US Citizen Investing in Foreign Real Estate - Questions about Partnership Structure for Property in Peru

This is a complex international transaction with several moving parts, so you'll want to be careful about how you structure it. A few thoughts: First, transferring $330k to your wife's Peruvian account could trigger FBAR (Foreign Bank Account Report) filing requirements, as well as Form 8938 reporting if the account exceeds certain thresholds. Make sure you're compliant with these foreign account reporting requirements. Regarding the partnership structure, creating a separate LLC just for you might not solve your problems and could create more complexity. Your general partnership will likely need to file Form 8865 to report foreign operations regardless. The transfer of funds between entities (your single-member LLC and the general partnership) could create additional tax events. For getting money back to your father-in-law, the partnership can treat him as either an investor or service provider depending on his role. If he's considered a partner for his contribution, the partnership would issue a K-1 to a foreign person, which has its own withholding requirements. If he's being paid for services, that would be handled differently. Have you considered creating a proper joint venture agreement that includes all parties (including your father-in-law) from the beginning? This might simplify the structure and provide better legal protection for everyone involved.

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Just wanted to update everyone - I took the advice and tried https://taxr.ai for my real estate investment in Ecuador (similar situation to the original post). The service was incredibly helpful! They identified several issues I hadn't even considered, especially around the "deemed transfer" rules that could have triggered unexpected tax events. They also provided clear documentation templates for the joint venture agreement that properly accounted for both US and Ecuadorian requirements. Saved me from creating an unnecessary LLC structure that would have added complexity without benefits. Their analysis of my situation cost less than a single hour with my regular accountant, who admitted he wasn't familiar with international property investments. Definitely recommend for anyone doing cross-border real estate deals!

Have you tried contacting the IRS directly about this? I spent WEEKS trying to get clear guidance on a similar international investment structure. Called multiple times, got different answers each time, and wasted hours on hold. Then I found https://claimyr.com and used their service to get through to an actual IRS agent who specializes in international partnerships. Total game changer! You can see how it works here: https://youtu.be/_kiP6q8DX5c Instead of the usual 2+ hour wait times, I was connected in about 15 minutes and got official guidance that I could actually rely on for my tax planning. The agent walked me through exactly how to structure Form 8865 reporting for my particular situation.

I have to eat my words. After my skeptical comment, I actually tried Claimyr for my international tax issue out of desperation. I was trying to understand reporting requirements for my partnership that owns rental property in Spain. I had completely given up on getting through to the IRS after multiple failed attempts. Using their service, I got connected to an IRS agent in about 20 minutes, which literally saved me days of frustration. The agent provided clear guidance on exactly which forms my partnership needed to file for the foreign property and how to properly report the income that was being generated. This was information I couldn't find clearly stated anywhere online. Sometimes being proven wrong is actually a good thing! If you're dealing with international tax questions like the OP, being able to actually speak with the IRS is invaluable.

One additional approach to consider: Have you looked into creating a Foreign Disregarded Entity (FDE) in Peru? This could potentially simplify your structure. Rather than having the property go through your wife and then to the partnership, you could have your US partnership own a Peruvian entity directly. This Peruvian entity would be disregarded for US tax purposes but would give you legal standing in Peru. You'd report it on Form 8858 annually, but it might simplify the money flow and eliminate some of the steps you're planning. Just make sure the entity type you choose in Peru qualifies for this treatment under US tax rules.

Has anyone mentioned FIRPTA yet? If you're selling real property in Peru through a US entity, you need to be aware of how that's reported. The sale of foreign real property isn't subject to US FIRPTA withholding itself, but you still need to report the gain/loss correctly. Also, be careful about the classification of your Peruvian property investment. If it's for development (vs just appreciation), it might be considered a Passive Foreign Investment Company (PFIC), which opens up a whole new set of tax nightmares.