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Tag Archive for citizenship taxation

The Great Debate On Citizenship Taxation: Defining Residence For Income Tax Purposes

Lets Debate 2

An article we posted recently by Professor Edward Zelinsky had the impact of a lightening rod and sparked considerable discussion and commentary. You can view the post by going to this posted link on Defining Residency For Income Tax Purposes. The post was a catalyst for a debate we have now scheduled on Citizenship Taxation.

On Friday, May 17th starting at 11:00 AM PST/2:00 PM EST
TaxConnections is hosting a live stream YouTube Event having invited legal scholar Professor Zelinsky to present his views for Citizenship Taxation. We have also invited John Richardson to present his views and opposition to Citizenship Taxation.

The education these gentlemen will provide on the issues surrounding Citizenship Taxation and FATCA are important to bring to light to the public. We want taxpayers to have the answers they need; we want the tax professional community to have accurate information; and we want to understand the issues that need to be resolved by the US government.

We invite you all to join us during this very lively and educational debate. Register to receive a complimentary invitation to view the debate online live stream through YOUTUBE.

 

 

 

The United States Imposes A Separate And Much More Punitive Tax On U.S. Citizens Who Are Residents Of Other Countries

John Richardson April 10

Reposted Due To Upcoming Debate On Citizenship Taxation

On February 28, 2019 TaxConnections kindly posted my first post comparing the way that 19th Century Britain and 21st Century America Treated Its Citizens/Subjects. The post received a great deal of interest resulting in more than 120 comments (largely reflecting the frustration of Americans abroad and accidental Americans).

The purpose of that post focused largely on citizenship and the fact that the United States imposes worldwide taxation on U.S. citizens who are tax residents of other countries and do NOT live in the United States. What that post did NOT do was to focus on HOW the Internal Revenue Code applies to U.S. citizens who do NOT live in the United States.

The Bottom Line Is:

The United States is in effect imposing a separate and more punitive tax system on its citizens abroad. Strange but true. The purpose of this post is to explain how that works and to provide specific examples.

Prologue

Do you recognise yourself?

You are unable to properly plan for your retirement. Many of you with retirement assets are having them confiscated (at this very moment) courtesy of the Sec. 965 transition tax. You are subjected to reporting requirements that presume you are a criminal. Yet your only crime was having been born in America (something you didn’t even choose) and attempting to live as a U.S. tax compliant American outside the United States. Your comments to my recent TaxConnections Post reflect and register your conviction that you should not be subjected to the extra-territorial application of the Internal Revenue Code – when you don’t live in the United States.

Read more

Distributions From Canadian RRSPs Are Subject To #Obamacare Surtax While Distributions From US Plans Exempt

Yes, you read right.

By way of background, Obamacare was financed in part by the 3.8% Net Investment Income Tax (“NIIT”). At the risk of oversimplification, this is a tax on passive income. What those Canadians who are also “U.S. persons” need to know includes:

1. The NIIT is an instance of pure double taxation. It is believed by most practitioners that this tax CANNOT be offset by the usual foreign tax credit rules. (But, then again – maybe the NIIT is really a Social Security Tax and therefore NOT payable under the Canada U.S. Social Security Totalization Agreement.) Read more

Part 10 – Understanding “Exit Taxes”

The S. 877A “Exit Tax” and possible treaty relief under the Canada US Tax Treaty

Introduction – The Canada U.S. Tax Treaty Does Not Always Prevent Double Taxation

See: 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”.

When countries independently make major changes in tax law, double taxation can occur.

The following comment from 5thSwiss on the Isaac Brock Society site explains why and how double taxation can be a reality. It also underscores the dangers of a U.S. citizen leaving the United States. Read more

Part 8 – Understanding “Exit Taxes”

“The U.S. “Exit Tax vs. Canada’s Departure Tax – citizenship taxation vs. residence taxation”

Cdn Departure Tax has a logic to it. To have to pay a US “exit tax” when I left > 30 years ago, beggars belief. https://www.facebook.com/groups/AmericanExpatriates/permalink/448847051948039/?comment_id=450160951816649& 

The above tweet references the following comment:

“At least the departure tax has a sliver of logic to it, and an appropriate name. To have to pay a US “exit tax” when I left empty handed over thirty years ago, beggars belief. Perhaps if they called it an escape tax or freedom tax that would make more sense.” Read more

Part 4 – Understanding “Exit Taxes”

“You are a “covered expatriate” – How the “Exit Tax” is actually calculated”

How the Exit Tax is calculated in general – what is subject to the “Exit Tax”?

Remember that a person who relinquishes U.S. citizenship does not actually sell his assets or realize income from his assets. The Exit Tax is designed to ensure that the U.S. collects tax on assets as if they were sold OR as if generated an income stream (even though there is no sale). This means that one is forced to pay a massive tax when has not realized income to pay that tax!

The General Theory: Read more

Part 2 – Understanding “Exit Taxes”

Part 2 – Understanding “Exit Taxes” in a system of residence based taxation vs. Exit Taxes in a system of “citizenship (place of birth) taxation

Let’s begin with some politics …

In an interesting post Robert Wood writes:

Both Mayor Johnson and Senator Cruz are U.S. citizens. Both Mayor Johnson and Senator Cruz either have or are renouncing the citizenships of the countries where they were born. There will no tax consequences to Senator Cruz for renouncing Canadian citizenship. Mayor Johnson will probably be spared America’s draconian “Exit Tax” (assuming he was born a dual citizen) for renouncing U.S. citizenship. The “Exit Tax” Read more

Cook v. Tait 1924 – The Evolution of Citizenship, Taxation And “Citizenship Taxation” – Part 2

Part 1 of this post traced the evolution of taxation.  This brings us to:

Part 2 – The Evolution of Citizenship

In 1924, the Supreme Court of the United States, per Justice McKenna ruled in Cook v. Tait that U.S. “citizenship taxation” was constitutional. Since that time Cook v. Tait has been cited to justify the constitutionality, although not necessarily the propriety, of “citizenship taxation”. Note that “citizenship taxation” contains both the words “citizenship” and “taxation”. As a result, Justice McKenna’s decision along with the relevant statutes, may tell us a great deal about what “taxation” and “citizenship” meant in 1924.

Cook v. Tait – Justice McKenna’s decision Read more

Cook v. Tait 1924 – The Evolution of Citizenship, Taxation And “Citizenship Taxation” – Part 1

As goes taxation, so goes society

As Charles Adams argued in his classic book, “For Good and Evil: The Impact of Taxes On The Course Of Civilization“, as go the taxing practices of a nation, so goes the nation. Given that taxes are a certainty, tax laws are a certainty, and those laws speak volumes about the “state of the nation” and the “values of the nation”. Tax laws evolve on an almost daily basis. The changes in tax laws reflect changes in societal values.

In 1924, the Supreme Court of the United States, per Justice McKenna ruled in Cook v. Tait that U.S. “citizenship taxation” was constitutional. Since that time Cook v. Tait has been cited to justify the constitutionality, although not necessarily the propriety, of “citizenship Read more

Part 1 – Life In The “Penalty Box” – U.S. Citizens And Green Card Holders Living Outside The US

On October 18, 2011 the U.S. Ambassador to Canada – Ambassador Jacobson – made a speech on “U.S. Canada Relations” to the Canadian club. The speech took place after the frightening summer of 2011 during which thousands of Canadians:

1 Learned that they might be considered to be U.S. citizens;

2. Learned that they might be required to file U.S. taxes;

3. Made attempts to file those taxes (often through the 2011 “OVDI” program).

Americans abroad throughout the world were living in a “state of fear and confusion” sheer terror. Read more

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