of British banks. The Revenue is also writing to banks, informing them that it knows the details of their customers with offshore accounts. The Revenue has not said how it identified the 500 savers, but it says that banks have a legal obligation to provide information about account-holders if requested.

Tax experts have branded this latest attempt by the Revenue to uncover offshore tax fraud as “heavy-handed”, with some claiming that the Government was contravening the tax investigation rules. Andrew Watt, director of tax investigations at Chiltern, a tax consultancy, said: “Many people are unaware of whether their overseas income is taxable in the UK. Receiving a letter from (the Revenue) referring to tax evasion and possible prosecution will be extremely alarming.”

Paul Noble, assistant director of investigations and inquiries at Vantis Tax, another tax consultancy, said: “The letter is a cop-out. The Revenue is essentially saying ‘tell us something, then we might be able to come to a decision’.”

The Revenue says that the letter is an informal way of ascertaining whether there is a need for a formal inquiry. It said: “The use of offshore bank accounts and other investments to hide the proceeds of tax evasion has been and remains a significant problem. (The) accounts are legitimate investment vehicles as long as people meet their obligations to declare interest that arises in their tax returns. However, we often find them associated with serious tax evasion.”

In 2003 a special Revenue unit, the Offshore Fraud Projects team, was set up to coordinate an effort against large-scale tax evasion. Most inquiries have been resolved through civil settlements, with account-holders agreeing to pay any tax, interest and penalties for which they are liable.

“Prosecutions only tend to occur in cases that the Revenue can highlight to others as a deterrent,” says Mr Noble. Account-holders who receive the letter are advised to seek professional help immediately.

Banking, finance, insurance The Times Times Online Sunday Times

Revenue begins offshore accounts crackdown

HM Revenue & Customs has stepped up efforts to curb the number of people evading tax through offshore bank accounts

Tax authorities have sent out about 500 letters to people with funds in offshore tax centres, giving investors 30 days to explain why they haven't declared interest on income in the UK.

The Revenue is also increasingly requesting banks divulge information on UK citizens who hold accounts offshore.

The move is part of a pilot test by the Revenue to tackle a 'significant problem' of UK citizens using offshore bank accounts to avoid paying tax on interest accrued.

'These letters are about ensuring that those with off-shore accounts pay the right tax like everyone else. Our aim is to avoid the need to open a formal enquiry if at all possible and to ensure that the rules have been followed. We have issued these letters in order to achieve this on an informal basis and with the minimum of fuss,' said the Revenue.

Offshore accounts are legitimate investment vehicles as long as people declare any interest that arises in their tax returns. 'however, we very often find them associated with serious tax evasion,' the taxman said.

In May the Special Compliance Offshore Fraud Group signalled its intention to take a stricter line with those who hold offshore bank accounts when it appointed 11 new investigators.

But tax experts have voiced concerns that the crackdown could target innocent taxpayers because authorities won't have time to conduct in-depth reviews.

The British Bankers' Association said it is in regular talks with the Revenue and although tax authorities can request specific information on accounts holders it must go through the correct channels.

The UK initiative follows the introduction of the European Union savings directive last month requiring offshore centres to share information on bank accounts of EU citizens or levy a withholding tax.

The crackdown on tax evasion has accelerated this year in the UK this year as part of a multi-pronged plan to tackle corporate and personal tax evaders in a bid to recoup millions in lost taxes each year.

http://www.financialdirector.co.uk/2140889

The expanding offshore universe and colliding moral galaxies

By Andrew De La Rosa, Barrister and Attorney-at-Law, London and Chicago

The offshore wealth management and legal services industries are always in some stage of transition, sometimes in synch and sometimes not. I am not sure whether the developments I am going to comment on fall into the category of harmonious parallel advancement or, perhaps more likely, the uneven stop-start or incremental process which has long characterised Anglo-American legal culture. What I am sure of is that some historic frontiers are being breached and re-defined. To illustrate this I will take as my theme three matters; two are obviously related but I will have to make good the case for connecting them to the third.

