Exit Tax Book Chapter 1: A Quick Overview of the Exit Tax

Today’s topic: A quick overview of the exit tax

The term “exit tax” is not used or defined in the Code or regulations anywhere. It is a shorthand to describe the federal law that requires some citizens and green card holders who are leaving the US tax system to pay US tax, one last time, on their worldwide assets.

The defining feature of the exit tax is that all assets are treated as if they are sold on the day before citizenship or resident status is terminated. If there are any profits from the pretend sale, you pay tax on those profits.... continue reading

File an Income Tax Return Extension to December 15, 2018

If you are an American living abroad and sweating the October 15, 2018 tax filing deadline for your 2017 income tax returns, there is a possible piece of relief. You may be able to qualify for a further extension of time for filing your tax return — to December 15, 2018.

For American taxpayers living abroad, if you want to get a filing deadline of December 15, 2018 for your 2017 Form 1040, do this:

• On or before June 15, 2018, file Form 4868.
• On or before June 15, 2018, pay whatever tax you have to pay for 2017, along with that Form 4868 you are filing.

Dual-Status: Expatriation Year Tax Returns when US Income is Zero

This week we are talking about dual-status returns. An email reader sent us this question, asking what his income tax return should look like in the year of expatriation:

I file 1040 covering income up to the date of renunciation. Do I have to file 1040NR from the date of renunciation to the end of the year if I don’t have any US source income at all for either before or after renouncing?

The expatriation year income tax return is a little more complicated than that. It is slightly difficult to figure out whether you need to file Form 1040NR or Form 1040 as your tax return.... continue reading

Treaty Elections, Long-Term Resident Status, and Expatriation

The impact of treaty elections on long-term resident status and expatriation

Over the course of two days last week, I received three questions about the interaction of treaty elections, long-term resident status, and expatriation.

It seems there exists some confusion about what happens when a lawful permanent resident makes a treaty election to be taxed as a resident of another country: Does it cause you to expatriate? Does it prevent you from becoming an expatriate?

I am not surprised this confusion exists. Depending on when the treaty election is made, it could either cause you to expatriate or prevent you from becoming an expatriate.... continue reading

Assign a Purchase Contract to an LLC and Why It Works

Nonresidents often show up and sign contracts to buy U.S. real estate in their own names. Then, before the sale is complete, they set up a holding structure. They transfer the purchase contract to the holding structure, and the purchase is complete.

Hey presto.

As I wrote a few weeks ago, transferring a purchase contract from a nonresident individual to a holding structure is a “disposition” of U.S. real estate. The result?

• Paperwork. Until proven otherwise, the nonresident individual must file a U.S. tax return to report the “disposition” of a “U.S. real property interest”, even though self-evidently there is no capital gain.