Part 1: Renouncing US Citizenship? Valuation of joint interests (including the family home) in the context of the 877A Exit Tax Rules

March 17, 2021 - Participants Include:

John Richardson - @Expatriationlaw

More and more people are taking the steps to renounce their US citizenship or to abandon their Green Cards. US citizens who renounce US citizenship and Green Card holders who are "long term" residents are potentially subject to the Exit Tax rules found in Internal Revenue Code 877A.

Those who expatriate with a net worth of 2 million USD or more will (unless they have the benefit of the dual citizen from birth exemption) be subject to the 877A Exit Tax.

Many people who expatriate own property jointly with a spouse. There are different forms of joint ownership. The most common form of joint ownership in Canada and many other countries is "joint tenancy".

Therefore, the question of how "interests held in joint tenancy" should be valued is vitally important. It can make a difference between whether an individual is a "covered expatriate" or not.

Assuming one is a "covered expatriate", it is also important to understand how the Exit Tax rules apply (in the context of joint tenancy) assuming one is a covered expatriate.

This podcast is an excerpt from a presentation given by John Richardson on March 17, 2021

Obviously it is not intended to be and should not be relied upon as legal advice for any specific individual.

The general message is that (in most cases) the percentage of the ownership should follow the percentage of the contribution.

Part 2 will continue with a discussion about Part 1.

Taxability of Canada’s CERB payment and the US CARES Act payment for Dual Canada/US citizens residing in Canada

April 28, 2021 - Participants Include:

John Richardson - @ExpatriationLaw

Oliver Wagner - @1040Abroad

For dual Canada/US citizens living in Canada it's tax time. Specifically it's time to file both Canadian and US tax returns for the 2020 tax year.

2020 was a very difficult year. Dual citizens living in Canada may have received both the Canadian CERB payment and the the US CARES Act payment.

The basic principle, as discussed in this blog post, is that the Canadian CERB payment is taxable in both the US and Canada and that the US CARES Act payment is taxable in neither the US nor Canada.

US citizens residing in Canada may be eligible to receive up to $3200 US dollars of relief payments from the US government. This is  your money to do with what you please!

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Thanks to Olivier Wagner of 1040Abroad.com for participating in this  podcast.

Moving To Another Country? Consider: Pensions, Mobility and Pension Mobility

March 2021:

John Richardson and Trowbridge partner Wayne Bewick discuss global mobility and pensions.  Should people be prisoners of the country where they earned their pension? Is it time for there to be a global tax treatment on the mobility of pensions?

Trowbridge Partner Wayne Bewick: Canada’s Principal Residence Capital Gains Exemption - Will It Continue?

April 8, 2021 - Participants Include:

John Richardson and Trowbridge partner Wayne Bewick discussion the Canadian tax landscape. Will the principal residence exemption from Canadian capital gains tax, survive the Covid-19 inspired tax storm?

Mobility Consultant David Lesperance -The Warren Wealth Tax And Quick Citizenship By Investment Options

March 10, 2021 - Participants include:

David Lesperance and John Richardson

The whole concept of taxation is including a move toward taxation that is NOT based on income realization events, but rather on the ownership of assets.

What does this mean for your residence and citizenship portfolios?

Dr. Laura Snyder Explains The US Extraterritorial Tax Regime And How It Applies To Americans Abroad: Let The Senate Finance Committee Know How It Affects You!

April 2, 2021 - Dr. Laura Snyder - @TAPInternation

About “citizenship-based taxation”- The US extraterritorial tax regime

The United States has the following three distinct tax regimes:

1. Source – like all countries: All income sourced to the United States is subject to U.S. taxation on U.S. source income (regardless of the “tax residence” or citizenship of the taxpayer);

2. Residence – like all countries: All individuals who are resident in the United States are subject to U.S. tax on their worldwide income; and

3. Extra-territorial tax regime – unique to the United States: The United States imposes worldwide taxation on the non-U.S. source income of certain individuals, who are tax residents of other countries and do NOT reside in the United States. This includes U.S. citizens living outside the United States.

