Category Archives: S. 877A Exit Tax

Summary Of The Reporting Obligations Triggered By Relinquishing US Citizenship Or Abandoning The Green Card

The American Expat Financial News Journal reliably reports information about the “Name and Shame List”. The report generally includes information about the number of people on the list and people who are reported more than once. The report often attempts to determine whether those on the list are citizenship relinquishers or green card abandoners.

The purpose of this brief post is to explain the statutory basis for the reporting obligations, identify the relevant statutes and clarify some common misconceptions.

A summary of the analysis is that:

1. All individuals renouncing (whether “covered expatriates” or not) US citizenship during the relevant period are to be included on the “Name and Shame List”.

2. Green Card holders that are “long term” residents” are required to be included on the list

It is common knowledge that the lists contain many inaccuracies.

Which statutes are relevant to determining the reporting obligations?

IRC 6039G – https://www.law.cornell.edu/uscode/text/26/6039G

IRC 877 – https://www.law.cornell.edu/uscode/text/26/877

IRC 877A – https://www.law.cornell.edu/uscode/text/26/877A

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Good discussion on renouncing US citizenship AKA #citizide: The good, the bad and the ugly

This is one of the better interviews regarding US citizenship renunciation, covering a wide range of important issues.

From Jackson-Vanik To The HEART Act – The Evolution Of American Hypocrisy

Introduction

The above tweet references a 2012 post from the Isaac Brock Society pointing out the hypocrisy of “Jackson-Vanik” and the United States. “Jackson-Vanik” – enacted in 1974 – was a U.S. law which imposed sanctions on countries who imposed unreasonable restrictions (exit taxes) on the rights of their citizens to emigrate to new countries.

By 1996, the United States (led by the Clinton administration) was imposing Exit Taxes on certain Americans who renounced U.S. citizenship. James Dale Davidson writing in “The Sovereign Individual” (1997) compared the justification (or lack thereof) for U.S. Exit Taxes to the rationale for Exit Taxes imposed by the East Germany, as follows:

If you accept the premise that people are or ought to be assets of the state, Honeker’s wall made sense. Berlin without a wall was a loophole to the Communists, just as escape from U.S. tax jurisdiction was a loophole to Clinton’s IRS. Clinton’s argument about escaping billionaires, aside from showing a politician’s usual disregard for the integrity of numbers, were similar in kind to Honeker’s, but somewhat less logical because the U.S. Government, in fact, does not have a large economic investment in wealthy citizens who might seek to flee. It is not a question of their having been educated at state expense and wanting to slip away and practice law somewhere else. The overwhelming majority of those to whom the exit tax would apply have created their wealth by their own efforts and in spite of, not because of, the U.S. Government.

James Dale Davidson – The Sovereign Individual page 117. (This book contains some of the most prescient observations about citizenship-based taxation I have ever seen.)

(Enacted as a revenue offset to the HEART Act in 2008, the United States of America now has the most brutal exit taxes imposed in the history of the world. In effect, it confiscates non-U.S. assets, acquired by people who did not live in the United States. Because of the confiscatory intent of the U.S. Exit Tax Regime, the Internal Revenue Code includes numerous reporting requirements whenever an individual renounces U.S. citizenship. To learn about the inner workings of the Section 877A Exit Tax – see the series of posts here.)

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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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Considering renouncing US citizenship? Thinking #citizide? Abandoning your #GreenCard? @Expatriationlaw webinar explaining the S. 877A Exit Tax

The general message …


More details – hope to meet you online on December 6, 2018

#Greencard abandonment: The safe disposal of the US "permanent resident" visa without triggering the S. 877A Expatriation Tax


https://www.taxation.co.uk/Articles/2018/04/24/337897/us-expatriate-tax-conference-pt-2
What follows is a summary of a presentation I made in March of 2018 in London, UK:
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What are the advantages to a Green Card holder becoming a US citizen?


