Tag Archives: Covered expatriate gift tax

Part 11 – S. 2801 of the Internal Revenue Code is NOT a S. 877A "Exit Tax", but a punishment for the "sins of the father"

Updated September 12, 2015 – the IRS has issued “proposed rules”  governing the issue of “The sins of the father”.

Here the proposed rules from September 9, 2015:

IRS-Sec.-2801-2015-22574 (1)


IRS Sec. 2801 2015-22574

IRS S. 2801 Guidance 2015-22574

The above tweet references the following comment to Part 9 of this “Exit Tax” series.

I know many tax compliant, patriotic Americans who have renounced. Many have done so seeing the $2m threshold approaching, to protect their families and get on with their lives. All with heavy hearts.

You did not mention the additional burden on those who renounce who have US citizen relatives–the tax their relatives are supposed to pay on receiving a gift or bequest from a covered expatriate. More and more will be covered expatriates as the $2m gets smaller by reason of inflation and currency change. Although the IRS promises to give guidance on this unenforceable “succession” tax that punishes the children for the acts of their parents, so far, since 2008, we are still waiting for it. The reason for the delay is that there is probably no way of identifying those donors or deceased persons who were covered expatriates. Will the US take a FATCA approach and assume every foreign donor or deceased person is a covered expatriate unless the US recipient can demonstrate otherwise?? Certainly this law proves your point that an exit tax reflects the morality of a nation.

Thanks for the comment. S. 2801 is NOT part of the “Exit Tax” Regime. The “Exit Tax” punishes “covered expatriates” for relinquishing U.S. citizenship. S. 2801 is to inflict further punishment after relinquishment on both the “covered expatriate” and his heirs. You will see that S. 2801 exists for one and only one purpose – the punishment of “expatriation”.

The definition of “covered expatriate” is covered in Part 3 of this series of Posts about the S. 877A “Exit Tax”.

Yes, this post will focus on Internal Revenue Code S. 2801 punishment for the “Sins of the fathers“.

Exodus 20:1-26

And God spoke all these words, saying, “I am the Lord your God, who brought you out of the land of Egypt, out of the house of slavery. “You shall have no other gods before me. “You shall not make for yourself a carved image, or any likeness of anything that is in heaven above, or that is in the earth beneath, or that is in the water under the earth. You shall not bow down to them or serve them, for I the Lord your God am a jealous God, visiting the iniquity of the fathers on the children to the third and the fourth generation of those who hate me, …

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