The past few years have seen a marked expansion in the presence of a number of leading offshore law firms outside their "home" jurisdiction or indeed geographical region. In part, this has come about by reason of mergers between firms established in different offshore financial centres, eg, the Channel Islands and Cayman. Other instances have involved the establishment of branch offices in London but more recently also much farther afield, in Hong Kong and Singapore. It is not difficult to see the basic commercial logic of these developments. Offshore firms wishing to expand existing trust or corporate business, or extend the range of their practices into specialised areas which certain jurisdictions effectively dominate (such as Cayman for mutual funds, or the Bahamas for insurance) need to be represented where the work and money is. The mechanics of these exercises have a particular professional interest for me; however, the point of mentioning them in the present context is to draw attention to where the new frontier is, or at least where one can have a shrewd idea it is emerging.

It may come as no surprise that the location I refer to has no shortage of sand and beaches, and that Western offshore bankers got there somewhat before their offshore legal counterparts. But the region in question presents a whole new array of challenges on a different scale of magnitude than those posed by expansion into jurisdictions which are essentially offshoots of the English common law tradition. It is that part of the Persian Gulf area which comprises six Gulf Co-operation Council ("GCC") Arab Islamic law states, Bahrain, the U.A.E., Kuwait, Saudi Arabia, Qatar and Oman.

At least one of these states (Bahrain) is currently in the process of preparing legislation to provide for what practitioners from common law jurisdictions would recognise as a form of trust of the offshore variety. This development is still at an early stage and what is being mooted strikes me as a curious fusion of Islamic law or Shari'a concepts with American trust drafting. In other GCC states (in particular Saudi Arabia and the U.A.E.) there has been a substantial growth in interest in sophisticated but Shari'a-compliant investment vehicles alongside more conventional financial arrangements.

The important point is that the post-September 11th repatriation of Arab capital from the US, coupled with economic growth within the region, has created a vast reservoir of funds looking so to speak for new channels of investment and wealth management, and regional interest in offshore vehicles has never been higher than at present. My firm belief, based on dealings with Middle Eastern clients over a number of years, is that to service the new regional demand for legal and wealth management expertise two things are essential: one is a sustained presence in the region itself and the other is knowledge of and respect for the religious heritage which forms such a large part of the basis of Gulf political and legal institutions.

In the past, Muslim Arab clients with large international financial interests have not consistently opted for Shari'a-compliant investments or wealth management structures. The point is perhaps graphically illustrated by some figures currently doing the rounds, inexact as they are. The total value of Shari'a -compliant investments by such clients is estimated to be between USD200 and 500 billion; non-compliant investments are estimated to total some USD1.2 trillion. But the Shari'a underpins the succession, family and other personal status laws of all of the Gulf jurisdictions, and even in the context of establishing offshore trust structures outside the Gulf, one increasingly finds that Muslim Arab clients are not satisfied with, eg, fairly standard forms of discretionary trust but wish to have structures which comply with Shari'a principles, or indeed the individual client's own idea of them.

Something like that last point may be familiar to readers who have had dealings with one or another of the Shari'a advisory boards which have emerged in response to the need of Western advisors for guidance on Shari'a law principles. Their answers may not be consistent or readily understandable to advisors used to working in the realms of Western legal principles.

This is one reflection of the most basic difference between Shari'a and Western legal ideas. The Shari'a is derived from Islamic religious beliefs; Islam is not merely a religion in the sense we use the word in the West but a complete code for living of which the legal principles are an inseparable part and, indeed, many of the principles governing succession (to which I will refer again below) are laid down in the Quran itself and taught as part of basic Islamic religious education.

That, however, is not to say that the Shari'a is a uniform, monolithic or immutable system of law; contrary to the impression one might gain from the periodic press reports of Shari'a sanctions for crimes, the very opposite is true. In many respects the Shari'a has become severely fragmented. Even within the majority (some 90%) Sunni branch of the world-wide Muslim community, there are no fewer than four main schools of jurisprudence, the Hanifi, Maliki, Shafii and Hanbali, each named for the scholar on whose writings it is based and each having its own distinctive character. The Hanbali school, eg, forms the basis of the Wahhabi beliefs that hold sway in Saudi Arabia and is particularly moralistic in its approach. The Maliki has a significant paternalistic element (eg, in placing restrictions on lifetime gifts by females not recognised by the other schools).

