I am planning to be an EB-5 investor and would like to invest $ 1 million for a residential home development located in a non-TEA area. Can I use $600,000 to purchase the land and $400,000 for initial working capital, including salaries for the 10 workers, materials and outsourcing suppliers? What about the income and profits during the first two years, will those be considered as part of the 1 million investment scope?
Yes, you can use the $1 million investment towards the purchase of the property and working capital. However, the income and profits will not be considered part of the investment unless they were distributed to you personally and then you re-invested them into the business.
In most cases, as long as all other EB-5 requirements are met, the investor can allocate a portion of the investment for land purchase. All of the capital must be at risk and go toward job-creation purposes, but in your case, it appears that the funds used for land purchase for a residential home development would qualify. The income and profits (and retained earnings, if any) would not be considered part of your investment unless you receive a distribution of those profits, pay taxes on them, and reinvest them into the new commercial enterprise. Not very likely.
The $600,000 to purchase the land and $400,00 for initial working capital could be used to make an EB-5 investment of $1,000,000. Income from the business which is reinvested in the new business will not be seen as part of the EB-5 investment of the foreign national. If an owner of the new business receives profits from the new business and pays taxes on this personal income, then the remaining funds which are reinvested in the new business will be seen as part of the foreign national EB-5 investment. You need a consultation appointment with an immigration attorney to discuss the details of these issues and other issues.
Generally speaking, you would have to invest $1 Million from an account under your control that would have to flow for some period of time into the project. You can use the funds for the purchase of the land and for other purposes, but your income from the project would not be considered part of the $1 Million investment.
As long as the $1million invested is not for your own home development but for real estate development of residential properties the $600,000 for purchase and $400,000 for salaries, equipment, suppliers etc, is fine. The income/profit derived during the first two years do not count toward the $1million investment.
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