Expatriation by US citizens and Green Card holders


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Issues of Expatriating USA Citizens and Green Card Holders - find out more from the LLM program http://mastersinlaw.tjsl.edu/lpap/

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Expatriation by US citizens and Green Card holders

  1. 1. Issues of Expatriating ex-USACitizens and Green Card HoldersITSAPT Authors’ Conference(Sweet & Maxwell, 2nd Ed. 2011)3 Nov. 2011 London Prof. William H. Byrnes International Tax & Financial Services Graduate Program Delivered via Video-Conferencing
  2. 2. Whom am I ?- 11 top-selling books of 30+ volumes- 4 textbooks- 20 book chapters- 500+ articles- 100+ conference and training engagementsNational Underwriters/Summit Business Media - dominant information service inthe insurance/advanced markets industry with 300,000+ subscribers.Before academia - Senior Manager, then Associate Director of international tax forCoopers and Lybrand. Academia – tenured Professor of Law then Associate Dean.See www.profwilliambyrnes.com for daily original tax articles Email wbyrnes@tjsl.edu
  3. 3. Expatriation TopicsHistoryLoss of Citizenship or Permanent Residency3 ThresholdsMark to Market treatmentConnecting Factors
  4. 4. History 1966 – 10 years but IRS burden to show tax avoidance 1996 – 10 years with taxpayer burden to show not tax avoidance 2004 – 10 years regardless of tax avoidance 2008 – CGT mark2market all assets (limited exceptions w/ tax bond) – Step up in basis 2009 - 2012 – Depressed asset values w/ 15% CGT 2013 ….. ? - CGT of > 20% (new medicare 3.8% CGT) - Income & Estate Tax Rates
  5. 5. Loss of Citizenship(1) date renounce nationality before a diplomatic/consular officer & certificate of loss of nationality by State Dept(2) date submits State Dept voluntary relinquishment for act of expatriation & certificate of loss of nationality by State Dept(3) date State Dept issues a certificate of loss of nationality(4) date a US court cancels naturalization
  6. 6. Lawful permanent resident IRC 7701(b)(6)revoked / abandoned orTax Treaty w/ Forms 8833 (Treaty Benefit) 8854 (Expatriation)
  7. 7. 3 Thresholdsaverage annual net income tax for the 5 years ending before the date of expatriation or termination of residency is > than X (adjusted for inflation) or – 2011 > $147Knet worth is $2 million or more on the date of your expatriation or termination of residency orForm 8854 – US tax compliance for preceding 5 years expatriation / termination of residency
  8. 8. Mark to Marketgenerally all property deemed sold for its fair market value on the day before the expatriationexemption amount adjusted for inflation – 2011 = $636KGain subject to CGTDeferral Election + Tax Bond + Waive Treaty BenefitsDeferred compensation items
  9. 9. Connecting Factors1. Citizenship2. Residence (post expat)3. Domicile (E&GT)4. Marital (community property?)5. Beneficiaries (E&GT)6. Sources of Income (post expat Income Tax)7. Location of Assets (post expat Income/EGT)8. Timing
  10. 10. Sources of Information The Internal Revenue Code (IRC) 877A “Tax Responsibilities of Expatriation” http://www.law.cornell.edu/uscode/26/usc_sec_26_00000877---A000-.html IRS website “Expatriation Tax” http://www.irs.gov/businesses/small/international/article/0,,id=97245,00.html Notice 2009-85 (and Rev. Proc. 2010-40) http://www.irs.gov/irb/2009-45_IRB/ar10.html and http://www.irs.gov/irb/2010-46_IRB/ar17.html State Department “Advice about Possible Loss of U.S. Citizenship and Dual Nationality” http://travel.state.gov/law/citizenship/citizenship_778.html and http://www.law.cornell.edu/uscode/8/1481.html 8 U.S.C. 1481(a)(1)-(4) Loss Of Nationality …