EB-5 Investor Moving to the U.S.: Why Tax Planning Before Residency Matters

This anonymized case illustrates our premium planning service: a coordinated, asset-by-asset review before residency, rather than discovering international reporting obligations after transactions are complete.

The client's situation: an EB-5 investor preparing to move

The client lived in Colombia and owned operating companies, rental properties, bank accounts and a diversified investment portfolio abroad. The family also had interests in a foreign trust. His immigration attorney handled the EB-5 process; we addressed U.S. tax consequences and coordinated timing assumptions with that attorney and his Colombian advisers.

Immigration status and tax residency are different. An EB-5 process does not itself establish the tax starting date. The green card test and substantial presence test determine residency under domestic tax law, subject to applicable exceptions and treaty rules.

What went wrong

The investor assumed only money transferred to a U.S. bank would become taxable. In reality, once U.S. tax residency begins, worldwide income generally enters the U.S. tax system even if it remains abroad. Foreign companies, investment funds and trusts can create additional reporting or current income without cash distributions.

There was also an important basis misconception: immigration generally does not reset an asset's U.S. tax basis to its market value. A later sale may therefore involve appreciation from before the move, measured under U.S. rules in dollars.

The tax or reporting requirement

Under the green card test, residency generally begins on the first day physically present in the United States as a lawful permanent resident. Substantial presence may establish an earlier starting date. It generally requires at least 31 current-year days and 183 weighted days over three years: all current-year days, one-third of prior-year days and one-sixth of second-prior-year days. First-year and dual-status rules require separate review.

Foreign mutual funds may be PFICs, with Form 8621 and potentially unfavorable tax and interest rules. Company ownership may trigger Form 5471 and controlled foreign corporation rules, including Subpart F and GILTI or successor tested-income rules applicable to the year. Foreign trusts require grantor versus non-grantor analysis: ownership attribution, contributions and distributions can change both tax and Forms 3520/3520-A responsibilities.

FBAR generally applies when reportable foreign accounts exceed $10,000 in aggregate at any point. Form 8938 is separate; for a single filer living in the United States, thresholds generally exceed $50,000 at year-end or $75,000 anytime. Filing status and residence affect thresholds. Foreign tax credits may reduce double taxation but have source, category and timing limits.

Forms potentially involved:

• Form 1040 or a dual-status return, depending on the starting date.
• Forms 8621 and 5471 for applicable investments and companies.
• Forms 3520 and 3520-A for applicable foreign trust matters.
• FinCEN Form 114 (FBAR), Form 8938 and Form 1116 for applicable foreign tax credits.

The potential IRS exposure

The concern was not a promised penalty reduction. It was preventing avoidable reporting gaps and transactions whose U.S. treatment the family had not anticipated. Certain missing international information returns carry substantial penalties even when little income tax is due. PFIC taxation and trust reporting can also make a simple annual return far more complex.

How Chirino USA analyzed the situation

We assembled ownership charts, trust deeds, account statements, fund identifiers, historical acquisition costs, rental records and foreign tax returns. We modeled the residency timeline using prior travel rather than relying only on the anticipated relocation date. Each asset received a tax classification, a potential form requirement and a document owner.

We compared retaining investments with potential dispositions before residency. Realizing gains before residency may be considered generally, and depending on home-country tax, U.S.-source or business connections and transaction details. It is not a blanket recommendation to sell, transfer or restructure everything.

How we addressed the issue

Our recommendations prioritized decisions that needed action before residency, then reporting systems needed afterward. We evaluated basis records, potential PFIC elections, foreign company income inclusions and whether the trust documents supported the assumed treatment. Foreign tax credit projections helped compare combined-country outcomes instead of looking only at U.S. tax.

We also flagged gifts and estate planning for coordinated legal review. Income-tax residence and transfer-tax domicile are not interchangeable, and asset location, ownership and citizenship matter. No family transfer was recommended solely to remove an asset from a reporting list.

The result

The deliverable was a written pre-immigration roadmap and timeline, coordinated with the client's immigration attorney and home-country advisers. It identified decisions, responsible professionals, required records and the first U.S. filing calendar. The result was an informed planning process, not an IRS approval or a guarantee of tax savings.

Pre-immigration planning checklist for EB-5 investors

• Confirm the tax residency starting date using both tests and actual travel.
• Inventory entities, trusts, funds, properties and accounts, including indirect ownership.
• Collect historical basis and foreign tax records before institutions become harder to access.
• Model proposed sales, distributions and gifts in both countries before execution.
• Assign reporting deadlines and revisit the roadmap when plans change.

How Chirino USA can help

Chirino USA Accountants & Advisors specializes in U.S. international tax matters for foreign nationals moving to, working in, or investing in the United States. We can review your days in the U.S., your income and your assets abroad, and tell you which U.S. returns and reports apply to you. We advise on taxes only; questions about your visa or immigration status should go to an immigration attorney. You can email us or message us on WhatsApp, in English or Spanish.

Sources and official references

• IRS — Publication 519, U.S. Tax Guide for Aliens
• IRS — Instructions for Form 5471
• IRS — Instructions for Form 8621
• IRS — Foreign Trust Reporting Requirements and Tax Consequences
• IRS — Comparison of Form 8938 and FBAR Requirements