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Buying the property correctly is the secret to tax success. We know how to set things up correctly from the start.

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Trusts can act as a firewall against the US tax system, but are hard to do right. We create, terminate, and fix trusts.

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For companies that operate across the US border, we can help with the complexity of US tax planning.

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January 19, 2018

The Evident Accounting Complexity of Section 951A

There has been a lot of ballyhoo over the last few years about mega-multinationals (like Apple and Google) and their international tax structures. The amounts of money stashed abroad are staggering. But frankly, spending time complaining about Apple and Google’s tax planning is a mug’s game — the political ideologue’s version of smugly judgmental nattering about the Kardashians.

Meanwhile, real people roam the surface of Planet Earth, living real lives. Think of a normal American citizen living abroad, running a consulting business with $1 million of revenue and $500,000 of expenses. That’s real, and his problems are worth talking about.

Our American citizen abroad is the human embodiment of a multinational business enterprise.... continue reading

January 16, 2018

Why (Some) Expatriates Cannot Own Guns

I want to give you a slight detour from tax law to see a little-known Federal law that applies to U.S. citizens who renounce their nationality.

The topic is guns–former U.S. citizens cannot (legally) own them. The topic is interesting in its own right, but it is meta-interesting too:

  • It shows how anti-expatriate fervor has seeped into Federal law generally; and
  • How few people have seen this and care about it, either in specific application or for its implications.

You might not care about guns. You might be violently anti-gun (haha see what I did there?). But the propensity for ever-extending tendrils of Federal legislation might be of interest to you.... continue reading

January 11, 2018

Active Rental Income Exception to Passive Income

Active rental income

This is a question we received through an email:

I own stock of a foreign real estate investment trust (REIT). It is a corporation under US tax law. It owns a hotel and rents rooms directly. It outsources the management of the hotel to an unrelated entity, but it has all the legal and contractual relationships with the guests.

In this post, I will discuss why this type of rental income is passive, which causes the REIT to be a passive foreign investment company (PFIC).

What are PFICs?

Passive foreign investment company (PFIC) is a specific classification under US tax law.... continue reading

January 10, 2018

My desk has a hole in it from repeated blows received from my forehead

I received an email this morning from a correspondent: an Enrolled Agent working outside the United States.

Hope all is well. My new year was off to a good start until I had to call the IRS today regarding a client matter. They asked me for my SSN or ITIN. Told them I was a nonresident alien and did not have one. They said the new policy to combat identity theft is they cannot talk to me unless I have a SSN or ITIN. The fact that I have a PTIN, a CAF number and an EIN and have been an EA since 1996 did not matter.

... continue reading
January 5, 2018

Foreign Earned Income Exclusion and Self-Employment Income

Self-employed people are enterprises engaged in commerce without using a business entity, like a corporation or limited liability company. Human-scale businesses can be large, and even be multinational enterprises: doing business within the grasp of multiple countries’ tax systems.

An American entrepreneur living and doing business abroad is by definition a multinational business: his country of residence and the United States both assert the right to tax him.

For purposes of demonstrating basic tax principles, let’s assume we have an American management consultant living and working in Dubai. No spy stuff, just commerce.

The Taxes

An American living and working abroad is fully taxable by the United States, simply because he is a U.S.... continue reading

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Featured Event

American Minimultinationals: 30 January 2018, New York

Phil will be speaking at the NYSSCPA International Tax Conference on 30 January 2018 in New York. His topic this year is American Minimultinationals.

Everyone hears about Google and Apple and other bloated behemoths of capitalism.

International Tax Lunch

February: International Tax Lunch

International Tax Lunch: Pensions as Foreign Trusts

U.S. citizens and foreign persons who immigrate to the U.S. often have foreign pensions. The U.S. tax law does not accommodate foreign pensions well, with the result that many of these pensions do not give tax deferral.

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