Subpart F, GILTI and The Transition Tax - Fake Income: Americansabroad are taxed more punitively than US residents

January 3, 2022 - Participants include:

John Richardson - @Expatriationlaw

Jim Gosart - Vice-President Republicans Overseas

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The United States is the only major country in the world that continues to impose worldwide taxation on its citizens when they move from the country and establish tax residency in another country. But, it gets worse. When US citizens move from the USA and establish tax residency in another country they are subjected to a separate and more punitive form of taxation that that imposed on US residents.

Nothing illustrates this principle better than the story of US citizens who attempt to carry on small businesses outside the United States. As well as the expensive forms and regulation, those US citizens who are "entrepreneurs abroad" risk being subject to tax on income they never received! Yes, it's true. Read on ...

US citizens abroad are generally subjected to various forms of taxation on "fake income" (meaning income they have never received). Some very common forms of "fake income" are found in Subpart F of the Internal Revenue Code. The Transition Tax and GILTI were created by the 2017 TCJA.

In this episode Jim Gosart and John Richardson discuss "fake income" as a general principle (it doesn't apply to US residents on their US based assets). The 2017 Transition Tax and GILTI are the result.

Our point is simple:

The only solution is for the United States to stop citizenship-based taxation and adopt pure residence-based taxation!