There are many “permanent residents” of the United States AKA Green Card holders who have never become U.S. citizens. Citizenship is part of one’s identity. There are many reasons why a “permanent resident” of the United States would NOT become U.S. citizens. There are also many reasons why a “permanent resident” would become a U.S. citizen.
This post explores some of the factors that might influence one’s decision to become a U.S. citizen. What follows is an answer that I posed on Quora.
Read John Richardson's answer to Are there any real advantages of becoming a US citizen while you already have a green card? on Quora

The proper care and feeding of the Green Card – An interview with "long term resident" Gary @Clueit

Introduction

The Internal Revenue Code of the United States imposes worldwide income taxation on ALL individuals who are U.S. citizens or who are otherwise defined as “residents” under the Internal Revenue Code. “Residents” includes those who have a visa for “permanent residence” (commonly referred to as a Green Card). A visa for “permanent residence” is a visa for immigration purposes. Once an individual receives a visa for “permanent residence” he will be considered to be a “resident” under the Internal Revenue Code. His status as a “resident” for tax purposes continues until he fulfills specific conditions to sever his “tax residency” with the United States. The conditions required to sever “tax residency” with the United States are found in S. 7701 of the Internal Revenue Code. (Basically a Green Card holder can’t simply move from the United States and sever tax residency.)

In the same way that U.S. citizens are subject to taxation on their worldwide income even if they don’t reside in the United States, “permanent residents” will continue to be subject to taxation on their worldwide income until they take specific steps to sever tax residency in the United States. In certain circumstances Green Card holders living outside the United States can avoid filing some of the “forms” that are required of U.S. citizens living abroad.

The steps to sever tax residency are found in S. 7701(b) of the Internal Revenue Code. Those wishing to explore this further are invited to read my earlier posts about Gerd Topsnik: Topsnik 1 and Topsnik 2. Those “permanent residents” who qualify as “long term residents” will be subject to the S. 877A Exit Tax rules if they try to sever tax residency with the United States. It’s probably easier to secure a “permanent residence visa” for immigration purposes, than it is to sever tax residency for income tax purposes.

On September 5, 2018 I had the opportunity to participate in a conversation with Mr. Gary Clueit who has been a permanent resident of the United States for 34 years. Interestingly Mr. Clueit is one more Green Card holder who never applied for U.S. citizenship. There are both advantages and disadvantages to a “Green Card” holder becoming a U.S. citizen. One often overlooked disadvantage to a Green Card holder becoming a U.S. citizen is discussed here. In general, “permanent residents” (Green Card holders) of the United States have certain “tax treaty benefits” that are denied to U.S. citizens. Because of the “savings clause” U.S. citizens are denied the benefits of tax treaties. Interestingly (at least until now) other countries have failed to understand that the inclusion of the “savings clause” in U.S. tax treaties means that the treaty partner is agreeing that the United States can impose worldwide taxation on the citizen/residents of the treaty partner country. The reason is simple:

The primary impact of the “savings clause” is that assists the United States in imposing “worldwide taxation”, according to U.S. rules on people who are “tax residents” of other countries and who do not live in the United States!

The following tweet links to the podcast of the conversation. Anybody considering moving to the United States as a “permanent resident” should listen to this podcast.

More from Mr. Clueit after the jump …

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As Sir John Templeton said: The best time to invest is when you have the money – The 7 Habits Of Highly Effective #Americansabroad

The late Sir John Templeton pioneered the concept of “international” investing. Of course, by the standards of today, this would be considered “offshore investing”. He also pioneered the concept of “renouncing U.S. citizenship“. It is clear that Sir John’s renunciation of U.S. citizenship was the best investment decision he ever made. Like many Americans who are forced to renounce U.S. citizenship to create business opportunities, Sir John likely renounced to save his mutual fund business.

Sir John was fond of saying:

“The best time to invest is when you have money.”

Of course, that is a more difficult concept for Americans abroad. (The problem is particularly acute in Australia where it is believed that the Australian Superannuation may be subject to U.S. taxation.) Time after time, in country after country, I speak with people who avoid investing because they are Americans abroad. This is a great mistake.

It’s important for Americans abroad to heed the teaching of Sir John Templeton. They must (1) learn to invest when they have the money and (2) discipline themselves to acquire the money to invest!

One of my most consistently read posts is “The biggest cost of being a “dual Canada/U.S. tax filer” is the “lost opportunity” available to pure Canadians“.

I have been meaning to write a “follow up” post for a long time. Perhaps, the message was too simple. Perhaps it is only worth a tweet. Perhaps it’s dangerous to expand such a simple thought into multiple paragraphs, but here goes …

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