You will also learn alot from this YouTube Video: https://www.youtube.com/watch?v=DWYnIGgG0Ak
Part A: Introduction – About Citizenship-based Taxation
Part B: How the Internal Revenue Code is designed to mitigate the effects of double taxation in certain circumstances
Part C: Determining what is “foreign source” income
Part D: The problem of international waters …
Part E: The effect of sourcing to the US income earned in international waters by dual tax residents
Part F: Deducting “foreign taxes” paid – although income from international waters may not be foreign, it is still subject to the payment of “foreign taxes”
Part G: Can a US citizen living abroad be saved by a tax treaty? Maybe if he/she lives in Canada****
Part H: Conclusion and the need for “Pure Residence-Based Taxation”
Part A: Introduction – About Citizenship-based Taxation
Whether they live in Mexico, France, Canada, Brazil or even on a yacht, US citizens are taxable on their worldwide income. Worldwide income means income of all kinds, from all sources and wherever earned. US citizens are taxable an ALL income sources. It doesn’t matter whether the income has a source in Mexico, France, Canada, Brazil or even on a yacht. For example, a US citizen living in France who has ONLY French source income is required to treat that income as taxable in the United States. The fact that the income is also taxable in France is irrelevant!
The Internal Revenue Code is based on a presumption of double taxation. The presumption of “double taxation” is reinforced by the “saving clause” in US tax treaties where the treaty partner country agrees that the US retains the right to tax US citizens regardless of the tax treaty. The treaties themselves typically contain a small number of specified exceptions that mitigate against the effects of double taxation in certain narrow circumstances.
Relief from double taxation is available either domestically under the Internal Revenue Code or through provisions in international tax treaties (or possibly both). Each avenue of mitigation will be considered separately.
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