Americans abroad are generally in the third category and are subject to the extraterritorial tax regime. They are subject to worldwide taxation by both the United States and their country of residence. Americans abroad do NOT as a general principle benefit significantly from tax treaties. This is because, all U.S. tax treaties contain a “saving clause” designed to ensure that Americans abroad are in effect subject to double taxation.

Who Are Americans Abroad?

The short answer is that Americans abroad are U.S. citizens living outside the United States in other countries. They run the whole circumstantial and economic spectrum of humanity. They include the poorest of the poor. They include some wealthy people. They include a large number of middle-class people. They include the employed, the self-employed and they include the unemployed. They include individuals who run small businesses in their country of residence. Some of these small businesses are run through corporate structures in the country where they reside and are tax residents.

Although Americans abroad are Americans who live in other countries, they are NOT and do NOT view themselves as “living offshore”!

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In order to let the US Senate Finance Committee know how the US Extraterritorial Tax Regime affects you, go here and select your template!

Coach Coutts: If you want to stay healthy, don’t sit too long

March 31, 2021 - The Return Of Coach Coutts

John Richardson and David ("Coach") Coutts discuss the essentials of staying healthy.

"Somebody's Gotta Care!"

The Senate Finance Committee Holds Hearings Affecting Mini-MultiNationals AKA #AmericansAbroad

March 29, 2021 - Participants include:

Dr. Karen Alpert - @FixTheTaxTreaty

Dr. Laura Snyder - @TapInternation

John Richardson - @Expatriationlaw

"Activism Is NOT A Spectator Sport!" - To learn how to make your personal submission to the Senate Finance Committee read the SEAT blog post here.

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On March 25, 2021 the Senate Finance Committee held one (of what I assume will be) of a number of hearings on International Taxation. Interestingly the title of the hearing was:

"How US International Tax Policy Impacts Americans Workers Jobs And Investment"

Interestingly and significantly the hearing did NOT discuss individual American workers, jobs or investment. The hearing was primarily focussed on the GILTI provisions found in S. 951A of the Internal Revenue Code. The hearing also discussed whether the US corporate tax rate should be increased. It's important to understand that:

Any change in the GILTI rules and/or an increase in the US corporate tax rate will have an impact on Americans abroad generally and those Americans abroad running small businesses particularly.

I have previously written about how an increase in the GILTI tax would impact Americans abroad here. I have written about how a general increase in the US corporate tax rate might impact Americans abroad here.

You can read about the hearing and watch the video of the hearing here:

https://www.finance.senate.gov/hearings/how-us-international-tax-policy-impacts-american-workers-jobs-and-investment

Helen Burggraf of American Expat Finance wrote an excellent article about the hearing which appeared here.

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These International Tax Hearings are a very big deal. They will impact you as individuals. SEAT has prepared a submission.  It's important that the Senate Finance Committee receive a large of number of submissions from individual Americans abroad.

We ask that you make a submission. We encourage you to watch the hearing and send your own submission. But, given the time it takes and the technical content, we have prepared some "submission templates" for you.

SEAT is working very hard to help you! Please take the time to send your submission. It's important that Senate Finance hears from individuals - individuals just like you!

"Activism Is NOT A Spectator Sport!" - To learn how to make your personal submission to the Senate Finance Committee read the SEAT blog post here.

Residency As An Investment Asset: Why Paying To Sever Tax Residency Can Be An Investment - Canada Edition

March 10, 2021 - Participants Include:

Wayne Bewick - Partner at Trowbridge International Tax

John Richardson - Tax Residency Solutions

In the 21st Century your most important asset may be your tax residency!

Volatile times mean instability. Instability  causes individuals and families to reconsider their life circumstances. Covid-19 has caused many people to reconsider those circumstances. The threat of Wealth taxes in the United States (including California and New York) is making people nervous. The US extraterritorial tax regime is wreaking havoc in the lives of American citizens living in Canada and other countries outside the United States.

