I am increasingly convinced that the November 6 Presidential election is the most important election in my lifetime. If I am right, that would also make it the most important election in your lifetime. The United States of America – AKA “Form Nation” – is in a state of paralysis. Here we are October 29, 2012 and Americans don’t even know what rate of tax they will be paying next year. For example:
The Obama campaign is trying to draw an analogy between Mitt Romney and an Etch A Sketch. The idea being that Romney’s positions are forever evolving and are evolving in unpredictable directions. Don’t know whether that is true or not. An Etch A Sketch drawing is a drawing in a continuous line. At least we know where the line started. The line can always be traced back to its roots.
But, since the Obama campaign is comparing Romney to a toy, I suggest that President Obama should be compared to another toy – specifically: The Magic Slate.
The Magic Slate is a great thing. One can completely erase the original position. What position? It never existed to begin with. Example: Wasn’t there something about closing Guatonomo?
Shades of 1980. We have a weak Democrat incumbent up against a hard working Republican challenger.
Although I hate to predict election results, I am going to predict that:
Barack Obama will lose the November 6 election.
Note that I am not saying that I predict a Romney victory. I do predict an Obama loss. My reasoning is as follows: Continue reading
is an article that appeared in the Wall Street Journal on October 19, 2012. The article was reported at the Isaac Brock Society. The article is fairly good. But, what is really interesting are comments. The comments reveal that “Homelanders” and US citizens abroad life in “different worlds”. If you have the time, I suggest reading all the comments. But, since you don’t I have tweeted some of the more interesting ones.
To me, the comments confirm that one can understand the problems of life as a US citizen abroad if you have actually lived the life of one. I find the comments very discouraging. It seems to me that there are now two kinds of US citizens abroad:
1. Those who are not tax compliant and will keep their heads buried in the sand. This group is just hiding.
2. Those who are tax compliant and cannot live with the expense and time that continued US tax compliance requires. This group is renouncing their citizenship.
Either way, unless you live in the Homeland, US citizenship is a difficult cross to bear. Continue reading
Anecdotal evidence suggests that the majority of Americans Abroad and Green Card holders are not in compliance with their tax and FBAR filings. Much has been written on this in the last year. Of particular interest are a series of posts written by former IRS attorney Steven J. Mopsick.
In order the posts are:
Tax Justice for Americans Abroad – July 16/12
On January 9, 2012 the IRS reopened the Offshore Voluntary Disclosure Program “OVDP”. You should exercise caution when considering whether to enter OVDP. During the last year I have written a number of posts about OVDI and OVDP.
Here are some selected updates.
Financial planning is difficult for US citizens abroad. I have been writing a series of posts that describe the tax treatment of US citizens abroad in very specific circumstances. Few would imagine many of these circumstances. I have recently written about when US citizens abroad sell a principal residence and why US citizens abroad should not invest in TFSAs. I have written about why PFICs must be avoided.
My topic today is how the fluctuating exchange rates can create “phantom gains”. AARO has noted and proposed the following as part of legislative tax reform for US citizens abroad:
Based on current tax law, for Americans living abroad, currency fluctuations create U.S. dollar capital gains or losses even on daily transactions as well as on movements of short and long term investments done in local currencies. The exchange rate on the purchase date and the exchange rate on the sale date determine the capital gain for the U.S. Treasury.
Allow Bona fide foreign residents the option to choose a foreign currency as their functional currency and calculate all capital gains/ loss transactions in that currency before converting to U.S. dollars. The current average annual exchange rate with the U.S. dollar is then used to convert any gains/ losses into dollar amounts from the foreign currency. Since the use of a functional currency is allowed for foreign subsidiaries of U.S. corporations, it is only reasonable that a similar logic be applied to U.S. citizens abroad.
Obviously fluctuating FX rates are a problem for US citizens abroad. My inspiration for this post comes from the following comment by Lisa on the Isaac Brock Society site. Anybody who has taken out a mortgage loan will have to deal with this problem.