What is perhaps surprising, at least to a non-Muslim observer, is the extent to which ideas from one school may be borrowed by legislators or practitioners who adhere to another to fill in gaps in their own system of principles or to deal with novel issues. That by itself makes it rather difficult to predict how a Shari'a law issue not precisely and exactly covered by the Quran itself, the Sunna or record of the Prophet Mohammed¹s own acts and decisions, or the ancient learning of the schools will be answered. In other words, on difficult questions, the results may be up for grabs so to speak as opposed to being certain as a matter of orthodox religious belief.

At least when one comes to the area of family wealth dispositions there are several well-established principles common to the Sunni schools of thought. But to state some of them is itself to show the chasm between Shari'a and Western legal ideas which advisors have to attempt to bridge when framing Shari¹a-compliant trusts and wills. It also shows that while the Shari'a does not form a different moral universe it is something of a different moral galaxy which, in the context of the developments I have referred to, is destined to collide with our own.

The Shari'a recognises a concept called waqf which has some similarities to a trust. In Arabic, waqf literally means to prevent or restrain, the term signifying the permanent dedication of property to a pious purpose. From its origins as a form of charitable endowment, the waqf was recognised as a means for an individual permanently to devote property to the benefit of his descendants with an ultimate benefit for charitable purposes, the whole being regarded as dedication of property to God and therefore a proper religious object. But, consistent with the Shari'a principles governing wills that I describe below, a waqf may not be made to benefit a purpose (or person) disapproved under Shari'a.

Under the traditional Shari'a a waqf is perpetual, but legislation in some Arab Islamic states limits the duration of a family waqf to a fixed number of generations. There is no concept of split legal and beneficial ownership; the waqf constitutes a legal person represented by an administrator (the mutawali) who is merely a manager. The settlor must altogether divest himself of ownership of the assets and the dedication of the assets must be irrevocable, but the settlor may be the first administrator.

Given other Shari'a principles, it seems strange (again, at least to a non-Muslim observer) that a waqf may be used to avoid the strict application of the Shari'a succession rules and that, unlike those rules, the position of male and female beneficiaries, in default of a specific direction to the contrary, is one of equality. Those rules, which are part of what the Prophet Mohammed described as the greater part of the sum of learning, have in Sunni jurisprudence some basic features:
1 Testamentary freedom is limited to one-third of an estate if there is an heir or heirs entitled under the Shari¹a forced heirship rules; the balance of the estate passes under those rules.
2 Under the Shari'a forced heirship system, only Muslims are entitled as "heirs"; non-Muslims are altogether excluded and, indeed, in some Islamic law jurisdictions, a Muslim may not inherit from a non-Muslim.
3 There are three categories of heirs, the primary category being near relatives of the deceased (including women) who had no rights of inheritance under pre-Islamic Arabian tribal law.
4 In many circumstances where there are both male and female primary heirs, the share of a male is twice that of a female, this often being justified on the basis of the tradition that a male takes his share subject to the obligations to provide for the maintenance of the family. This basic rule has its most obvious impact in relation to the respective shares of husband and wife and son(s) and daughters(s). For example, under the Sunni rules, the husband will inherit half of his wife's estate if there is no child and one-quarter if there is; a wife's share is half of these.
5 In contrast to the strictures of the forced heirship rules, apart from the overriding principle mentioned below, there is nothing to prevent a Muslim testator from making a bequest of property (in Arabic a wassiyah) to a non-Muslim.
6 To be valid, a wassiyah must not offend against basic Islamic beliefs, as by being given for a purpose or object which is contrary to the Shari'a. A will in favour of a mistress is often instanced as an example of a breach of this prohibition.
7 Nor may a bequest be made in favour of a person entitled to take as an heir, although if there are other heirs they may effectively ratify the bequest in whole or in part.
8 Although a non-Muslim wife may not inherit from her husband under the forced heirship rules, provided that she is a Christian or a Jew, ie, one of the kitabia or "People of the Book", who believe in revealed scriptures, she may take under a will.

