So I foreshadowed this already but Americans can't have passive holding companies and expect to avoid US tax. (Holding company implies passive property ownership.)
1960s era Congress already created CFC, PFIC, FBSCI, FBHCI laws which ensures that compliant Americans can't have passive offshore companies to defer taxes indefinitely. You looked like you were on to an original idea but your grandparents already thought of it. What you suggested still requires your non-compliance and the opposite of perfectly legal.
Those laws put your offshore earnings from US connected entities right back on your US personal income tax.
Most of these regulations are undermined by not having a passive holding company but an offshore company with additional business operations.
I didn't say it would be easy :-) Which is good in that it creates a nice moat around others entering the space. The question I would throw out to a tax lawyer that was operating at the level of Appleby would be this, "What set of relationships, companies, and structure would be necessary for a US person to shield all of their US tax exposure while living in the US?" Then I would ask my MBA friend, can we create such a structure so that the marginal cost of adding an additional US person to the structure would be significantly less than 3 - 10% of their shielded tax.
The theory being that the company would be funded on that margin and by knowing the cost to set it up and the rate of return from the marginal cost, you could put together a plan to build it and grow it.
yeah that could be interesting, it just requires trust which could be undermined with no recourse. there are also so many on-shore methods for US citizens that it is less worth it.
A non-US citizen could set up a corporation in a zero tax jurisdiction and allow partners to come in and keep diluting their share as long as it remains over 50% .... or a few other stipulations when it got over a certain number of members. but then adding additional property to this gets murky, and the non-US majority beneficiary has claims on the direction of all the property.
If you are functionally able to control it then then US courts will undermine it anyway and levy a big tax bill on you.
1960s era Congress already created CFC, PFIC, FBSCI, FBHCI laws which ensures that compliant Americans can't have passive offshore companies to defer taxes indefinitely. You looked like you were on to an original idea but your grandparents already thought of it. What you suggested still requires your non-compliance and the opposite of perfectly legal.
Those laws put your offshore earnings from US connected entities right back on your US personal income tax.
Most of these regulations are undermined by not having a passive holding company but an offshore company with additional business operations.