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Discussion about current events, culture, independent candidates, business, education, travel, death and taxes, global mobility, citizenship and residence by investment options, Americans abroad, FATCA, CRS, U.S. citizenship renunciation, Green Card abandonment, citizenship taxation, PFIC, GILTI, foreign trusts, I-407 and more ...
Friday Jan 06, 2023
Friday Jan 06, 2023
January 6, 2023 - Participants Include:
Keith Redmond @Keith__Redmond
John Richardson - @Expatriationlaw
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On December 30, 2022 US Treasury issued Notice 2023-11. The purpose of the Notice included a provision that allowed foreign banks to avoid a designation of "significant non-compliance" with the FATCA IGAs. This "temporary stay of execution" is available ONLY in return for heightened FATCA enforcement on both US citizens and the banks.
I have written the following two posts on this topic:
Joining me today is Keith Redmond where we discuss:
- what Notice 2023-11 really means
- What Americans abroad need to understand
- What options may be available for Americans abroad
"All Roads Lead To Renunciation!"
Friday Dec 30, 2022
Friday Dec 30, 2022
December 30, 2022 - Participants Include:
Hon. Philippe A. May - @EC_Holdings
John Richardson - @Expatriationlaw
In my final podcast of 2022 I had the opportunity to explore the issues of second citizenships and residents with Mr. Philippe A. May of EC Holdings which is a second citizenship advisory in Singapore.
We discussed the "Who", "What", "Where" and "When" of both second citizenship and residency programs. Mr. May shared his expertise and thoughts and the opportunities in general with a special emphasis on the South American countries of Uruguay and Paraguay. The opportunities in South America will come as a surprise to some.
Wednesday Dec 28, 2022
Wednesday Dec 28, 2022
December 28, 2022 - Participants include:
Aaron Katsman - Lighthouse Capital - @AaronKatsman
John Richardson - @Expatriationlaw
Thanks to Aaron for a great review of the basics of financial planning.
You will be amazed at the effects of buying three cups of coffee a week rather than saving the money!
Wednesday Dec 21, 2022
Wednesday Dec 21, 2022
December 21, 2022 - Participants include:
Anthony Parent - @IRSMedic
Keith Redmond - @Keith__Redmond
John Richardson - @ExpatriationLaw
Another interesting FBAR case (lawsuit filed on December 16, 2022) ... The FBAR penalties assessed exceed the value of the accounts (by a lot). What is going on here?
The "Complaint" (below) suggests that Ms. Molyneux was assessed FBAR penalties for a period of time when she was living in the US. The "Complaint" further suggests that Ms. Molyneux is currently living outside the US.
To learn the facts, read the government's "complaint" below.
_______________________________________________
United States v. Molyneux, No. 22-cv-10654
DAMIAN WILLIAMS
United States Attorney for the
Southern District of New York
By: TOMOKO ONOZAWA
Assistant United States Attorney
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA, :
:
Plaintiff, : 22 Civ. 10654
:
v. : COMPLAINT
:
PILAR MOLYNEUX, :
:
Defendant. :
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Plaintiff the United States of America (the “United States”), by its attorney, Damian Williams, United States Attorney for the Southern District of New York, brings this action to collect the outstanding unpaid civil penalties assessed against defendant Pilar Molyneux (“Molyneux”) for her willful failure to report her financial interest in foreign bank accounts in calendar years 2014 and 2015, as required by 31 U.S.C. § 5314 and its implementing regulations,
and alleges upon information and belief as follows:
JURISDICTION AND VENUE
1. The United States brings this suit under 31 U.S.C. §§ 3711(g)(4)(C) and
5321(b)(2), at the direction of the Attorney General of the United States and at the request of, and with the authorization of, the Commissioner of the Internal Revenue Service (“IRS”), a delegate of the Secretary of the Treasury of the United States.
2. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§ 1331, 1345, and 1355 because it arises under a federal statute and the United States is the plaintiff.
3. Venue is proper in this district under 28 U.S.C. § 1391(c)(3) because Molyneux, a United States citizen, currently resides in France and may be sued in any judicial district. Venue may also be proper in this district under 28 U.S.C. § 1395(a) because the acts or omissions giving rise to Molyneux’s liabilities occurred in this district.
THE PARTIES
4. Plaintiff is the United States of America.
5. Defendant Pilar Molyneux is a citizen of the United States and Chile, and on
information and belief, currently resides in Paris, France, and conducts business at J.P. Molyneux Studio, with an office located at 4 Rue Chapon, 75003 Paris, France.
REGULATORY BACKGROUND
6. The Secretary of the Treasury is authorized by statute to require United States persons to report certain transactions with foreign financial agencies. See 31 U.S.C. § 5314. Under the statute’s implementing regulations, “[e]ach United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship” to the Department of the Treasury for each year in which such relationship exists. 31 C.F.R. § 1010.350(a).
