Category Archives: PFIC

Part 9 of series: How do US Tax Rules Constrain the Investment Choices of US Taxpayers Living in Australia?

Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:

You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.

Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.

Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).

This is post 9 in my series leading up to the May 17 Tax Connections discussion. The first eight posts have been for the purpose of demonstrating:

– in posts 1 to 4, Laura Snyder did a wonderful job in explaining how the U.S. tax system impacts the lives of Americans abroad. Her specific focus was on those individuals who identify as being U.S. citizens

– in post 5, I extended the discussion to reinforce that what the U.S. calls “citizenship-based taxation” is actually a system that impacts far more than those who identify as being U.S. citizens. In fact it burdens every individual on the planet who can’t demonstrate that he is a “nonresident” alien (people are renouncing U.S. citizenship because they can save themselves ONLY if they become a “nonresident alien”).

– in Post 6, I added the thoughts of Toronto Tax Professional Peter Megoudis who explained how those who are connected to “U.S. persons” (through family or business arrangements) can be impacted by the U.S. tax system

In Post 7, I extended the analysis to explain that:

1. Not only does the United States impose worldwide taxation on individuals who don’t live in the United States; but

2. The system of worldwide taxation imposed is in reality and separate and far more punitive collection of taxes than is imposed on Homeland Americans.
Think of it! With the exception of the United States, when a person moves away from the country and establishes tax residency in another country, they will no longer be taxed as a resident of the first country.

But in the case of the United States: If a U.S. citizen moves from the United States and establishes tax residency in a new country: (1) he will STILL be taxable as a tax resident of the United States (2) he will be subjected to a separate and more punitive system of taxation! (3) he will have to engage in financial planning according to the rules of the tax system where he resides. #YouCantMakeThisUp! I recently discussed this on Quora as follows …

Read John Richardson's answer to What would I, as an American citizen, need to do to manage my finances (such as an investment portfolio) if I decided to move to Canada? What pitfalls await? on Quora

We will now see how being subject to the U.S. tax system disables the individual, from being able to engage in the normal financial planning, that is optimal under the tax system where he resides. In effect, he will lose the tax benefits which are available to “non-U.S.” residents of his country of residence. The biggest cost of this is NOT the additional tax. The biggest cost is the opportunity cost of being disabled from normal financial planning. A discussion of “lost investing opportunity” in Canada is here.

Dr. Karen Alpert will now explain how the “loss of opportunity” works in an Australian context.

Australia – A Study
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U.S. tax professionals discuss the principle that: The United States imposes a separate and more punitive taxation on #Americansabroad and @USAccidental

Here are some links to some of my videos discussion various of aspects of FATCA and U.S. “citizenship-based taxation”. In general there are three sources:

1. My personal YouTube channel.

2. Videos made at ThatChannel.com (a small Toronto internet based television station).

3. Podcasts at “PREP Podcaster” – featuring many interesting discussions with interesting people.

In March of 2019 I began a discussion at Tax Connections exploring the principle that:

“The United States is imposing a separate and more punitive tax system on people who are tax residents of other countries and do not live in the United States.”

As part of this discussion I had some discussion with Virginia La Torre Jeker, Peter Megoudis and Elena Hanson. Each of them is highly experienced and knowledgeable about how the U.S. tax system applies to Americans abroad and accidental Americans. The discussion took place in March of 2019. It turned out to be a very long discussion. Rather than include a video of the complete discussion, I have broken this into smaller videos that are based on themes.

This post is to separate and highlight the videos that resulted from this discussion.
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Part 6 of series: Why this Toronto based International Tax specialist always asks whether there are any U.S. taxpayers in the family

Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:

You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.

Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.

Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).
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This is the sixth of a series of posts that reflect views and experiences of Americans abroad who are experiencing the reality of living as an American abroad in an FBAR and FATCA world. (The first post is here.) The second post is here. The third post is here. The fourth post is here. The fifth post is here. I think it’s important to hear from people who are actually impacted by this and who have the courage to speak out. The “reality on the ground” is quite different from the theory.
I hope that this series of posts will give you ideas for questions and concerns that you would like to have addressed in the May 17, 2019 Tax Connections – Citizenship Taxation discussion.
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The last post in this series made the point that U.S. “citizenship-based taxation” impacts people who are dual citizens and tax residents of other countries. Many of of these people do NOT view themselves as U.S. citizens at all. The suggestion that they are U.S. citizens is not welcome and is (because U.S. citizens are subject to a vast regulatory scheme) an intrusion in their lives. Fair enough.

Most of the posts in this series describe the effect of U.S. regulation on those who ARE U.S. citizens. What about the effect of “citizenship-based taxation” on those who are NOT U.S. citizens? The marriage of Meghan Markle to Prince Harry has generated an awareness of the regulatory requirements on U.S. citizens who live outside the United States. This is only part of the problem. To focus on how U.S. citizenship-based taxation affects ONLY U.S. citizens is selfish and misguided. After all, by marrying Prince Harry, Meghan Markle is now part of a family which includes non-resident aliens. As I recently suggested on Twitter:

My thinking along these lines began with:

What about Internal Revenue Code Section 318? This would deem “Baby Sussex” to be (for IRS purposes) the owner of any the shares of any U.K. corporations that Harry might own. This is only one of many instances where (to put it simply) the U.S. citizenship of one family member can become a problem for the whole family. In any event, this series really needs a post, describing what could happen, when a U.S. citizen becomes part of what is otherwise, a family of “non-resident aliens”.

In order to assist with this, I realized that I needed the input of a “U.S. Tax Anthropologist”. I turned to Peter Megoudis who is the director of the expat tax division at Trowbridge. Peter astutely recognised that the United States invented the concept of the “expat”. See the following video clip.

I asked Peter if he would share the results of his research on how one U.S. citizen family member could impact the whole family. In other words: How do the rules of U.S. “citizenship-based taxation” affect people who are not U.S. citizens, but have chosen to interact with U.S. citizens?

Peter replied to me with the following …

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Part 1 of 4: “How Do I Protect Myself?” A Case Study in the Marginalization of Americans Living Overseas

Before moving to the post, if you believe that Americans abroad are being treated unjustly by the United States Government: Join me on May 17, 2019 for a discussion of U.S. “citizenship-based taxation” as follows:

You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.

Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.

Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).
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This is the first of a series of four posts that reflect views and experiences of Americans abroad who are experiencing the reality of actually living as an American abroad in an FBAR and FATCA world. I think it’s important to hear from people who are actually impacted by this and who have the courage to speak out. The “reality on the ground” is quite different from the theory.

I hope that this series of posts will give you ideas for questions and concerns that you would like to have addressed in the May 17, 2019 Tax Connections – Citizenship Taxation discussion.

I am grateful to Laura Snyder for contributing her thoughts, writing and research to the discussion.

Now over to Ms. Snyder …
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“How Do I Protect Myself?”

A Case Study in the Marginalization of Americans Living Overseas

by Laura Snyder*

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Considering renouncing US citizenship? Meet a person who I suggested NOT commit #citizide


For most U.S. citizens attempting to live outside the United States (in compliance with U.S. laws), their days as U.S. citizens are coming to an end. Those who have ignored the fiscal demands required of Americans abroad (meaning they have not entered the U.S. tax system) will be able to retain U.S. citizenship for the foreseeable future. But, for those who do file U.S. taxes and attempt to comply with the outrageous demands of the United States (FBAR, forms, PFIC, Transition Tax, GILTI, Subpart F and more), they experience life like this:
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Bye Bye Storify, Hello Wakelet – My "Stories" will live in this post and be moved to https://wakelet.com/@Expatriationlaw

