Tag Archives: residence taxation

Part 2 – Understanding "Exit Taxes" in a system of residence based taxation vs. Exit Taxes in a system of "citizenship (place of birth) taxation

This is Part 2 of a 9 part series on the Exit Tax.
The 9 parts are:
Part 1 – April 1, 2015 – “Facts are stubborn things” – The results of the “Exit Tax
Part 2 – April 2, 2015 – “How could this possibly happen? Understanding “Exit Taxes” in a system of residence based taxation vs. Exit Taxes in a system of “citizenship (place of birth) taxation”
Part 3 – April 3, 2015 – “The “Exit Tax” affects “covered expatriates” – what is a “covered expatriate”?”
Part 4 – April 4, 2015 – “You are a “covered expatriate” How the “Exit Tax” is actually calculated”
Part 5 – April 5, 2015 – “The “Exit Tax” in action – Five actual scenarios with 5 actual completed U.S. tax returns.”
Part 6 – April 6, 2015 – “Surely, expatriation is NOT worse than death! The two million asset test should be raised to the Estate Tax limitation – approximately five million dollars – It’s Time”
Part 7 – April 7, 2015 – “The two kinds of U.S. citizenship: Citizenship for immigration and citizenship for tax”
Part 8 – April 8, 2015 – “I relinquished U.S. citizenship many years ago. Could I still have U.S. tax citizenship?”
Part 9 – April 9, 2015 – “Leaving the U.S. tax system – renounce or relinquish U.S. citizenship, What’s the difference?”
“Exit Tax” – Understanding The Confiscatory Horror
Let’s begin with some politics …


In an interesting post Robert Wood writes:

Both Mayor Johnson and Senator Cruz are U.S. citizens. Both Mayor Johnson and Senator Cruz either have or are renouncing the citizenships of the countries where they were born. There will no tax consequences to Senator Cruz for renouncing Canadian citizenship. Mayor Johnson will probably be spared America’s draconian “Exit Tax” (assuming he was born a dual citizen) for renouncing U.S. citizenship. The “Exit Tax” (if applicable) is a very serious thing. Robert Wood notes that:
To leave America, you generally must prove 5 years of U.S. tax compliance. Plus, if you have a net worth greater than $2 million or have average annual net income tax for the 5 previous years of $157,000 or more (that’s tax, not income), you pay an exit tax. There is an exemption of approximately $680,000. Giving Up A Green Card can cost you too. Some people expatriate under the immigration rules and never file anything with the IRS, a practice that is generally unwise. But then, no one wants to get on the wrong side of the IRS.

As the following tweet suggests, Senator Cruz was very lucky that he was born in Canada (which does NOT impose a tax on renouncing Canadian citizenship) and NOT in the United States (which does impose a tax on renouncing U.S. citizenship).


Introduction – What is an “Exit Tax”?
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