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What is the calculation of net less to identify a troubled business in the EB-5 Program?

What is the calculation of net loss per the EB-5 program to identify a troubled business? a. Is it taxable loss per the tax return? b. Is it cash loss which includes debt service and capital purchases? c. Is it book loss per the financial statements?

Answers

• Julia Roussinova

  Immigration Attorney

  Answered on January 17, 2013

  It is a net loss *for accounting purposes* determined on the basis of GAAP (generally accepted accounting principles) during the 12 or 24-month period prior to the priority date on an EB-5 investor''s I-526 petition (Form I-526) and the loss for such period is at least 20% of the troubled business'' net worth prior to such loss. Net loss is an amount by which the total of costs and expenses exceeds the total revenue in an accounting period. If a company is larger is in size, it will most likely be involved in multiple activities other than just a single one. In this case, a loss is an excess of expenses over revenues either for main business activities or the sum of all transactions for operating or nonoperating activities for an accounting period. You should consult a licensed CPA to discuss this in more detail and provide an opinion to your immigration attorney.

• Lei Jiang

  Immigration Attorney

  Answered on January 10, 2013

  The loss should be shown on the tax return of the business entity. Other evidence of loss is also good.

• Stephen Berman

  Immigration Attorney

  Answered on January 10, 2013

  Net loss for 1 or 2 years, exceeding 20% of net worth.

• Ron Klasko

  Immigration Attorney

  Answered on January 10, 2013

  Net loss is determined by an accountant using GAAP (generally accepted accounting principles). Generally, this is net loss as determined by audited financial statements.

• Jinhee Wilde

  Immigration Attorney

  Answered on December 3, 2012

  The regulation requires that the business must have lost 40% of its business. Net income loss alone will not be sufficient and I will need to see the documents of the business to see how the business loss is being considered.

• Rana Jazayerli

  Immigration Attorney

  Answered on November 30, 2012

  The EB-5 rules define a troubled business as an enterprise that has been in existence for at least two years and has incurred a net loss during the 12- or 24-month period prior to the priority date on the immigrant investor''s Form I-526. The loss for this period must be at least 20 percent of the troubled business'' net worth prior to the loss. For purposes of determining whether the troubled business has been in existence for two years, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded. Beyond that, the only guidance that is provided about the definition of "net loss" is such a loss "as determined on the basis of generally accepted accounting principals.

• Boyd Campbell

  Immigration Attorney

  Answered on November 29, 2012

  The calculation is based upon generally accepted accounting principles.