7. To fulfill this requirement, a United States person is required file a “Report of Foreign Bank and Financial Accounts . . . or any successor form,” commonly known as an “FBAR,” by June 30 “of each calendar year with respect to foreign financial accounts exceeding $10,000 maintained during the previous calendar year.” 31 C.F.R. §§ 1010.350(a), 1010.306(c).
8. Civil penalties may be assessed on taxpayers for willful failure to comply with the reporting requirements of § 5314. 31 U.S.C. § 5321(a)(5). For calendar year 2014, the maximum penalty for willful violations involving the failure to report the existence of a foreign financial account, was the greater of $100,000 or 50% of the balance in the account at the time of the violation. Id. § 5321(a)(5)(C)(i). For calendar year 2015, the maximum penalty for willful
violations was the greater of $134,806 or 50% of the balance in the account at the time of the violation. Id.; 31 C.F.R. § 1010.821(b).
9. Penalties under 31 U.S.C. § 5321(a)(5)(C) are subject to interest and further
penalties pursuant to 31 U.S.C. § 3717.
FACTUAL BACKGROUND
10. Molyneux was a U.S. person during calendar years 2014 and 2015 and resided within the United States or was otherwise subject to the jurisdiction of the United States.
11. On information and belief, Molyneux maintained a residence in Manhattan at all times relevant to the complaint.
12. During at least calendar years 2014 and 2015, Molyneux was familiar with the FBAR filing requirements because she had previously timely filed an FBAR for calendar year 2013. In addition, in 2014, Molyneux filed delinquent FBARs for calendar years 2005 through 2012. Also in 2014, JP Molyneux Studio, an entity in which Molyneux held an ownership interest, timely filed an FBAR for calendar year 2013.
A. Banque Neuflize Personal Bank Accounts
13. From at least January 2014 through at least December 2015, Molyneux had signature authority over two accounts at Banque Neuflize in France, bearing account numbers
XXXXXXX0001 and XXXXXXX0002 (hereinafter, the “Banque Neuflize Personal Accounts”).
14. The mailing address of the financial institution in which the Banque Neuflize Personal Accounts were held was 3 Avenue Hoche, Paris, Ile-de-France, 75008, France.
15. The Banque Neuflize Personal Accounts were bank, securities, or other financial accounts in a foreign country.
B. Molyneux’s FBAR Reporting Obligations for Calendar Year 2014
16. During calendar year 2014, the Banque Neuflize Personal Accounts had a maximum aggregate balance of $29,310.
17. The aggregate balance of the Banque Neuflize Personal Accounts exceeded $10,000 during the 2014 calendar year.
18. Molyneux failed to file an FBAR with regard to the 2014 calendar year on or before June 30, 2015.
19. By failing to file an FBAR for calendar year 2014, Molyneux willfully violated the reporting requirements of Section 5314.
C. Molyneux’s FBAR Reporting Obligations for Calendar Year 2015
20. During calendar year 2015, the Banque Neuflize Personal Accounts had a
maximum aggregate balance of $64,736.
21. The aggregate balance of the Banque Neuflize Personal Accounts exceeded $10,000 during the 2014 calendar year.
22. Molyneux failed to file an FBAR with regard to the 2015 calendar year on or before June 30, 2016.
Pursuant to Federal Rule of Civil Procedure 5.2(a)(4), all but the last four digits of the financial account numbers herein are redacted.
23. By failing to file an FBAR for calendar year 2015, Molyneux willfully violated the reporting requirements of Section 5314.
D. Assessment of Civil Penalties
24. On March 4, 2020, a delegate of the Secretary of the Treasury sent Molyneux a notice to her business address in the United States, 750 Lexington Avenue, 5th Floor, New York, New York 10022. The notice proposed civil penalties totaling $400,000 (the “FBAR Penalties”) against Molyneux for her willful failures to comply with the FBAR filing requirements for calendar years 2014 and 2015.
25. Specifically, the notice proposed penalties in the amount of $200,000 ($100,000 per account) for Molyneux’s willful failure to file an FBAR for calendar year 2014, and $200,000 for Molyneux’s willful failure to file an FBAR for calendar year 2015.
26. On March 4, 2020, the IRS also sent Molyneux an IRS Form 13449, entitled “Agreement to Assessment and Collection of Penalties Under 31 USC 5321(a)(5) and 5321(a)(6)” to 750 Lexington Avenue, 5th Floor, New York, New York 10022. Above the signature line, the Form 13449 stated: “I consent to the immediate assessment and collection of the penalty amount specified above,” and listed $400,000 as the total proposed penalty.
