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  1. What is the present value of an RSU computed to be when you have to pay exit tax (covered expat AND non US issuer of RSU) ? is it the actual value of the stock of the RSU the day before expatriation ? That seems pretty obnoxious if the RSUs don’t vest at all because the other US company fires you.

    At least, for options there is an established method of valuing an option (Black Scholes) that seems reasonably fair. RSUs should possibly have a value equal to options for the same duration, with a zero strike price ?

  2. @Anon,

    You are right about the economic incentives. Paying a tax today that you might never have to pay is indeed painful.

    But you are right about the primary defense. Our first order of business when working with an expatriation client is to strive to avoid covered expatriate status.

  3. Re your last paragraph: “…you will have some additional gain (you hope) but for the amount you paid tax on already”, as somebody who has in the past held both options and RSUs, I can say for a fact that I would *really* try to avoid paying tax on a prospective but far from certain income.

    In my experience, the likelihood of RSUs coming good as you describe, at least for the likely commonest case of high tech, is relatively modest. The exit tax as applied here is quite likely for many to represent yet another tax on phantom income. Not to mention the problem of how to obtain the cash to pay real tax on a wholly pretend income.

    And of course another perverse incentive. If you think your RSUs are likely to grow in (phantom, nominal) value to the point where they push you into exit tax territory, your optimum move is to leave the US now, before becoming covered. Nuts, isn’t it?

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Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.