The last rule produces the curious result that it is theoretically possible for a Christian or Jewish wife to inherit one-third of her Muslim husband's estate, while a Muslim wife would be restricted to a quarter share (or one-eighth if the deceased left one or more children) under the forced heirship rules. For an illustration of the extreme consequences that can follow, see the Al-Bassam case, [2004] WTLR 757, C.A., a true collision of the kind I have mentioned.

Anyone who has tried to frame a Shari'a-compliant trust or will, where there are beneficiaries subject to US or UK capital taxation, will know what complications there are in trying to reconcile legal concepts and language that arise out of very different traditions.

That brings me to my third and final point. I fear that the language barrier between lawyers from the English, American and Islamic legal backgrounds is one of the most difficult aspects of this particular expansion of the offshore horizon. I am not confident that English and American trust lawyers speak the same language anymore, at least when it comes to tax issues, or that we will make ourselves clear when it comes to dealing with Shari'a law issues. It certainly will take practice; it would assist if there were more forums (such as STEP) for discussion. In any case, I am sure that all our skills at translation are about to be severely tested.

Offshore Investment - current issue - commentary (main)

Sexy Tax inspectors go undercover

Sexy female tax inspectors are stripping off to expose tax frauds at beachside bars in Italy.

Tax authorities have admitted that they have sent the undercover female tax agents posing as bikini-clad holidaymakers to the tourist region of Liguria to see if bars and restaurants were issuing customers with proper receipts.

News website Tgcom.it reported the trial project has been such a success, it will now be expanded to the rest of the country.

It is estimated the state loses millions of pounds a year in tax frauds by companies which do not give out proper receipts to customers.

Ananova - Tax inspectors go undercover

Is buying property overseas worth it?

