Tag Archives: U.S. Estate tax

Considering renouncing US citizenship? #citizide – There are times when US citizenship can save you from foreign taxes!

Should other nations be permitted to impose taxation on U.S. citizens or corporations?
At first blush, the question sounds absurd. Is there something about being a U.S. citizen that should exempt individuals from taxation in or by a another country? Some time ago, this question was explored in a discussion on a Facebook group. Interestingly, most participants thought the discussion was absurd and did not take it seriously. But truth can be stranger than fiction. When it comes to taxation there can be some benefits to being a U.S. citizen. In fact, in certain cases, U.S. citizenship can act as a “cloaking device” – a device that shields you from taxation in another country.

The two certainties are “death and taxes” …

It’s in the area of “death” where U.S. citizenship can be helpful. Sometimes it can be to your benefit to die as a U.S. citizen. Sometimes U.S. citizenship can be helpful when somebody dies leaving you part of their estate.
What follows are some categories where U.S. citizenship can protect you from taxation. These possibilities should be considered prior to renouncing U.S. citizenship.
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Part 6 – "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"

This is Part 6 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?”
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Introduction
Many Americans abroad have had their lives turned upside down by the combination of FATCA and the enforcement of U.S. “place of birth” taxation. Those who are “long term” residents abroad find themselves caught between a “rock and a hard place”.
On the one hand they can’t afford the costs and complexity of filing U.S. tax returns.
On the other hand, many “middle class” Americans abroad cannot relinquish their U.S. citizenship (freeing themselves from the complexity of U.S. tax laws and the IRS) without paying the U.S. an “Exit Tax”.
Many Americans abroad can neither afford to comply with U.S. tax laws nor afford to relinquish U.S. citizenship.
The “Exit Tax”
Yes, many “long term” U.S. citizens abroad are in a position where they are forced to “buy their freedom from the U.S. Government”. I am reminded of one of Ronald Reagan’s great speeches where he noted, that when it comes to Americans:


 
“The price of our freedom has sometimes been high. But, we have never been willing to pay that price”.
I often wonder what President Reagan would have thought of the America today. Yes, the United States of America has joined some of the nastiest regimes in history with it’s “Exit Tax”. (Well, we all know, there must be a good policy reason for it. Just ask your Congressman.)
Not all Americans abroad are subject to the “Exit Tax”. Only “covered expatriates” are subject to the “Exit Tax”.
The obvious question is:
“How does somebody become a “covered expatriate?”
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