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  1. Phil,

    this is very helpful, thanks for writing this up. In the previous comment you said “Sometimes assets are owned by one spouse only, but in fact the “true” ownership is 50/50 between the two spouses”. Does that apply to stock? I.e. will stock that only I own be counted against my wife’s net worth when she fills out form 8854 for herself, and if only she expratiates? We always filed jointly.

    Thanks again

  2. @Lord Jim,

    Your computations are correct. Each spouse puts the numbers ($100,000, $100,000, $100,000, $50,000, and $50,000) in the blanks on his/her respective Form 8854, in order to achieve an average of $80,000.

    Each spouse does indeed measure his/her net worth against the $2,000,000 threshold. Thus, a married couple with a net worth of under $4,000,000 will be safe–both of them will not be covered expatriates.

    And yes. Assets that are jointly owned are generally divided in half for the balance sheet test. A couple’s primary residence that is worth $800,000 would be reported by each spouse as a $400,000 asset. (I say “generally divided” because in some situations it is claimed that one spouse is the true owner of the entire property and the other spouse is on title but not a true owner.) Also, watch out for the inverse of this. Sometimes assets are owned by one spouse only, but in fact the “true” ownership is 50/50 between the two spouses. Community property rules are a classic situation where this occurs.

  3. Phil,

    Thanks (once again) for your very practical explanations. Minnows who are trying to understand and/or do their own 8854s without spending thousands are grateful.

    Let’s see if I have understood you through the following example: A couple, married filing jointly, expatriates in 2012. Their 2011 1040 line 55 is $100,000. 2010 is $100,000, 2009 is $100,000, 2008 is $50,000, and 2007 is $50,000. Each person of the couple takes the AVERAGE tax liability for the 5 years, or $80,000, and includes that amount IN ALL 5 BLANKS on his/her 8854, part IV, line 1. So, same amount for each person, not one half, and same average amount for the five years, not the actual amount for each year. Is that correct, as contrary to logic as it seems (for example why have five blanks when we include the same amount in each one)?

    Obviously the amounts given in my example are well below the covered expatriate amounts, but it is important to understand and to get the details right.

    I hope this IRS (il)logic does not extend to other parts of the 8854…. Could you confirm that EACH member of a US person couple has a threshold of $2 million and that the fair market value of the couple’s primary residence is divided in half on each of their 8854s?

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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.