Today is May 15, 2018. Tomorrow Storify closes forever (unless it provides a last minute_ reprieve.
Therefore, I am creating this post to “store” copies of my 6 Storify Stories.
They are being saved here in pdf format. I have also moved them over to my Wakelet account where I will continue posts of this type.
‘Will you walk into my parlour?’ – #Americansabroad and IRS “amnesty” offers in the 2009 #OVDP
Australian Greens Senator @LarissaWaters resigns because of her CANADIAN place of birth. Too bad she was born in Canada
Can the common law “revenue rule” be used to stop the enforcement of U.S. “citizenship taxation” on non-U.S. residents?
My tax professional told me my “non-U.S. mutual fund is a #PFIC! What is a #PFIC and what do I do?
Tax, culture and how the USA uses #citizenshiptaxation to impose US culture (and penalties) on other countries
The “Pax Americana” to the “Tax Americana”: How the USA is imposing a separate, punitive tax regime on “nonresidents”

Part 9: Responding to the Sec. 965 “transition tax”: From the "Pax Americana" to the "Tax Americana"


This is the ninth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by taxpaying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen.
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The worldwide trend of attacking the use of corporations as a way to reduce or defer taxation for individuals

Introduction – The war against corporations and the shareholders of those corporations
Corporations as entities that are separate from their shareholder/owners
As every law students knows, a corporation is a legal entity that is separate from its owner. As a legal entity that is separate from its owner, a corporation is capable of holding assets, carrying on a business and investing in a way that results in separation of the shareholder(s) from the business itself. It is a mistake to infer that the corporation’s status as a separate legal entity means that the corporation’s income will not be taxed to its shareholders.
Corporations as legal instruments of tax deferral
When corporate tax rates are lower than individual tax rates, there is incentive for individuals to earn and invest through corporations rather than to earn and invest as individuals. In other words, in certain circumstances, corporations can be used to pay less taxes.
Corporations as instruments of tax evasion
In many jurisdictions is it possible to create a Corporation and NOT disclose the identities of the beneficial owners. Because of this circumstance:
1. Corporations (as was made clear in the “Panama Papers Story”) can be used to hide income and assets for either legitimate or illegitimate reasons; and
2. Corporations can be used to avoid the attribution of income earned by the corporation to the shareholders.
Corporations and the rise of @TaxHavenUSA
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The biggest cost of being a "dual Canada/U.S. tax filer" is the "lost opportunity" available to pure Canadians

Update August 6, 2018:

I have written a sequel to this post – “7 Habits Of Highly Effective Americans Abroad” which you may find of interest:

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The reality of being a “DUAL” Canada U.S. tax filer is that you are a “DUEL” tax filer

“It’s not the taxes they take from you. It’s that the U.S. tax system leaves you with few opportunities for financial planning”.

I was recently asked “what exactly are the issues facing “Canada U.S. dual tax filers?” This is my attempt to condense this topic into a short answer. There are a number of “obvious issues facing U.S. citizens living in Canada.” There are a number of issues that are less obvious. Here goes …
There are (at least) five obvious issues facing “dual Canada U.S. tax filers in Canada”.

At the very least the issues include:
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Are "non-U.S. mutual funds" foreign corporations AKA #PFIC? Does your tax preparer know for sure?


I have written many posts that include a discussion of PFICs. This post has been motivated by a post by Karen Alpert at “Fix The Tax Treaty” (well it can’t really be fixed). The post focuses on the use of “non-U.S. mutual funds” in retirement planning. The post is written from the perspective that “non-U.S. mutual funds” ARE PFICs.
If you don’t know what a PFIC is be happy, be happy! A bit of knowledge (especially if you know things that aren’t true) can be a dangerous thing. Although most “tax professionals” treat non-U.S. mutual funds as PFICs, there is little explanation or analysis of WHY or HOW a “non-U.S. mutual fund” is a PFIC. In other words, most “tax professionals” know that “non-U.S. mutual funds” are PFICs. But, they don’t do a good job of explaining why. This post is based on a series of comments on Karen’s post that are consolidated as tweets in this Storify post.

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