The interest in TaxConnections Live Stream Event featuring Lawyers John Richardson and Edward Zelinsky is drawing a very high level of interest throughout the world. With registrations and commentary already surpassing our expectations, this presentation on worldwide taxation vs. residence based taxation of U.S. citizens is going to be a globally engaged encounter.
We have compiled a list of questions as they continue to come to us from those who have registered to be informed on how to attend the live stream event. The participation to date has been exciting and for this reason we are working to get all of your questions answered by lawyers John Richardson and Edward Zelinsky or another member of the www.taxconnections.com platform.
In the meantime, here is a question submitted by one of our visitor taxpayers that I want to share with all of you.
Question Submitted By A Registered Attendee For May 17th Event
I moved to Europe in the late 1980s and built up a lifetime of savings under the Swiss system. I always filed my US taxes and along the way became aware that many of my investments were considered PFICS. I put up with the difficulty and high cost of keeping some these investments in PFICs (USD 1200 per year) as I had no other option due to legal requirements in Switzerland for these required retirement investments. I also kept stocks as that was an investment that was easier to manage in US accounting terms. I hated the situation, but although I had two other citizenships, renunciation was not something I wanted to do. I found a situation I thought I could live with.
In 2012, along came FATCA and my bank told me that they could not meet the US requirements for reporting and they were closing my investment accounts and sold everything. Showing them that I was compliant did not change anything. The timing for the sale was far from optimal. In Swiss francs, which was my daily operational currency, I lost CHF 19,000, which was a huge chunk of my lifetime savings.
The insult to injury came when we did my US taxes. The US requires that you declare everything in dollars, but not solely at the exchange rate at time of sale. You need to calculate the value in dollars at the time the asset was bought and the value in dollars the exchange the rate of the dollar when you sold the asset and pay taxes on the difference. The rates were very different after 20 years and not to my advantage at the time of sal. The result of this exchange rate calculation gave me thousands of dollars in phantom capital gains. These combined with the peculiarities of how PFICs taxes are calculated when you sell caused me to end up paying USD 7,000 on a CHF 19,000 loss. I did not even have a dollar account and have not had one since the 1980s. I owned no dollars at all. My,life was conducted in Swiss francs. At the time, I had not even traveled to the US in 9 years.
Many US citizens abroad also face phantom gains when they sell their houses. It just does not make any sense for people who have built their lives abroad. It is not the goal of every American abroad to return to the US and conduct their lives in dollars. Why is it so hard to recognize this?
Can we please distinguish between Americans resident in the US and those permanently resident abroad in the area of functional currencies for our tax returns?
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