Does the US tax citizens on capital gain from Cayman Islands non-resident corporation?

But what if the Cayman Islands corporation never distributed anything to them personally? Does that still count as income they have to pay taxes on? And does it matter that they don't have clients in the US?

The distribution question is actually important - with CFCs, certain types of income (called Subpart F income) can be taxable to US shareholders even without distribution. This includes passive income like interest, dividends, royalties, etc. Whether they have US clients doesn't change their tax obligations as US citizens. The IRS taxes citizens on worldwide income regardless of source. The location of clients might affect other tax issues, but not the basic obligation to report capital gains from selling shares in a foreign corporation.

Does it actually help with complex situations like Cayman Islands corps? Most tools I've tried fall apart when you start dealing with offshore structures and just give generic advice.

How does this compare to expensive international tax attorneys? I got quoted $15K just for a consultation about my Singapore business structure, but I'm skeptical of online tools handling something this complicated correctly.

It absolutely handles complex offshore structures including Cayman Islands entities. The system is specifically designed for international tax situations that most regular tax software can't handle. One of the features I found most helpful was that it identified the exact reporting requirements for my specific situation - it's not just generic advice. For the cost comparison question - I had the same concern initially. What I found was that the tool provided a comprehensive analysis I could then take to my accountant, which drastically reduced their billable hours since they didn't have to start from scratch. My accountant was actually impressed with the accuracy of the guidance and said it aligned with what they would have recommended.

Wait, this actually works? I thought the IRS was basically unreachable these days. How do they get you through when calling directly is impossible?

This sounds like a scam. There's no way some service can magically get through the IRS queue when millions of people can't. They probably just take your money and tell you they tried but couldn't get through.

Yes, it really works! They use technology that keeps your place in line and calls you back when they reach an actual human at the IRS. I'm not sure exactly how their system works, but it saved me hours of hold time. Definitely not a scam - I was connected to a real IRS agent who answered all my questions about my international filing requirements. I understand being skeptical because it sounds too good to be true, but I was in a desperate situation with a filing deadline approaching and needed answers about my foreign accounts. It worked exactly as advertised.

Thanks for mentioning this! Just to clarify, would I need to file the FBAR form even if the company itself owns the accounts rather than me personally? And is the threshold still $10,000 for reporting in that case?

You would need to file FBAR if you have signature authority over the foreign accounts, even if you don't personally own them. This often applies to officers/directors of foreign companies who can direct the movement of funds. The $10,000 threshold still applies - if the aggregate value of all foreign accounts you have signature authority over exceeds $10,000 at any point during the calendar year, you need to file. And remember, this is separate from tax filings - FBARs are filed directly with FinCEN, not with your tax return to the IRS.

Do you remember the name of that case? Would be interesting to read about the details, especially if the circumstances were similar.

This is really helpful, thank you! I had no idea about Form 5471 or the ongoing reporting requirements. When you mention "undistributed earnings from prior years under Subpart F or GILTI rules" - does that mean we might owe taxes on profits the company made even in years when we didn't take any money out personally? That would be a huge surprise if true. Also, since we're both US citizens and own the company 50/50, does that definitely make us subject to CFC rules, or is there some ownership threshold we need to hit?

Yes, unfortunately you could owe taxes on undistributed earnings from prior years. Under Subpart F rules, certain types of "passive" income (like interest, dividends, royalties) are taxable to US shareholders immediately, even if not distributed. GILTI (Global Intangible Low-Taxed Income) rules can also create current tax liability on foreign corporation profits above a certain threshold. For CFC rules, you need more than 50% ownership by "US shareholders" (each owning at least 10%). Since you and your brother each own 50% and are both US citizens, you definitely meet this test - together you own 100% and each individual stake exceeds 10%. The really concerning part is that Form 5471 was likely required every year since incorporation, not just when you sold. The penalties for not filing can be $10,000 per year per person, and that's just for late filing - it goes up significantly if the IRS determines it was willful. You should definitely look into the IRS voluntary disclosure programs if you haven't been filing these forms. Getting ahead of this proactively is much better than waiting for them to find you.