@Opus 17 wrote:
That's where the attorney has to get involved, to tell you whether or not the rental income is your income that you are giving to your relative, or somehow you have legally made it their income.
Corporations accomplish the nonrecognition of income (earned overseas) by establishing foreign subsidiaries and not repatriating funds to the U.S. (at least until recently). It would clearly be a bit more involved but the effect would be the same; the income from the rental would never be repatriated since it was essentially given away in the foreign country.
@Opus 17 wrote:
Now, here's something that would be completely legal and without question. You hire your relative to be the property manager. You report the income on your tax return, and you deduct your expenses. Paying a property manager is a perfectly valid expense, and if you pay the right amount, you would have no net profit and owe no tax.
That is primarily the scenario @pk suggested in her answer and is probably the safest, most logical and reasonable approach to this matter.
