Getting Out | Expatriation And Federal Taxes

Are you U.S. citizen or resident? Have you ever just wanted to leave the whole U.S. federal tax system behind? Well, you can . . . try at least. But there’s a cost.

The Problem

U.S. citizens and residents are subject to federal income tax on their worldwide income.[1] They’re subject to federal estate tax based on all assets wherever located upon death.[2] And, they’re subject to gift tax on the transfer of all property, whether it be real or personal, tangible or intangible.[3]

Noncitizens-nonresidents, on the other hand, are subject to federal income tax only on certain U.S. source income and income that’s effectively connected with the conduct of a U.S. trade or business.[4] They’re subject to federal estate tax only with regards to assets situated within the United States upon death.[5]  And, they’re generally subject to gift tax only when the gift is real estate or tangible personal property located in the United States at the time of the gift.[6]

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