Life comes with responsibilities. Those responsibilities include the necessity of seeking opportunities for security and growth. Often the search for opportunities and growth results in a decision to sever tax residency with one country and to acquire tax residency in another. 

 But, severing tax residency comes at a cost. More and more countries are requiring individuals severing tax residency to pay a "departure tax". Canada has a departure tax. The United States has it's 877A Expatriation tax. Australia has a departure tax.

Although Canada's Departure Tax applies to a wider range of people than the US 877A exit tax, Canada's  tax is payable on fewer things. Departure taxes are the cost of severing tax residency. As such they should be viewed as in investment. More and more people view the payment of Departure taxes as a sound investment (possibly prepaying taxes at lower rates) in their financial futures.

In this episode John Richardson and Wayne Bewick discuss the reasons for severing tax residency, the price of severing tax residency and why departure/exit taxes should be viewed as the price of investing in a different future.

Canada continues to be a very attractive country for immigration.

But, there is a growing group of people who see severing Canadian tax residency and paying the departure tax as an investment in their futures.

The Impact Of The Proposed Warren Wealth Tax (and How It Ineracts With FATCA) On Americans Abroad

March 7, 2012 - Participants Include:

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

In the 21st Century the single  most interesting thing about a person is her/her tax residency. The United States makes US citizenship sufficient for tax residency. The effect of US "citizenship-based taxation" is that the United States, imposes worldwide extraterritorial  taxation, on the non-US income of individuals who are tax residents of other countries and do not live in the United States. (The rules of the US extraterritorial tax regime are far more punitive than the tax regime imposed on Homeland Americans.) That's on the income tax side.

In early March of 2021, Senator Elizabeth Warren proposed a US Wealth tax that would apply to the non-US assets (among other things) of US citizens living in other countries. Furthermore, it is drafted in a way that brings the assets of the non-US citizen spouse into the wealth tax net.

In this episode John Richardson and Virginia La Torre Jeker discuss how this is intended to work. Americans abroad considering expatriation should take note of the provision that (in addition to the 877A Exit Tax) the Warren wealth tax, would impose an ADDITIONAL 40% (that's not  a typo)  on "covered expatriates" who renounce US citizenship.

Virginia has supplied the following example in her blog post here, to illustrate the severity of this:

"Here’s a very realistic example: Let’s say Joseph was born in the US because his parents, who were Italian citizens, were employed in the US at the time. Assume Joseph lived in the US until the age of 5 and then returned to Italy with his parents. Assume he attended 4 years of college in the US as well.  Assume Joseph moved to England and Joseph gives up his US citizenship. Assume Joseph  is a “covered expatriate” with  a net worth of US$53 million on the expatriation date. This significant wealth leaves him in the cross-hairs of the wealth tax.

For the sake of simplicity, let us say his exit tax amounts to $1 million and that he cannot use the exit tax to reduce net worth for purposes of the wealth tax.  In addition to the exit tax of  $1 million, Joseph will owe $21.2 million in wealth tax in order to escape Uncle Sam’s clutches ($53 million x 40%). Total US tax bill so far is $22.2 million.  But Uncle Sam is not done yet!  At Joseph’s death, let’s assume he leaves $25 million to his children and they are US persons.   Uncle Sam will take another $10 million from them simply because they must be punished since their father was a covered expatriate. So, while Joseph and his heirs started off with $53 million, once Uncle Sam got through with them, Uncle Sam got $32.2 million and Joseph and his family got only $20.8 million.  That’s right. Uncle Sam took 60% of their wealth, all because Joseph simply gave up his citizenship (or green card held for at least 8 tax years)."

Those considering renouncing US citizenship should expatriate at the earliest possible moment!

The proposed legislation (in two places) requires the use of FATCA to assist in the identification of assets outside the United States. John and Virginia discuss the  evolution of FATCA and how it is being used to incrementally expand the US tax base outside of the United States.

Further details may be found at John Richardson's  post here.

You can read the actual  text of Senator Warren's proposal here. You will be shocked!