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Old 07-06-2008, 07:41 PM
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Join Date: May 2008
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Question "Exporting" business expenses to USA

Dear Sir/Madam,

My wife is a US citizen who started a business abroad in 2007, but had only insignificant sales until now, while she did have a lot of business expenses (roughly $60K), as she was manufacturing her inventory. We will be moving to the States this week (to NYC), and she would like to transfer her foreign business expenses to the American business which she plans to open, and so we are trying to figure out what is the best way to do that.
From what we gathered until now, She should file her 2007 tax returns now (she didn't file it yet), and attach schedule C, etc., and claim her expenses abroad. Then she should somehow sell/export her inventory (with a price tag of $60K) to an American legal entity which she will create, so she won't have any taxes due abroad (60-60=0 profit), and her American business will start with a $60K loss, thereby transfering her business expenses to the US.
There are some issues regarding the above plan which we are particularly unsure about:
1. Is this the "right way" (if there is one) to achieve this? Is there a better way to transfer the losses?
2. Does the type of legal entity she will choose for her American business affect the way she will transfer the expenses?
3. How will the IRS see this? We are worried since she will in fact be selling her iventory to "herself" - is this 100% legitimate?
4. When she files the tax return with the IRS claiming the expenses abroad, would they accept her original foreign invoices/receipts or will they want her to translate everything to English (there must be hundreds, all in a foreign language of course..)?

I am looking forward to hearing from you soon. Thank you in advance for all of your help.

Best regards,

J. Silo

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