transfer of property at death or lifetime gift technically applies to non-resident alien
individuals. However, it is axiomatic such transfers by non-residents are exempt if the
foreign individual holds the United States property in a foreign holding company.54
Essentially, this and other benefits55 offered by the US adds credence that the
industrialized nations are similarly offering preferential regimes for taxation purposes.
Another highlight of the United States treatment of foreign investment preferentially can
be found in the laws of Delaware and more recently Nevada. The companies’ law of the
United Kingdom traditionally has been used by foreign persons in a manipulative fashion
to incorporate entities in the UK but which carried on no business there. This obviously
resulted in substantial savings by US companies and individuals and gave the United
Kingdom a competitive edge. As some experts point it out56 many individuals including
some tax authorities incorrectly surmised that because the company was registered in
London it was subject to United Kingdom company taxes.
Once these amendments were made by the United Kingdom the most popular
“successor” has been the Limited Liability Companies as established under Delaware and
54 See generally Marshall Langer arguments on this and other similar points.. Langer has argued that although the United States wants every country to give it tax information, U.S. law does not permit the IRS to give any tax information to a foreign country, unless either that country has either a tax treaty or a tax information exchange agreement (TIEA) with the United States.
55 The OECD June 200 reports suggest several countries such as Canada, Norway, Italy and Germany all have preferential regimes with regard to international shipping. However, arguably the US could have been included on this list of countries. A huge number of cruise ships leave from Florida and Gulf Coast ports to the Caribbean and South America. If the cruise ship companies used US- registered ships owned by US companies, they would be subject to full US income tax. However, by using foreign flag vessels owned by foreign companies, the cruise ship companies reduce their tax burden to zero. The Internal Revenue Code exempts all income from international shipping operations if the company’s country of residence grants an equivalent exemption to US persons. SEE S.883 (a)/ See generally Langer note 46
56 Se generally Rhoades and Langer, US International Taxation and Treaties, Chapter 47 and 73 which gives an expanded view of their opinion on this issue.