United States Expatriation Tax

1. Issues of Expatriating ex-USA
Citizens and Green Card Holders
ITSAPT 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. Whom am I ?
- 11 top-selling books of 30+ volumes
- 4 textbooks
- 20 book chapters
- 500+ articles
- 100+ conference and training engagements
National Underwriters/Summit Business Media - dominant information service in
the insurance/advanced markets industry with 300,000+ subscribers.
Before academia - Senior Manager, then Associate Director of international tax for
Coopers and Lybrand. Academia – tenured Professor of Law then Associate Dean.
See www.profwilliambyrnes.com for daily original tax articles
Email wbyrnes@tjsl.edu

3. Expatriation Topics
History
Loss of Citizenship or Permanent Residency
3 Thresholds
Mark to Market treatment
Connecting Factors

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. 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. Lawful permanent resident IRC 7701(b)(6)
revoked / abandoned or
Tax Treaty w/ Forms
8833 (Treaty Benefit)
8854 (Expatriation)

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. 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. Connecting Factors
1. Citizenship
2. 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. 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 …