Monthly Archives: July 2013

#FATCA Hunt, fluctuating exchange rates, #Americansabroad and the #Expatriation Game

 

Introductory thought 1:

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.

Introductory thought 2:

We all know that US tax liability is computed in US dollars. We also know that exchange rates can play in rule in creating profits and losses. It would be interesting for people to comment on their experiences with how changes in exchange rates have created “phantom gains” for them. I think this could be very helpful evidence in working on how to get this whole thing (citizenship-based taxation) reversed. So, if anybody is reading this, please comment on your experiences.

In addition, the issue of exchange rates and a falling US dollar is extremely important on this issue of expatriation? Why?

As the US dollar falls, almost everybody will become a “covered expatriate”. That two million dollars will seem like nothing.

Obviously this is one more reason why you need to get on with the job, painful as it is, of expatriation and freeing yourself from this nightmare!

Since the election of Barack Obama the world has  been introduced to two new sports/games.

When it comes to playing games:

Some people make things happen, some watch things happen, some ask “what happened?”

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Democracy in America – Voting and #americansabroad – Means taxation without representation

democracyinamerica

Before the Berlin wall came down, Germany was divided into East Germany and West Germany. East Germany was called the DDR (“Deutsche Demokratische Republik,”). It was clearly not a democracy. In the Soviet Union people were entitled to vote. It’s just that no representatives of the voters appeared on the ballot. Clearly the fact that a country calls itself a democracy does NOT make it a democracy. There are many different kinds of democracies. They can have different rules, different kinds of representatives and different ways to determine the winner of elections. Yet all true democracies share one characteristic:

They allow citizens and stakeholders to have meaningful participation in the political process. Meaningful participation includes more than the right to cast a ballot. It necessarily includes having someone on the ballot who represents ones interests.

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5 strategies for weight reduction and a better life for #Americansabroad – Lose your “covered expat” status

povertywealth

My recent post discussed the importance of renouncing U.S. citizenship before becoming a covered expat. For those who need a reminder (and this is not a substitute for careful legal advice) a “covered expatriate” is one who meets any of the following tests:

1. The Income Test – Has the composition of income hat has resulted in a U.S. tax bill of approximately 140,000 for each of the last three years (this is a paraphrase, look it up yourself);

2. The Asset Test – Has a net worth of two million dollars or more

3. The Compliance Test – Is unable to certify compliance with U.S. tax laws for each of the five years prior to expatriation. Note that this is intended to include having filed all relevant information returns. (I would argue that since FBAR is a Title 31 requirement it is irrelevant to Title 26 compliance). Interestingly, if you do not meet either the asset test or the income test, you have a huge incentive to ensure that you have five years of tax compliance.

When it comes to U.S. tax compliance:

The only thing worse than the fear of non-compliance is the certainty of compliance. Why?

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Tax compliant #americansbroad with a principal residence or mutual funds should renounce before becoming a covered #expats

For those who do not want to read this post. Here is the bottom line:

If you are a tax compliant U.S. citizen abroad, with a net worth of less than two million U.S. dollars, with investments (including mutual funds, pensions, and a principal residence in your country of residence), you should renounce your U.S. citizenship at the earliest possible moment. To the extent that your investments are in non-U.S. mutual funds, other kinds of PFICs or your principal residence, the U.S will confiscate large amounts of the proceeds of sale. (And you thought you were solving your problems be being tax compliant.)

Many Canadians are using their principal residence as their retirement plan. Their plan is to sell, downsize and live of the balance of the proceeds. This is NOT possible if you are a tax compliant U.S. citizen! You must NOT be a U.S. citizen at the time the investments are sold.

If you want to preserve your investments  you must relinquish your U.S. citizenship to protect your access to your investments!

For those who want to understand why, read on …

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Cook v. Tait 12: Afroyim v. Rusk, the 14th amendment and the forcible destruction of US citizenship

afroyim

Introduction:

I have been blogging on U.S. citizenship-based taxation since 2011. In February of 2012, I wrote the “Prologue” for this series of posts:

Citizenship renunciations soaring under Obama – Renunciation as an Act of Self Defense

That post included the following poll. The results are shocking!

 

In January of 2013 I began a series of posts to explore the rationale (if there is one) for  “citizenship-based taxation”. I simply cannot understand how the United States of America, a country that once was a leader in human rights, can treat it’s citizens (not to mention Green Card holders) so badly. I assume that Congress has simply not considered this issue.

This series of posts (including the Prologue are):

Cook v. Tait Prologue: Citizenship renunciations soaring under Obama – Renunciation as an Act of Self Defense

Cook v. Tait 1: Does Cook v. Tait really mean that citizenship-based taxation is constitutional in all cases?

Cook v. Tait 2: The presumption of government benefit

Cook v. Tait 3: Legal Scholar agrees justification in Cook v. Tait, but offers new justification for citizenship-based taxation

Cook v. Tait 4: Taxation of #Americansabroad based on US culture 150 years ago! Time warp or what!

Cook v. Tait 5: Citizenship-based taxation was never justified – League of Nations reports!

Cook v. Tait 6: Taxation of Green Card holders who reside outside the U.S.

