Live Online Workshop

Portfolio Interest Lending for Foreign Investment in U.S. Real Estate

Join me for a live one-hour workshop and learn everything you need to know about portfolio lending structures

20th May 2024

9am PDT / 12pm EDT / 6pm CET

Portfolio interest loans feel like
deep magic.

Tax deduction for the borrower, tax-free income for the lender.

In a one-hour live, online workshop, I will show you how the magic works so you can do it yourself.

There’s also a special bonus for attending the workshop. I’m doing a Big Thing in a few months, and people who attend this workshop are first in line for it. 

More on that below.

What is portfolio interest?

Portfolio interest is interest on a loan – with a twist. There is a loan, and the borrower pays interest on that loan to a foreign lender. 

If you configure the loan correctly, you add an adjective: portfolio. The interest income received by the foreign lender becomes portfolio interest income.

Usually, a foreign lender’s interest income is taxed at normal income tax rates (if the lender runs a U.S. business making loans). (That’s “effectively connected income” for you tax nerds. I self-identify as a tax nerd.) 

Let’s not talk about lenders actively engaged in business in the United States. 

Let’s talk about opportunistic lending opportunities, usually between related parties—one-off loans. A foreign lender pays a 30% tax on interest income from U.S. borrowers. (FDAP income for the tax nerd crowd.) The borrower has a withholding job:

  • Take 30% of the interest payment.
  • Send it to the IRS.
  • Send the rest to the foreign lender. 

That’s on regular interest paid.

But portfolio interest? Zero per cent tax rate. And no tax withholding is required.

Typical scenarios

When would you do this? Here are two scenarios I see frequently:

  • A nonresident parent lends money to a U.S.-resident child to buy a personal residence.
  • A nonresident investor prepared to pay all cash will instead put 20% down and borrow 80% from himself to buy U.S. investment real estate.

The magic hides in plain sight

I hate to undersell this, but this is just cooking. Follow the cake recipe, and bake a cake.

Internal Revenue Code Sections 871(h) (for foreign individual lenders) and 881(c) (for foreign corporation lenders) are where you find the recipe, plus the Treasury Regulations, of course.

Topics we will cover

In this workshop, I will demystify the magic and show you – directly from the Code and Regulations – how to do portfolio interest lending correctly. How do you choose the right borrower and the right lender? What should the loan documents say? What is the required tax paperwork?

The Parties

Who or what is the lender? Who or what will be the borrower? Should these be people? Or should you set up an entity?

Related Party Rules

Like everything else in tax, there are related-party rules for portfolio interest transactions. If you violate these rules, you lose the tax benefits. These rules work differently from any related-party rules I know of in the Code.

Loan Paperwork

The loan documentation must be in "registered form." This is not easy to figure out from the Code and Regulations. I will show you precisely what the promissory note must contain to make the debt obligation in registered form.
The lender must prove that it is a foreign entity in the right way and at the right time. I will show you how to do this and when. (Making this error exposes the interest to taxation and forces the borrower to withhold tax).
Withholding prophylactics.


What would a cross-border transaction be without disclosure documents? Here, the paperwork requirement consists of Form 1042 and Form 1042-S. We will cover the preparation and filing of this form, which boxes to check (and why), and when it should be filed.

Interest expense deductions

Interest expense can be tax deductible for the borrower. Do the portfolio interest rules affect the borrower's ability to deduct interest expense? We will explore this question.

Get smart on portfolio lending structures with this live workshop 

20th May 2024

9am PDT / 12pm EDT / 6pm CET

You'll get a lot of good information that will make you look intelligent (I know you're already good-looking) in front of your clients. You will also build a capability for a new service you can offer to your clients.

But wait, there's more...

You're also going to get something else.

I will be forming a group in a few months. People who attend the portfolio interest workshop will have the first opportunity to join.

I talk to a lot of you. (And if you're reading this and we haven't spoken – by email, on Zoom, or in person – please fix that and shoot me an email.)

We are scattered all over the world, often working alone. Even those in a firm are usually the only international tax specialists, so you're alone in a crowd.

We need people to brainstorm with, to sanity-check us, or to mentor us. We're lonely.

Well, that's my experience, at least. From my conversations with many of you, it is the experience of many people who practice international tax.

I want to make a small dent in this problem.

What you'll get as a member

At the moment, I am putting together the plans for a small community of practitioners. The details are still being ironed out so the below is subject to change, but here's what I'm thinking so far:

Quarterly workshops

Deep-dive, hands-on one hour workshops like this one. You'll get free access. 

Regular Q&A's

You ask a question, and I put it on a slide and brainstorm the answer. I'll do my best to answer all of the questions.

Community access

A vibrant community for everyone to talk amongst themselves.

Curated updates

Monthly, curated updates on what's happened in international tax and what matters. 

By attending the portfolio interest workshop, you get to be first on the waiting list along with four (yes, four!) free months when you sign up.

You will also be grandfathered in to the original membership price. This will start low and increase as more features are added. Your price will never increase.

Sign up for the portfolio interest workshop on May 20, 2024

20th May 2024

9am PDT / 12pm EDT / 6pm CET

Get smart now on portfolio lending structures, so the next time your nonresident client who wants to buy real estate mentions the topic, you will have the confidence to quarterback the transaction.

And, if you want to join the International Tax Insiders when I open the doors, you'll have the first shot at it.