SEPTEMBER 202119It is also very common for the invest-ment funds to be totally, or partially, obtained through gifts from friends and family. But it is not sufficient to just show a gift deed and the receipt of the gift; evidence of where the gift donor obtained the funds is required. In short, the source of funds eviden-tiary exercise shifts to the gift donor.Source of Funds Evidence Ex-ample To illustrate the source of funds evi-dence requirements, I will provide a hypothetical example of a typical sce-nario we see from India. The EB-5 investor is the owner of an IT services company in Mum-bai. He founded his company in 1990 and over the years has taken out sal-ary and excess profits. He routine-ly moves the salary and profits into Fixed Deposits and Mutual Funds. He decides to liquidate 5,000 units of a Mutual Fund to obtain the capital for the EB-5 investment. Those 5,000 units were purchased in multiple transactions between 2010 and 2020. We review the bank statements from 2010 to 2020 to see what actual funds were used for the Mutual Fund purchases and explain those funds. For example, 1,000 units were pur-chased on 2 January 2017 for Rs 1 crore via a debit from his bank account and immediately prior to that debit was a deposit of Rs 2 crore of excess profits from his company--so the purchase of those 1,000 units easily connects to the profit receipt and those 1,000 units are cleared for liquidation and use for the EB-5 investment. Another 500 units of the Mutual Fund were purchased on 5 February 2015 and the funds in the bank ac-count for that purchase debit were from the deposit of Fixed Deposit ma-turity proceeds. That Fixed Deposit was opened from stock sale proceeds in 2014. We then examine the 2014 bank statements to see which funds were used to purchase that stock. This source of funds exercise goes back un-til there are no missing links and the chain begins with an easy-to-explain clean source, such as a salary deposit or excess profit deposit. LRS and FEMAUSCIS and the Reserve Bank of India ("RBI") both require all investment re-mittances to comply with applicable Indian laws. For EB-5 investors, the RBI's Liberalised Remittance Scheme ("LRS") is the most commonly-used mechanism for moving funds out of In-dia. If the LRS is utilized to fund an EB5 investment, then the source of funds must comply with the LRS, the Foreign Exchange Regulation Act ("FEMA"), and all other applicable laws. The remit-tance rules differ based on whether you are an Indian resident or a NRI and are beyond the scope of this article. The outward remittance plan, and the source of funds, should be pre-ap-proved by a qualified LRS/FEMA-professional to mitigate your risk of non-compliance.The Good NewsWhile the source of funds exercise may seem daunting, we have always been able to guide our Indian investors through selecting funds for investment which we can sufficiently evidence to the satisfaction of USCIS. The key to avoiding an EB-5 petition denial based on failure to prove lawful source of funds is to involve your U.S. immigration lawyer and your LRS/FEMA professional early in the process, before any remittances are made.
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