Blog   /   Expatriation

November 7, 2017 - Phil Hodgen

How to Make Zero Capital Gain Tax When Moving Assets Between Spouses

The net worth test is something that may cause an expatriate to become a covered expatriate. Instead of just having a paperwork problem (Form 8854, specifically), a covered expatriate has a paperwork problem plus a potential tax problem.

You become a covered expatriate by satisfying one (or more) of three requirements. Being rich ($2,000,000 or more in personal net worth) is one of those three requirements.

Our expatriation cases frequently require some financial engineering to reduce our client’s net worth to below $2,000,000 — in order to avoid covered expatriate status. And that frequently means shifting assets to the soon-to-be expatriate’s spouse.... continue reading

October 24, 2017 - Phil Hodgen

Green Card Received in 2011? Give It Up in 2017 or Face Exit Tax

Deadline for 2011 Immigrants

If you received your green card visa in 2011 and you are thinking about terminating your permanent resident status, do it in 2017 if you want to avoid the exit tax entirely.

Eight Years

If you hold green card status for at least eight years and then want to leave the United States, the exit tax rules will apply to you.

The result may not be painful, but it is better to avoid the exit tax rules entirely if you plan to leave the United States anyway.

If you received your green card in 2011, you have held the permanent resident status in seven years already: 2011 through 2017 inclusive.... continue reading

October 10, 2017 - Phil Hodgen

How to Complete Form 8854, Part I

Expatriates have the rare pleasure of becoming intimate (in a one-time sort of way, usually) with Form 8854. Let’s take a look at Part I of the Form 8854.

  • What information are you asked to provide?
  • By what right does the IRS claim the power to force you to provide this information?
  • How do you answer the questions correctly?
Line 1 – Mailing Address, Telephone Number

The IRS wants to be able to find you after you expatriate. They’re coming to get you, Murdoch.

For this they need your mailing address1 and telephone number.2

Line 2 – Address of Principal Residence

If you don’t live at your mailing address, then you must provide your actual residence address.... continue reading

September 26, 2017 - Phil Hodgen

When Covered Expatriates Come Back

The current iteration of the exit tax rules were enacted in June, 2008. At this point, nearly 10 years later, I am working with people who expatriated and now want to become residents and citizens of the United States again.

When Covered Expatriates Come Back

This sometimes creates interesting tax problems. An accountant friend, K. N., sent me this interesting situation he is working on now, specifically involving the Section 2801 tax.

When a covered expatriate makes a gift or leaves an inheritance to a U.S. person, the recipient must pay a tax of 40% of the amount received from the covered expatriate.... continue reading

September 12, 2017 - Phil Hodgen

How to Handle Inheritances from an Expatriate

Everyone focuses on the income tax side of expatriation. Understandable. The year of giving up U.S. citizenship or permanent residence is a busy year and income tax is painful.

But estate tax problems can lurk, even after expatriation. Expatriates receiving inheritances from U.S. persons is one side of the equation.

Let’s look at the other side of the equation: money flowing back to the U.S. when an expatriate dies.

An expatriate (covered or otherwise) leaves an inheritance to a U.S. person. Here are the questions to ask:

  • What assets belonging to the expatriate (covered or noncovered) are hit with the U.S.
... continue reading