Taxation of Offshore Bonds for US Residents

Hi all,

There is a long story to this but the short of it, that I have no real clue about, is what would be the potential tax implications for a US resident if they surrendered an offshore bond held in Ireland?

Any helpful comments/ suggestions would be welcomed.



  • JonaJona Member

    As far as I understand it - which is not very far at all - there are both State and Federal taxes levied in the US. Federal taxes worldwide income and I think it is down to the State to set it's own parameters....

    International tax expert needed.

  • Hi,

    We have a similar issue with one of our clients as they have significant IHT issues, however one of her sons lives in the US, New York State.

    What would the tax status be if we were to recommend an offshore trust? Do the US even use Offshore bonds?

    Thanks in advance.

  • With the caveat that it's been a while since I last discussed similar issues with the tax office at the US embassy in London (very helpful if you can get to speak to them).

    In simple terms, anyone subject to completion of an IRS tax return cannot do this if they are invested in collectives. Therefore, can't use UK collectives for US tax residents.

    US tax authorities do not recognise UK trusts. (although I would have thought a discretionary trust with a potential US resident beneficiary would not be an issue until the trustees allocated money to that person; provided it was cash should be ok? Don't take this as gospel).

    The collective / trust issue is obviously unfair given that if you are a US citizen you can invest in US mutual funds. But hey, that's the Land of the Free for you!!

    So @Jamie_Barnes in respect of your query; don't go anywhere near this issue; refer to specialsit US tax advisor. There are a couple based in London but they tend to deal with individuals with quite a lot of money!

    @thomas12993 For your problem I do not think you can advise your UK client in a manner which knowingly protects her US-based son from US taxes. Again, some specialist US tax advice may help but you would want that delivered by a specialist firm and not yours.

  • Thanks, @richardgough , that is basically what we've done.

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