LLC, Utilization of Depreciation and Losses.
The Smith family are an Australian based family office. They are currently looking to invest in the U.S. real estate hedge fund based in Atlanta which requires a 5 year commitment. The hedge fund is structured as a Delaware Limited Liability Partnership. The Smith family has been investing in the U.S. for a decade and hold both income generating and long term capital investments. These investments are both passive and active in nature.
The economics of the fund is such that in year 1 to 2 the fund will allocate losses associated with accelerated depreciation to its partners and profits in years 3 to 5.
The Smith family wants to ensure that they can maximize the current benefit of the losses within the U.S. and offset them against other profitable investments they have made in the U.S. and ensure that in years 3 to 5 that they obtain foreign tax credits in Australia for the income tax they expect to pay at that time in the U.S.
In Australia the Smith family own their operating assets in of a proprietary limited company and their real estate and equity portfolios in a unit trust. The unit trust is then owned by discretionary trusts.
The Smith Family will run comparative tax calculations to determine whether their unit trust should invest directly in the hedge fund or whether they should do it via a U.S. based Limited Liability Company.