just in in-tray
player 1: Interestingly, I had a lunch today and found out that the person with whom I had lunch had recently renounced her US citizenship as well and that she had a friend in line to renounce his as well.
She told me that the wait list to renounce your citizenship in Hong Kong is now 11 months long. In Bern, Switzerland it is now 12 months long and you have to wait until 2012 if you are trying to do so in London according to the Wall Street Journal.
online.wsj.com
I don't think most people in the US are even aware of this massive shift. High income US citizens living abroad are leaving in droves. This certainly doesn't help US tax revenues!
player 2: The queue was shorter in 1992.
player 1: You were just ahead of the curve ... as always ... <g>
I wonder if they're making the process slow in order to not let the tax base drop too dramatically.
I'm guessing that if you're giving up your citizenship, you're making a nice chunk of change, say US$1 million per year?
Assuming a 39.6% top tax rate, 2,500 renunciations of $1 million per year earners means $1 Billion per year less for the US Government .... numbers are all pure conjecture on my part. They'll get a one-time boost as you have to pay capital gains on current value of assets at time of renouncing US citizenship, but after that, the US gets zero.....
player 2: What are the actual numbers looking to leave?If this gets serious I'd look for Congress to ratchet up the exit tax.No doubt the media spin in a couple of years will be that renouncers are traitors and 'economic terrorists'.
player 1:
zerohedge.com
SNIP:
1) “Even if I expatriate I'll still have to file U.S. tax returns for the next ten years.”
... Believe it or not, this USED to be true. However, the law changed years ago and no longer applies. Now all you do is file a final return for the part of the year when you were still a citizen. That final return also includes Form 8854, which lists what, if any, exit tax is due.
2) “If I expatriate, the IRS will take half my money.”
... Not true. Taking half your money is what the IRS does if you die as a wealthy U.S. citizen. Here's the reality. If you have a net worth less than $2 million and don’t meet their income test, you automatically owe no exit tax. If your net worth is over $2 million, you are what the IRS calls a “covered expatriate,” meaning you MIGHT have to pay exit tax. But you also might not, even if your net worth is $200 million or $2 billion.
So how can you tell what you would owe, if anything? It's pretty straightforward: You pay exit tax on unrealized gains as of the day before you expatriate. In other words, it's as if you sold all your assets the day before you expatriated and paid whatever applicable tax would have been owed (long-term capital gains, ordinary income, etc.). If you own illiquid assets when you expatriate such as private companies or real estate, you'll need to get a fair market valuation done to determine what, if any, gains you would have had IF they had been sold. Here's a critical caveat in the calculation: You get a free pass, called the “exclusion amount,” on the first $626,000 in gains. If you're married and your spouse expatriates with you, the exclusion amount doubles to $1.252 million. For example, you and your spouse could expatriate with a stock portfolio showing $1.2 million in gains and not owe exit tax on it. Even if the portfolio tripled in value shortly after expatriating, you could sell it any time and owe no taxes.
To recap, if upon renunciation you own assets with unrealized gains of less than $626,000, you will not owe exit tax, no matter how wealthy you are. If you do end up owing exit tax, look at it this way: Because of the exclusion amount, it's less tax than you would have paid if you'd stayed in the U.S. and sold the assets. Plus, if any asset you pay exit tax on continues to rise in value post-expatriation, all those additional gains are yours, free and clear. |
