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December 20, 2016 - Phil Hodgen

Make Big Gifts in the Year Before Expatriating

Bottom Line Up Front

If you make a large gift before expatriation and in the same year, you will pay a large gift tax. The unified credit does not apply to you.

Make your big gifts in year 1, and expatriate in year 2.

Objective: Avoid Covered Expatriate Status

A covered expatriate is someone who has a net worth of $2,000,000 or more when relinquishing U.S. citizenship (or giving up a long-held green card).1

If you have a net worth of more than $2,000,000 but less than $7,500,000, it is possible to give away enough assets — with no gift tax — to avoid covered expatriate status.... continue reading

Expatriation
December 15, 2016 - Haoshen Zhong

PFIC Wrapper Miniseries #3: Products That Sound Like Life Insurance

PFIC wrapped in a continental life insurance

This week’s topic is the third of a series of posts that will talk about how various “wrappers” affect the US taxation of PFICs. The last post discussed participating life insurance I have seen in China and Southeast Asia.

This post discusses a few types of financial products that sound like they are life insurance but may in fact be something else. It is inspired by the French assurance vie and a life assurance product I have seen in the Isle of Man.

This post discusses the implications of this type of life insurance wrapper around a PFIC.... continue reading

PFIC and CFCs
December 9, 2016 - Phil Hodgen

Who’s On the Hook for Withholding Tax Failures?

This week I want to cover a real estate situation, and the perils of being a withholding agent when there is a foreign seller of U.S. real estate.

Foreign Corporation as Seller

From time to time I see foreign corporations as direct owners of U.S. real estate. This can work from a U.S. tax point of view (i.e., it can block the application of estate tax on the real estate if the shareholder dies).

But it creates a host of practical problems. And solving those practical problems will sometimes beget more practical problems.

This time I am going to explore the fine points of withholding tax on the sale of U.S.... continue reading

Friday Edition Nonresidents with US Activities US Real Estate Investments
December 6, 2016 - Phil Hodgen

U.S. Estate Tax After Expatriation

Hi and welcome to Expatriation Only, the newsletter devoted entirely to tax problems faced by people who give up their U.S. citizenship or green cards. You watched “escape” movies, right? This is all about the tax hurdles you face when escaping the U.S. tax system.

This episode was written in response to an email I received from reader D.O. Thanks for the questions. (Hint: you, too, can email me and I will answer your questions.)

Estate Tax After Expatriation

Let’s talk about estate tax. This is a tax imposed on what you own when you die. The tax rate caps out at 40%.... continue reading

Expatriation
December 1, 2016 - Haoshen Zhong

PFIC Wrapper Miniseries #2: Participating Life Insurance

This week’s topic is the second of a series of posts that will talk about how various “wrappers” affect the US taxation of PFICs. The last post discussed Canadian RESP.

This post discusses a participating life insurance policy I have seen in China and Southeast Asia. It is called a participating life insurance because the policy contains a cash value that is tied to returns on investments made using the premiums–in this way, the policyholder “participates” in the profits from the investments.

This post discusses the implications of this type of life insurance wrapper around a PFIC.

PFIC defined

A passive foreign investment company (PFIC) is a foreign corporation that meets either 1 of the following 2 tests (IRC §1297(a)):

  1. Income test: At least 75% of the corporation’s gross income is passive income.
... continue reading
PFIC and CFCs