By Martha Myron

Bermudians have always had a compulsion to acquire real estate, with so many of us spending our entire lives purchasing, renovating, upgrading and paying off our most cherished asset. And why not? Everyone wants to have a place to call their own, to stamp their identity, and to feel secure even in worst of weather (except in the case of a couple of really nasty hurricanes).
Bermudians are also probably the most world travelled of any country's citizens. Perhaps because most of our ancestors ended up here on the way to somewhere else, the wanderlust created by isolation and compact living is never dormant in the Bermudian soul and it is common to hear travel tales of adventures to the four corners of the earth from anyone, young or old alike.
When many Bermudians choose to spend significant parts of their time abroad, it becomes a natural extension to buy a second home property for future investment. Imagine, a little play house to retreat to in Canada, the United States, France or the UK! Without serious planning, however, foreign real estate investments do not materialise into decent profits, let alone the break even point that the foreign purchaser had hoped for.
Additionally, the foreign owner is exposed to (excuse the repetition) a completely foreign tax structure that kick starts into place with the first transaction, your purchase. After the horrendous events of September 11 in the US, securities transactions from all origins have received heightened scrutiny and real estate investments are no exception.
Over the seven years of providing investment and financial advisory services here in Bermuda to hundreds of clients, I would easily estimate that one in four local Bermudian residents have very strong ties to the United States. Older clients, particularly those closer to retirement, very often also own real estate abroad. Those that currently don't, voice opinions that they plan to buy or wish that they owned that little vacation spot.
Real estate in Bermuda has always been a great investment – there are after all only so many units available at any one time. Choice of sites did not enter the picture; the buyer was happy to purchase just about any home of a small inventory at just about any price. Domestic banks, too, were conservative in their lending habits and while home foreclosures happened, the rate of such sad events appears lower than that of other countries. Not so in the United States where the forces of supply and demand (or lack thereof) for housing drive real estate cycles that ebb and flow with the tide.
This is not the case in the US where there may be thousands of units available for sale at any one time; financing may be palatable and very aggressive, even for a foreign investor; builder/broker/mortgagors may extend very lenient credit terms; buyers tend to be more transient, and you may never know your neighbours. After weighing those thoughts, you need to focus on the purchase price, and above all, the price may be right. What's a couple of hundred thousand dollars compared to the average home price in Bermuda today?
In Las Vegas today, real estate has risen more than 35 percent over the prices of last year, with 2004's prices increasing by the same margin over the year before. Dry heat, booming economy, easy access with hundreds of planes a day bearing the more than 35-40 million visitors a year. Sounds great, you think? So do many others with more than 6,000 people moving to Las Vegas every week.
Everywhere as far as the eye can see, sand is being converted into substance, concrete forms faintly resembling the adobe structures of the real Native Americans.
Schools, instant communities, many of them gated, a Walgreens and Starbucks on every corner, and easy money to be had, if you are in real estate. How can you go wrong? Perhaps, you can't or won't. After all, Steve Wynn just sunk billions into a new 53-storey resort where a round of golf costs $400 per person.
Is this the place for you, or should it be a Florida golf (gulf) scene, slightly exposed to the weather elements, but "simply fabulous" just the same. Whatever the choice, the decision to relocate, however temporarily, is energising and, but that should not be the only reason to invest abroad.
There are many items that should be considered before buying a US property. In articles to follow, we will explore the benefits and detriments of a US real estate purchase, both single family dwellings and condominium structures. Just for starters, here are a few things to think about!
Property taxes, use taxes, federal, state, and city income tax, geographical location, federal estate and state inheritance tax, condominium fees, capital reserves, excess liability insurance, absentee owners versus live-there neighbours, bankruptcy and insolvency by other condo owners, home inspections, radon gas, environmental impact, title search, wills, estate planning, probate court, real estate structure, titling of ownership, financing, corporations, property management, number of days in the US, reporting requirements of attorneys, accountants, real estate and rental agents, US source rental income and the most important of all: Location, location, location.
@EDITRULE:
Martha Harris Myron CPA/PFS CFP® is a VP and Senior Private Banker, HSBC Private Bank, Bank of Bermuda. She specialises in providing comprehensive financial solutions for individuals and their families. She can be reached at 299-5578 Send confidential email to marthamyron@northrock.bm
The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product.

Internet payment system e-gold� circulation surpasses gold reserves of Luxembourg

Internet payment system e-gold® circulation surpasses gold reserves of Luxembourg

e-gold announced today that it has surpassed 2.5 million fine grams of gold in circulation, a 40% increase since 2004. At this level of gold holdings, e-gold exceeds the official gold reserves of 27 countries including Albania, Hong Kong, Uruguay, Qatar, Chile, and Estonia as reported by the World Gold Council. e-gold now processes over 10 million user-to-user payments annually with a value exceeding $1 billion USD.

Dr. Douglas Jackson, e-gold’s founder, stated that, “Each time e-gold surpasses the gold reserves of a sovereign nation we regard it as a significant milestone. The e-gold system has now surpassed 27 out of 109 gold-holding nations and is on track to exceed Canada’s gold reserves by year-end. e-gold’s sustained growth in reserves and transaction volume indicates the growing acceptance of the e gold system for Internet payments. e-gold has the critical mass necessary to meet the needs of any consumer Internet payment or user-to-user funds transfer.”

About e-gold:

e-gold is an alternative payment system that mobilizes the value of gold, as money, for Internet payments and funds transfers. e-gold builds upon the fundamental strength in proven customer demand for gold as a secure store of value. All e-gold is backed by a 100% reserve of physical gold in recognized repositories. e-gold offers customers a secure and robust payment system that operates globally 24/7 and assures finality of payment with no chargebacks. The system features easily implemented merchant payment interfaces and supports micropayments. Operational since 1996, e-gold has settled over 47 million transactions, serves customers in 165 countries, and holds over 2.5 metric tonnes of gold.

For more information visit www.e-gold.com or e-mail jray@e-gold.com