Abusive Offshore Tax Avoidance Schemes -
Facts (Section II)
From: http://www.irs.gov/businesses/small/article/0,,id=106494,00.html

II. Legitimate Transactions

There are a number of possible reasons for a U.S. taxpayer to utilize offshore entities and accounts. While many are created with tax evasion as the primary motivation, some are legal in every respect.

• Foreign corporations - Foreign corporations may be used for many valid business purposes. In some countries, the creation of a corporation in that country is the only way that a U.S. company can do business there.

• Foreign partnerships - Foreign partnerships are a common way of pooling financial resources and knowledge among participants from more than one country. In some nations, the government may actually restrict foreign investment to partnerships or joint ventures with the government or domestic partners.

• Foreign trusts - Foreign trusts may be used to place assets in the hands of competent managers when there is doubt about the ability or inclination of the beneficiaries to effectively manage the assets themselves. Trusts offer a means of managing a single asset for the benefit of a virtually limitless number of beneficiaries, while keeping the asset intact. Foreign trusts may offer additional advantages by operating in a different legal and tax environment. A number of countries do not tax trusts on income earned outside their borders.

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