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Because there are limitations of IRA and 401(k), such as $7000 or some people use somewhat complicated backdoor to do it "legally" have a higher amount, but also subject to penalties if the money is needed, say, when the person is 55 or 58 years old, so then, if a person can go to Europe, Northern Europe, Asia and form a company or corporation, then is it true that if the law in that country is that stock gain is not taxed, then the stock gain can be tax deferred, all the way until the end when distributed to the person?

For example, if the person decides to take some money out when he is 58 years old, then he could sell it for the corporation's account, and then distribute to himself, and only at that point it is taxable. So it is like an IRA or 401(k) but is more flexible?

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Americans are taxed on their worldwide earnings. Forming a foreign corporation does not absolve Americans of this, and there are a lot of information sharing agreements from foreign countries, their banks and more to the US Treasury to help the US enforce its tax collection laws on its citizens.

Your idea cannot effectively function as a way to grow capital tax free.

  • Corporations sure aren't "taxed on their worldwide earnings." Otherwise, Apple wouldn't have incorporated in Ireland. – RonJohn Jan 7 at 20:01
  • Right... I thought the whole point of corporation is that it is a legal entity that is different from the individual? So if that corporation is an entity of a European country, how can US tax it? And I really wonder if wealthy people form a corporation or a trust in foreign countries to achieve what I described in the original question – deeper-understanding Jan 7 at 20:25
  • @deeper-understanding for trading, Americans are subject to "Controlled Foreign Corporation" and "Passive Foreign Investment Company" rules – CQM Jan 8 at 3:11
  • @RonJohn see above comment, CFC and PFIC are the taxation regulations that an individual will have to work around. – CQM Jan 8 at 3:12
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    @RonJohn: before Dec 2017 US corporations could defer US tax on foreign subsidiary income indefinitely, and that's what Apple (like many) did. The Trump/R tax reform, TCJA (Tax Cuts and Jobs Act, PubL 115-97), reduced rates but ended this deferral option, and the 2018 annual reports for most large companies I saw had large nonrecurring expenses for the section 965 'transition' tax. – dave_thompson_085 Jan 8 at 9:42

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