[ashok jain]

Dear Mukata,
Maybe you can guide me with this one...
I am going to file US Tax for the first time as RESIDENT alien after getting my Green card for full year 2010. The scenario in 2010 is that apart from my Foreign Earned income which qualifies for FEI Exclusion, I have portfolio income from various Shares and Funds held by me in different foreign companies and foreign brokers (total 35,000). I understand that all these are required to be listed one by one on schedule B.

As a first time filer I am quite confused with the details, particularly because, in UAE there is no Tax so we are not used to maintain so much of paperwork!!

I have 2 questions here: Is there a way to avoid this listing of every share / fund etc. on schedule B ? Can I avoid this by forming some sort of a kitty or corpus or trust which invests into these individual shares / funds etc? Can you suggest some tip which provides and easy and inexpensive method of handling it?

Second related question is that on the above portfolio investments, I have Investment Loan Expenses of12,000. I am filing jointly with my wife on Form 1040 / 2555. I do not want to forgo the standard deduction allowed to me. I know that I need to itemize on Schedule A in order to claim this investment loan expense deductions of 12000. Therefore at the moment I have to forget about the deduction of the Investment Loan expense. Maybe you can suggest some way?

[AtlantaTaxExpert]

Using a trust merely transfers the record-keeping and tax return requirements to the trust, which must file its own tax return. It is, In my opinion, not worth the effort.

Your investment loan interest expense EXCEEDS your standard deduction of $10,900 for 2009 and the projected standard deduction of $11,300 for 2010, so why NOT claim this interest if it is legitimate. It will also allow you to claim charity donations and other itemized deductions you would otherwise be unable to deduct.

[ashok jain]

Using a trust merely transfers the record-keeping and tax return requirements to the trust, which must file its own tax return. It is, IMHO, not worth the effort.

Your investment loan interest expense EXCEEDS your standard deduction of $10,900 for 2009 and the projected standard deduction of $11,300 for 2010, so why NOT claim this interest if it is legitimate. It will also allow you to claim charity donations and other itemized deductions you would otherwise be unable to deduct.

Is it OK to form a husband wife partnership or LLC to handle the various portfolio investments .If yes , then can this partnership/LLc pay a reasonable amount of say $2000 yearly on 1090-MISC to the wife to manage the portfolio and the wife shows this income on 1040 schedule C and pay SSTax on this? Is this OK?

[AtlantaTaxExpert]

In my opinion, setting up such an LLC is NOT cost effective and NOT justified to get SE tax credits for your wife. As to whether it is legal, I see no reason why it would not be legal.

[ashok jain]

In my opinion, setting up such an LLC is NOT cost effective and NOT justified to get SE tax credits for your wife. As to whether it is legal, I see no reason why it would not be legal.

dear atlantata expert:
Sorry but I am more confused when I combine your 2 previous replies and unable to get a general direction, which I was looking for. May be I did not understand it fully or convey the question fully. Let me try it again.

The scenario is that both self and wife obtain Green card and then we continue to live and work abroad. We have no US source income. The husband works with a foreign employer and all his income is excluded as per foreign Income exclusion. Wife has no salary income.

The wife is living abroad and filing as joint Resident Alien with me as mentioned earlier. And she has no other earned income.
However she actually spends all her time and effort in pursuing 2 self employed activities. She WANTS to pay Social security tax on the income earned on these 2 activities, in order to earn the Social security Tax, so that when she turns 65, she can get her Medicare benefit. Her 2 self employed activities are:

First activity is for managing all activities connected with renting, cleaning, minor repair of a rental property which is jointly owned by her and her husband and is currently earning rental income of $ 45,000 per year. This is a time consuming and regular efffort for which we want to pay her a reasonable amount of 6500 per year on 1099- MISC. she wants to report on her Form C, this 6500 income and deduct reasonable expenses of 1500 to cover her monthly travel to check the property which is located 150 kilometre away from her residence and some small office/telephone expenses, and thus pay pay SSTax on the net income of 5000 to earn the credits. Husband spends no time on this activity and it is a passive activity reported on schedule E ( or 1065 if you suggest to form a LLC - partnership)
The second activity is the portfolio management fee for the time and effort she spends on managing a portofio ( again jointly owned by her and husband) of 200,000 which earns a portfolio income of about 15,000. For this effort we want to pay her a reasonable amount of $1500. This 1500 she wants to report on second Form C with a reasonable expense of telephone and office expense of 300 and pay SS Tax on the net SE income of 1200. Husband spends no time / effort on this activity and it can be reported as passive activity on schedule B, or if suggested by you, on 1065 as a second LLC/partnership.

So the total SE income reported on 2 schedule C by 6200 ( 6500-1500=5000 and 1200) .

We donot necessarily wish to form the 2 above mentioned LLC or partnerships, unless it is recommended by you, If we need to do that, in order to keep any IRS questions away, then please give us an idea on how much forming LLc / partnership would cost and what additional paperwork filing requirements would be there and can you handle that aspect also along with the Tax return filing?

We request your views on the possible route to organize the above 2 activities ? We are getting more confused. Please give us a general direction in which we should plan for our future taxation requirements.

[AtlantaTaxExpert]

What you are asking will require some in-depth research, and, right now, I just do not have the time.

If you email me at [email protected], we can discuss this in more detail and determine what fee would be appropriate for the consultation.