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Tax Scam: The Florida Real Estate Connection

December 27, 2011

MIAMI - The Miami Herald reports that Florida is the number one state in the country for international residential real estate sales, with almost one-third of the nation's foreign-backed property transactions. Most of the deals are in cash. However, the State of Florida and the federal government may be left holding the bag, according to this investigative report from Les Coleman.


Some investors in the Florida housing market have found a way to avoid paying everything from state title transfer fees to federal capital gains taxes. How? By going off-shore, to places like a Caribbean island called Nevis.

The domestic housing bust has made Florida properties very appealing to overseas investors wanting to buy a house or condo in the Sunshine State, and 76 percent of them pay in cash. State and federal governments normally would get their cut of each transaction in the form of fees and capital gains taxes. However, a clever loophole is leaving the tax man's pockets empty when investors set up a shell company in an off-shore tax haven to buy that Florida condo.

R.M. Woodnutt, a former off-shore agent in Gibraltar, says tax avoidance is the name of the game.

"If you transfer the stock in the offshore company and do not actually sell the company or the real estate property outright, then you certainly avoid paying any taxes on the transaction. That is the beauty of all this."

The Miami International Real Estate Congress claims foreign investment in South Florida is growing, and industry experts are predicting that next year, in 2012, there will be even more international interest in the area.

Creating an offshore company is simple, and can even be done online: www.OffshoreFormations247.com specializes in creating shell companies to hide individual identities and assets. It is based in Nevis, a little Caribbean island just 200 miles south of Puerto Rico.

"A lot of people like Nevis 'cause it's quick and easy: three-to-five day turnaround to get a company back. For an LLC it costs only $1,295, a corporation is only $1,695. The only thing you need is name of the company, who the director will be, and where to send it."

The offshore company buys the property in Florida. When it goes to unload it, the Bearer Certificates of company ownership are transferred to the new owners. There is no record in Florida of a sell-buy transaction, so no transfer fees or capital gains taxes are ever paid.

Rosa Schecter, an international real estate attorney in Coral Gables, points out that buying Florida property normally requires slogging through a lot of red tape and paying thousands in taxes and fees.

"There are different kinds of taxes. There are transfer taxes that are associated with every real estate transaction in Florida that you have to pay on a deed; there also are intangible taxes that are due on promissory notes, and documentary stamp taxes. If a property is sold and there is gain on it, obviously there is tax to be paid on that gain."

Such taxes and fees are never recorded because, as far as Florida is concerned, the property never changed hands - the deed is still recorded in the offshore company's name. What did change hands was the stock in the offshore company, a transaction that need not be disclosed to anyone.

Most overseas buyers do not qualify for an exemption from capital gains taxes, since the properties are not usually their primary residence. Forming an offshore company to purchase a house in Florida hides any record of the property changing hands, thus no capital gains are recorded on the tax rolls.

As one offshore agent we'll call "Manny" told us, there are advantages for American citizens, too, like dodging debts, child support or alimony payments.

"So a guy pays cash and he titles the real estate in the name of the off-shore company, and he never owned that property before, then his creditors come looking for the property and they can't find it because it doesn't show up under his name."

The question is, will the state and federal treasuries ever see a penny? Several state and federal law enforcement agencies have been made aware of this off-shore scheme.

Further information is available at www.nevisisland.com and www.offshore.barclays.com.


This story was made possible through the assistance of the community of spot.us. A heartfelt thank you goes out to all members of the community for supporting investigative journalism and believing in new models to sustain journalism.

Les Coleman/Deb Courson Smith, Public News Service - FL