I have posted the full text of this case to make it easy to cross-reference to my previous blog post discussing what happened here. Don’t treat this version of the opinion as absolute Gospel. I might have messed something up converting the file for posting.
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF INDIANA
JOSEPH DADON, Plaintiff, v. UNITED STATES OF AMERICA, Defendant.
April 1, 2020, Filed April 1, 2020, Decided
JOSEPH DADON, an individual, Plaintiff: Michael A. Bowse, PRO HAC VICE, BOWSE LAW GROUP, APC, Los Angeles, CA.
For UNITED STATES OF AMERICA, by and through the Internal Revenue Service, Defendant: Arie M.... continue reading
“How will they ever find out?”
It’s a classic tax-planning strategy that works very well, until the day it doesn’t work. Then it fails spectacularly.
Children do this all the time. They say “Dad said I could stay out until midnight!” to Mom and “Mom said I could stay out until midnight!” to Dad. This works until Mom and Dad compare notes.
It’s the same with taxpayers working across borders. If the tax authorities in Country A can’t see transactions that happen in Country B, then you can lie to Country A and get away with it. ... continue reading
Covered expatriates are subject to exit tax. For most types of assets, a pretend sale applies, and the covered expatriate must pay tax on gains (after an exclusion is applied) from the pretend sale of all their worldwide assets. This is referred to as the mark-to-market regime.
There are a few types of assets to which an exit tax still applies, but the exit tax works a little differently than for the mark-to-market assets. These are specified tax deferred accounts, deferred compensation, and interests in nongrantor trusts.
In the last couple months of this series, I covered how specified tax deferred accounts and deferred compensation are taxed.... continue reading
All covered expatriates must pay exit tax. The exit tax is computed differently depending on the type of asset.
Over the last two months, I discussed two types of exit tax: the mark-to-market regime, and the tax on specified tax deferred accounts.
For most assets, the mark-to-market regime applies. Specified tax deferred accounts are an exception to the mark-to-market rules: these accounts are subject to a pretend lump sum distribution of the full plan value on the day before expatriation date.
This month, I am discussing another type of asset that is excepted from the mark-to-market rules: deferred compensation. This includes stuff like pensions, stock options, etc.... continue reading
Recently the IRS announced that it will be rolling out a compliance initiative for expatriates.
There is no information about how this program will work just yet. Here is what the IRS news announcement says, and this is all we have to go on at the moment:
... continue reading
“U.S. citizens and long-term residents (lawful permanent residents in eight out of the last 15 taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The Internal Revenue Service will address noncompliance through a variety of treatment streams, including outreach, soft letters, and examination.”