Of the three tests that an expatriate must meet to be non-covered, the certification test is the most difficult to understand. It is also the only test to which there are no exceptions – fail this test, and you are a covered expatriate.
Today’s topic will be limited to a general discussion of what it means to pass this test.
Expatriation occurs when a US citizen or “long-term resident” terminates his or her citizenship or permanent residence. 1
If the expatriate meets certain thresholds for net worth and the amount of tax they have been paying over the last five years, he or she will be what is known as a covered expatriate.... continue reading
Let us imagine that you are planning to expatriate in 2018, and that you will be a covered expatriate. You have a number of rental properties in the United States. Those rental properties have accumulated a substantial amount of passive activity losses (PALs) during the time that you have owned them. Because you are a covered expatriate, you will need to pretend you sold all those properties at fair market value on the day before your expatriation and report the gains or losses on your tax return as if you really sold the properties.... continue reading
We are just a few short days away from a very important date. If you expatriated during 2017, chances are you need to file your tax return and Form 8854 by June 15, 2018. You also need to make full payment of any tax due by that date.
If you need more time to get the tax return ready, you can file for an extension to December 15. However, the payment due date remains June 15, 2018.
Today’s topic will be limited to a description of the filing and payment deadlines for expatriates and how to get an extension to file your tax return.... continue reading
We often mention that covered expatriates, who are subject to a deemed sale of all their worldwide assets (with a few exceptions), are permitted to exclude the first $700,000 or so of gains that arise from the deemed sale.
For someone hiring us to prepare their tax return, that is typically all they really want to know – “my exit tax is lower because I get to exclude some of this pretend income”.
It is rare that we talk about how to apply the gain exclusion, because that is the behind-the-scenes work that we do for our clients when preparing their tax returns.... continue reading
How expatriation works is something we talk about with clients all the time, and it’s worth devoting a little blog space to a general description of the basic mechanics every once in a while.
Imagine we are now boarding an airplane and zooming up to 30,000 feet. Let’s see how the expatriation process works from 6 miles up.
From this far up, we can see the mountains and oceans and rivers, but not the cars or trees or houses or people.
Because we are taking a very high-level view, we must ignore the details, the nuances, and all the little things that make this topic so complicated.... continue reading