Tag Archives: u.s. exit tax

Thoughts on Exit Taxes in the Modern World by @VictoriaFerauge – Do the S. 877A rules go too far?

The above tweet references a comment that appeared on post written by Victoria Ferauge on her “TheFrancoAmerican-Flophouse.blogspot.com” blog. It is a old post that was written about “Exit Taxes” in general which she refers to as:

An exit tax is a tax that is levied against an individual or a corporation who wishes to transfer residency or citizenship from one country to another.  It is a tax on emigration and/or expatriation.  How does it work and what is its purpose?:

In general, ET [Exit Taxation] aims at levying the potential or latent gains (also called “hidden reserves”) related with the assets that an individual, a company or a PE located in a given country, economically (eg., through allocation to a foreign PE of a trademark or a shareholding), or physically transfer to another tax jurisdiction. A first feature of ET is, thus, related with the fact that it is imposed when no asset disposal takes place, and no revenue is generated.

It is a tax that the United States levies against certain individuals who relinquish U.S. citizenship. I recommend this Victoria’s post as an objective description of what is meant by an Exit Tax. I also found that I had left the following comment on the post:

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U.S. dollar FX Rates give and take – falling Canadian dollar a benefit for #Americansabroad renouncing

Almost two years ago to the day, I wrote a post explaining how:

How Fluctuating FX Foreign Exchange Rates Generate Capital Gains on the Sale of Property and the Discharge of Debt.

Those wishing to understand how exchange rates affect possible U.S. capital gains liability for Americans abroad should revisit that post. The “Readers Digest” version is as follows:

1. For the purpose of U.S. taxes, all transactions are converted to U.S. dollars (using the applicable rate at the time of the transaction);

2. The result is that fluctuating exchange rates can generate “phantom” capital gains and losses, which can generate U.S. tax liability for Americans abroad.

As the Canadian dollar rises in value, fewer Canadian dollars are needed to purchase a U.S. dollar. The capital gains measured in U.S. dollars would increase.

As the Canadian dollar falls in value, more Canadian dollars are need to purchase a U.S. dollar. The capital gains measured in U.S. dollars would decrease.

The Canadian dollar has fallen by about 10% in the last two years. The above tweet references a video suggesting that, the decline of the Canadian dollar or (as a Homelander would say), the strengthening of the U.S. dollar is EXCELLENT for Americans in Canada considering renouncing U.S. citizenship.
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Cook v. Tait 14: It’s NOT “citizenship-based taxation”, It’s “extraterritorial taxation”

The Cook v. Tait Series of Posts

boldlygo

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 YET 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

Cook v. Taint 13: The U.S. can no longer be permitted to levy taxes on the residents of other countries in general and border babies in particular

Cook v. Tait 14 – Boldly Go where no taxing authority has gone before

Cook v. Tait 15 – Why did the Soviet Union, Bulgaria, Vietnam and Myanmar adopt CBT? To maintain control.

Cook v. Tait 16 (Reblog of Tax-Expatriation.com post) Supreme Court’s Decision in Cook vs. Tait and Notification Requirement of Section 7701(a)(50)

 

The above tweet references the following comment to the Cook v. Tait 1 post.

 

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Sooner or later, if you have money, you must pay the U.S. – You can pay the Exit Tax now or the Estate Tax later

You can pay the Exit Tax NOW, or the Estate Tax LATER!

Sir John Templeton was one of the world’s greatest investors. In 1955 he founded the Templeton Growth Fund in Toronto, Canada.  Of course, it is now a PFIC. and PFICs are  “tax cancer” for U.S. citizens. U.S. citizens who invest in it will be severely punished. A good explanation of how PFICs work is here. (If you are  U.S. citizen you should consider selling all non-U.S. mutual funds.) In 1969, John Templeton renounced his U.S. citizenship and moved to the Bahamas. In so doing, he avoided the U.S. estate tax. Furthermore, at the time that he renounced, the U.S. did not have an “Exit Tax”. Continue reading

Exit tax triggered by renouncing U.S. Citizenship

You need to find one!

More and more U.S. expats are voting with their feet and opting to renounce U.S. citizenship. Renouncing your U.S. citizenship may or may not make sense for you. If you are considering renouncing your U.S. citizenship, the question that most people ask before taking any step is:

“What are the tax consequences of renouncing U.S. citizenship?”

The following is an excerpt from a comment on the Americans Driven To Divorce article on the Globe and Mail site:

“And for the correction: the definition of “wealthy” is based upon total assets and having paid and average of $150,000 of tax over the past 5 years ( not annual income ). Since most do not trigger that threshhold, the entire process is really not that burdensome at all.”

Do you see any mistake(s) in this? I believe that there are (is). Continue reading