In 1624 Peter Minuit bought the island of Manhattan for $24 in trinkets, thus establishing a precedent of foreign investment in U.S. real estate that is still going strong. Though the numbers may have changed -- today foreign investment accounts for 44 billion dollars of investment in U.S. real estate -- the principle is still the same. Investors from foreign countries who are seeking consistent returns at lower risk, availability of property, political and economic stability, and market liquidity are looking at the U.S. real estate market. However, foreign investors may be unsure or unaware of the tax ramifications of investing in U.S. real property, including the provisions of any tax treaties that may override the general provisions of U.S. tax laws. In many instances this could lead to problems for an investor unless he or she carefully plans for the tax aspects of this investment. The following rules can serve as a general guide, although any specific investment should be discussed with your tax advisor.

The structure of foreign investment in U.S. real estate can take many forms. A foreign individual can own a direct interest in U.S. real property, he/she can invest in a partnership or limited liability company that owns the real property, or the U.S. real estate can be held through a domestic or foreign corporation. The most commonly used structure for foreign real estate investors is a limited partnership or limited liability company. A limited partnership or limited liability company has several advantages for all involved parties. For all practical purposes, this structure gives each individual the assurance of financial protection for all unrelated assets in the event of law suits, bankruptcy. The partnership structure can also be especially significant in terms of tax ramifications. Although the partnership files an income tax return annually, it does not pay any tax on its income. Instead, it serves as a conduit -- passing all of its income through to the partners. The partners then include this income on their tax returns and must pay the taxes. However, the partnership is required to withhold tax on the income of foreign partners which they then claim as a prepayment on their tax returns.

Therefore, only one level of taxation exists for partnership income.

The foreign investors will generally be taxed at the same rates as individuals who hold their property interests directly.

category are dividends, interest, gains, rents, and royalties unless specifically exempt under the Internal Revenue Code. This type of investment income is generally taxed at the flat rate of 30% on the gross revenues, without reduction for expenses.

However, when income allocated from the limited partnership is effectively connected with a trade or business within the U.S., the income is taxed to the nonresident alien partner at the graduated U.S. tax rates, on a net basis, after deducting all expenses and allowances. In order to take advantage of this strategy and be considered as actively engaged in a U.S. trade or business, the partner’s level of involvement with the activity generally must be considerable, continuous and regular.

To alleviate the harsh tax treatment of rental income, foreign individuals can take advantage of the provisions of the Internal

Revenue Code permitting foreign investors to make an election to treat investments in U.S. real property as trade or businesses.

By making this election, the net income is taxed rather than the gross income, saving the taxpayer significant tax dollars. The election applies to all income from U.S. real property that is not already effectively connected with a U.S. trade or business and, once made, the election is effective for all subsequent years and can only be revoked with the consent of the IRS.

the appropriate statement to a timely filled income tax return that reports income from U.S. real property.

The tax treatment for foreign investors becomes somewhat more complicated when we look at tax withholding, a frequently misunderstood but extremely important area. The payor of investment income to a foreign investor is required to withhold

U.S. income tax at the rate of 30%, unless a reduced rate or exemption under a tax treaty applies.

When a limited partnership has effectively connected income allocable to a foreign partner, the partnership is required to withhold tax on that partner’s distributive share of the net income. The amount of the withholding tax is calculated at the highest rate of U.S. tax to which each foreign partner is subject.

For corporate partners the rate is 35%; for individual partners and other partnerships the rate is 39.6%. Since tax is withheld at the highest U.S. tax rate, most partners will be due a refund when filing their U.S. income tax return.

However, if a resident of a foreign country is entitled to reduced rates of, or exemption from, tax under a tax treaty between their country and the United States, they must notify the payor of the income, known as the withholding agent.

the withholding agent.

Besides federal income tax, the partnership and each partner may be responsible for state income taxes on the partnership income. Depending on the state where the real property is located, the individual partners or the limited partnership acting on behalf of the partners pay state income taxes.

Tax laws have made things substantially more complicated since the purchase of Manhattan Island and foreign investment in U.S. real estate can be a daunting venture for even a seasoned investor.

Despite the roadblocks, however, foreign investors who follow the rules will find that U.S. real estate can be a smart and profitable investment.

America 2030™ Equity LLC is a premier boutique US commercial real estate investment house providing alternative asset investment opportunities for high net worth individuals and institutions. Through our project specific and private funds, we offer fractional and whole ownership of Class A & B apartment complexes, regional retail shopping centers and triple net leased buildings. We focus on capital preservation and maximum growth modeled after historical trends and patterns.

Besides acquisition expertise, we offer full asset management for domestic as well as international clients.

America 2030 was founded by Val Sklarov with the sole purpose of offering clients his investment experience and knowledge.

Mr. Sklarov, Chairman and CEO, brings over 23 years experience investing in US commercial real estate and has personally acquired over $200 million in assets using all personal funds.

Our name derives from the fact that the population of the United States will grow by another 70 million people, to 370 million people, by the year 2030. Opportunities in US commercial real estate related to this growth are tremendous, and our goal is to use our success as private real estate investors as a platform for investment products that suit the needs of the most discerning individuals and institutions.

Since 1996, Mr. Sklarov has grown approximately U.S. $1 million in equity to $52 million in equity, representing a ten year Internal Annual Rate of Return, from January 1996 through December, 2006, of 46.5%