Part 15 – Understanding “Exit Taxes”

John Richardson 24
Interview with – Citizenship based taxation, PFIC, the S. 877A Exit Tax and #Americansabroad

On May 22, 2015 I was interviewed by Gordon T. Long. There is NO way to discuss U.S. “citizenship taxation” (which is primarily “place of birth taxation”) without discussing the S. 877A Exit Tax rules. During the month of April 2015, I wrote a 14 part series on “How the S.877A rules affect Americans abroad“. The interview with Mr. Long serves as a good reminder (or if you don’t want to read the posts) on:

– what it means to be a “covered expatriate

how the U.S. S. 877A “Exit Tax” rules operate to impose punitive “taxation” on non U.S. pensions (See the actual scenarios of how the Exit Tax applies to various individuals including those with a non-U.S. pension.

– more

This topic is of extreme important to anybody with a U.S. place of birth. Those with a “U.S. place of birth” begin life as a U.S. citizen. Therefore, those born in the U.S. are in effect:

“U.S. Taxpayers by birth”.

The U.S. is using FATCA to search the U.S. for people who were “born in the USA” to bring them into the U.S. tax system. More and more people are receiving “The FATCA Letter“.

This interview with Mr. Long really should be included as part of the “Exit Tax” series.

Therefore, I have designated my interview with Mr. Long to be:

Part 15 of the Exit Tax Series.

As a reminder this series of “S. 877A Exit Tax Posts” includes:

Part 1 – Understanding “Exit Taxes” – “Facts are stubborn things” – The results of the “Exit Tax”

Part 2 – Understanding “Exit Taxes” – “How could this possibly happen? “Exit Taxes” in a system of residence based taxation vs. Exit Taxes in a system of “citizenship (place of birth) taxation”

Part 3 – Understanding “Exit Taxes” – “The “Exit Tax” affects “covered expatriates” – what is a “covered expatriate“?”

Part 4 – Understanding “Exit Taxes” – “You are a “covered expatriate” How is the “Exit Tax” actually calculated”

Part 5 – Understanding “Exit Taxes” – “The “Exit Tax” in action – Five actual scenarios with 5 actual completed U.S. tax returns”

Part 6 – Understanding “Exit Taxes” – “Surely, expatriation is NOT worse than death! The two million asset test should be raised to the Estate Tax limitation – approximately five million dollars – It’s Time”

Part 7 – Understanding “Exit Taxes” – “Why 2015 is a good year for many Americans abroad to relinquish U.S. citizenship – It’s the exchange rate”

Part 8 – Understanding “Exit Taxes” – “The U.S. “Exit Tax vs. Canada’s Departure Tax – Understanding the difference between citizenship taxation and residence taxation”

Part 9 – Understanding “Exit Taxes” – “For #Americansabroad: US “citizenship taxation” is “death by a thousand cuts, but the S. 877A Exit Tax is “death by the guillotine””

Part 10 – Understanding “Exit Taxes” – “The S. 877A Exit Tax and possible relief under the Canada U.S. Tax Treaty”

Part 11 – Understanding “Exit Taxes” – “S. 2801 of the Internal Revenue Code is NOT a S. 877A “Exit Tax”, but a punishment for the “sins of the father (relinquishment)”

Part 12 – Understanding “Exit Taxes” – “The two kinds of U.S. citizenship: Citizenship for “immigration and nationality” and citizenship for “taxation” – Are we taxed because we are citizens or are we citizens because we are taxed?”

Part 13 – Understanding “Exit Taxes” – “I relinquished U.S. citizenship many years ago. Could I still have U.S. tax citizenship?”

Part 14 – Understanding “Exit Taxes” – “Leaving the U.S. tax system – renounce or relinquish U.S. citizenship, What’s the difference?”

Part 15 – Understanding “Exit Taxes” – “Interview with – “Citizenship taxation”, the S. 877A Exit Tax, PFICs and Americans abroad”

Original Post By:  John Richardson


The Reality of U.S. Citizenship Abroad

My name is John Richardson. I am a dual citizen. I am a lawyer – member of the Bar of Ontario. This means that, any counselling session you have with me will be governed by the rules of “lawyer client” privilege. This means that:

“What’s said in my office, stays in my office.”

I am also a member of the American Citizens Abroad Professional Tax Advisory Council (PTAC). This is an advisory panel focused on assisting American Citizens Abroad in an FBAR and FATCA world.

The U.S. imposes complex rules and life restrictions on its citizens wherever they live. These restrictions are becoming more and more difficult for those U.S. citizens who choose to live outside the United States.

FATCA is the mechanism to enforce those “complex rules and life restrictions” on Americans abroad. As a result, many U.S. citizens abroad are renouncing their U.S. citizenship. Although this is very sad. It is also the reality.

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