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  1. @Michael Miller. This is truly an interesting story, and a cautionary tale. I think that the obvious conclusion is this. Divest yourself of certain kinds of US assets before expatriating. Or, if that’s too costly, then do not expatriate after all.

    Fortunately, many of us US citizens abroad really have cut off ties with the United States. Many of us own no property there, engage in no business there, have no bank accounts there, etc. I myself do have two small 401k’s (actually 403b’s, but they’re similar) in the US, totally $25,000. I understand that there will be a withholding tax of 30% when I withdraw on these, but I’ll get a tax credit in Canada to offset that withholding tax. And, in the meantime, I’ll be able to open a TFSA, I’ll be able to start an RESP for any kids I have (I just got married and we are planning a family), etc.

    But thanks for the story. It’s nice to have people out there cautioning us in an appropriate way!

  2. One note of caution. It is possible to be WORSE off by reason of having expatriated. I have a client who (prior to consulting me) gave up her US citizenship, and whose principal asset is approx. $1M of US real property. Absent the expatriation, she could hold the property until her death, use her lifetime exemption from gift and estate tax (currently $5M, but that number is subject to change) and then her son would get a stepped-up cost basis allowing him to sell after her death at no gain. So if she hadn’t expatriated, the result would be no estate tax and, ultimately, no income tax.

    Since she expatriated, the lifetime exemption from US gift and estate tax does not apply, so if she died owning the property there would be an estate tax. She could avoid the estate tax by selling, but then we’d have income tax. Right now, she’s consulting an immigration attorney to see if the problem can be solved by reacquiring her US citizenship. I assume everyone’s stomach is now turning at the thought of someone reacquiring (!) US citizenship!

  3. Peter. I admire you. Atossa’s article is an oasis in a desert of threats, criminal prosecutions and taxes on innocent people. The main reason why an American Abroad may not declare his investments in the country where he is living and working is…fear of the paper work and the fees of CPAs and Lawyers. Because they have no reason to hide anything. First they have the earned income exclusion and then they have the tax credits. It may be in some cases that they would have to pay a difference between taxes where they reside and the USA. But this is it. It seems to me that they are being trapped into this in order for the USA to collect money. It is a shame. I bet the majority of Americans Abroad do not know about FBARS yet…and are heading for slepless nights, fear and anger.

  4. It is a weird thing to congratulate someone for. Losing my citizenship means I don’t have the right to live in the United States any more. It’s a loss. But it is not so strange when we consider it means freedom from an oppressive tax system, that would violate the spirit of the tax treaty between Canada and the United States. This was about being able to enjoy a TFSA, something that the IRS says that no US person who lives in Canada may do.

  5. @Peter

    I saw the blog post today. Congratulations.

    There is some kind of underwhelming majesty to these bureaucratic pieces of paper. They signify a momentous event, and attempt to somehow convey that aesthetically. Yet they’re still way cool to look at.

    I hope you are going to frame it and put it on the wall. It’s a great souvenir.

    I asked my wife to marry me over a dinner, long ago. At the end of the dinner I snagged the check and had it framed. It’s nice to look at it, even though the restaurant is long gone. (The wife is still with me. Good thing!)

  6. Phil: good advice for those who currently live in the United States. Of course, I haven’t lived in the United States since 1986, and my life here is in Canada. That is why my checking out of the system was non-brainer for the state department. As I reported at Isaac Brock, my CLN arrived today.

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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.