Cook v. Tait 7: Equality: Law prohibits both rich and poor from sleeping on the park bench

Cook v. Tait 8: Does citizenship-based taxation cross the boundaries of tax justice?

Cook v. Tait 9:  US may have to stop citizenship-based taxation to get #FATCA IGAs

Cook v. Tait 10: Those born outside the U.S. to U.S. citizens, may not be U.S. citizens

Cook v. Tait 11: Who should #Americansabroad be compared to for tax purposes? Even U.S. citizens are entitle to “equal protection” under the 14th amendment

Cook v. Tait 12: Afroyim v. Rusk, The 14th amendment and the forcible destruction of citizenship

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In our country the people are sovereign and the Government cannot sever its relationship to the people by taking away their citizenship. Our Constitution governs us and we must never forget that our Constitution limits the Government to those powers specifically granted or those that are necessary and proper to carry out the specifically granted ones.

– Justice Black Afroyim v. Rusk

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Barbara Boxer, Exit Taxes, and the Totalitarian Temptation.

The US exit tax applies to U.S. citizens abroad who have accumulated all their assets outside the U.S. For this reason the U.S. tax is arguably much more offensive than the Exit Taxes imposed by the Nazis and Soviets.

International Liberty

Some of the world’s most disgusting and evil regimes restricted the right to emigrate, including the imposition of exit taxes designed to fleece those who did want to escape.

Given the evils of communism, you won’t be surprised to learn that the Soviet Union had such a policy. Here’s an excerpt from a 1972 story in the Palm Beach Post.

…citizens have been refused permission to leave the Soviet Union unless they pay a new tax… Nearly 500 Jews signed a letter to U.N. Secretary General Kurt Waldheim calling the tax an illegal “ransom” and an extreme injustice. Jews trying to emigrate to Israel have been the main victims of the new tax imposed by a decree… However, the tax is applied to anyone trying to emigrate from the Soviet Union.

Not surprisingly, the Nazis also used the same approach. Here are the relevant passages from a report…

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Cook v. Tait 11: Who should #americansabroad be compared to for tax purposes? Even U.S. citizens are entitled to “equal protection” under the 14th amendment

14thamendment

I have been blogging on U.S. citizenship-based taxation since 2011. In February of 2012, I wrote the “Prologue” for this series of posts:

Citizenship renunciations soaring under Obama – Renunciation as an Act of Self Defense

That post included the following poll. The results are shocking!

In January of 2013 I began a series of posts to explore the rationale (if there is one) for  “citizenship-based taxation”. I simply cannot understand how the United States of America, a country that once was a leader in human rights, can treat it’s citizens (not to mention Green Card holders) so badly. I assume that Congress has simply not considered this issue.

This series of posts (including the Prologue are):

Cook v. Tait Prologue: Citizenship renunciations soaring under Obama – Renunciation as an Act of Self Defense

Cook v. Tait 1: Does Cook v. Tait really mean that citizenship-based taxation is constitutional in all cases?

Cook v. Tait 2: The presumption of government benefit

Cook v. Tait 3: Legal Scholar agrees justification in Cook v. Tait, but offers new justification for citizenship-based taxation

Cook v. Tait 4: Taxation of #Americansabroad based on US culture 150 years ago! Time warp or what!

Cook v. Tait 5: Citizenship-based taxation was never justified – League of Nations reports!

Cook v. Tait 6: Taxation of Green Card holders who reside outside the U.S.

Cook v. Tait 7: Equality: Law prohibits both rich and poor from sleeping on the park bench

Cook v. Tait 8: Does citizenship-based taxation cross the boundaries of tax justice?

Cook v. Tait 9:  US may have to stop citizenship-based taxation to get #FATCA IGAs

Cook v. Tait 10: Those born outside the U.S. to U.S. citizens, may not be U.S. citizens

Cook v. Tait 11: Who should #Americansabroad be compared to for tax purposes? Even U.S. citizens are entitle to “equal protection” under the 14th amendment

This post discusses citizenship in the context of the equal protection clause of the 14th amendment of the constitution. I will argue that the equal protection prohibits discrimination against U.S. citizens abroad based on their citizenship.

The idea for this particular post came from the following comment at the Isaac Brock Society.

What follows is a quote from Bernard Schneider’s submission to the Ways and Means Committee:

“Generally, U.S. expatriates are treated like U.S. residents and taxed on their worldwide income. However, U.S. expatriates should be compared not to U.S. residents but to nonresident aliens. But for their citizenship or immigration status, U.S. persons abroad would be treated like nonresident aliens, i.e. generally taxed at a flat rate of thirty percent on U.S. source income that is not effectively connected with a U.S. trade or business and at the regular graduated rates on income that is effectively connected with a U.S. trade or business, including on gain from the sale of real property interests in the United States. In addition, net capital gains would not be taxable unless they are fixed or determinable annual periodic income. Needless to say, the foreign source income of nonresident aliens is not taxed by the United States. In most cases expatriates could engage in the same economic activities in the United States as nonresidents without paying the higher taxes for which residents are liable. The difference between the tax imposed on nonresidents and that imposed on expatriates constitutes part of the “citizenship penalty” paid by U.S. persons abroad.”

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