27. On April 15, 2020, Molyneux acknowledged her liability for the assessed
penalties by signing the Form 13449 and returning it to the IRS via facsimile on April 17, 2020. The form listed her address as 750 Lexington Avenue, 5th Floor, New York, New York 10022.
28. On December 21, 2020, in accordance with 31 U.S.C. § 5321(a)(5)(C)(i) and consistent with the Form 13449 executed by Molyneux, a delegate of the Secretary of the Treasury assessed FBAR Penalties totaling $400,000 against Molyneux for her willful failures to comply with the FBAR filing requirements for calendar years 2014 and 2015.
29. On December 21, 2020, a delegate of the Secretary of the Treasury sent
Molyneux a notice of the assessment of the FBAR Penalties and a demand for payment to 750 Lexington Avenue, 5th Floor, New York, New York 10022.
30. On January 13, 2021, the notice of assessment was returned to the IRS by the United States Postal Service as undeliverable.
31. On February 17, 2021, the IRS mailed a copy of the notice of assessment to
Molyneux at JP Molyneux Studio’s address in Paris. To date, no portion of the FBAR assessments against Molyneux for calendar years 2014 or 2015 have been paid.
32. Since the date on which the IRS assessed the FBAR Penalties, interest and
additional penalties have accrued, and continue to accrue, including interest and a late penalty charge. 31 U.S.C. § 3717(a)-(c), (e)-(f); 31 C.F.R. § 901.9(b)(3), (d).
CLAIM FOR RELIEF
Judgment for Civil Penalties, 31 U.S.C. § 5321(a)(5)
33. The allegations in paragraphs 1 through 32 are repeated and realleged as though set forth fully therein.
34. By this action, the United States seeks to collect the FBAR Penalties assessed against Molyneux by the IRS on December 21, 2020, plus interest and additional penalties which continue to accrue as provided by law.
35. Molyneux owes the United States $400,000, consisting of the $200,000 FBAR Penalty assessed for calendar year 2014 and the $200,000 FBAR Penalty assessed for calendar year 2015, plus associated penalties and interest pursuant to 31 U.S.C. § 3717, which continue to accrue.
36. The United States may bring suit to recover the FBAR Penalties assessed under 31 U.S.C. § 5321(a) at any time before the end of the two-year period beginning on the date the penalty was assessed. 31 U.S.C. § 5321(b)(2)(A).
37. This civil action to collect the FBAR Penalties, and the associated penalties and interest, is timely under 31 U.S.C. § 5321(b)(2), because it is filed within two years of December 21, 2020, the date when the FBAR Penalties were assessed.
RELIEF REQUESTED
WHEREFORE, Plaintiff the United States of America respectfully requests that the Court enter judgment:
(a) awarding the United States the amount of Molyneux’s assessed FBAR Penalties totaling $400,000.00, plus any interest and/or additional penalties as allowed by law from December 21, 2020, to the date of payment; and
(b) granting the United States its costs incurred in connection with this action, along with such further relief as the Court may deem just and proper.
Dated: New York, New York
December 16, 2022
DAMIAN WILLIAMS
United States Attorney for the
Southern District of New York
Attorney for Plaintiff United States of
America
By: /s/ Tomoko Onozawa
TOMOKO ONOZAWA
Assistant United States Attorney
Monday Dec 19, 2022
Monday Dec 19, 2022
December 19, 2022 - Participants include:
Nancy Grouni - ObjectiveFinancialPartners.com
John Richardson - @ExpatriationLaw
The days of a defined benefit pension are long gone. All people must take responsibility for their financial futures. Yet, many aren't aware of this obligation. Of those who are aware, "many people don't even know where to start". Ms. Grouni provides "oversight" and acts as a quarterback to oversee all "the moving parts."
As always, US citizenship is a complicating factor.
As a person who gives advice on a fee-based basis, Nancy Grouni is not "one in a million" but is one of approximately 150 people serving the population of Canada.
You will enjoy this podcast!
Sunday Dec 18, 2022
Sunday Dec 18, 2022
December 18, 2022 - Participants include:
Tim Smyth - @Tpsmyth01
John Richardson - @Expatriationlaw
This spells trouble!!
_______________________________________________
The text of the treaty document can be found at: https://home.treasury.gov/system/files/131/Treaty-Croatia-12-7-2022.pdf
Of particular note in Treasury’s announcement is:
“The Treasury Department is pleased to conclude this new tax treaty with Croatia. It is the first comprehensive tax treaty that the United States has signed in over ten years and reflects our current tax treaty policies and is a milestone in the Treasury’s efforts to expand the U.S. tax treaty network. We appreciate the collaboration Croatia showed throughout the negotiations,” said Lily Batchelder, Assistant Secretary (Tax Policy).
The new tax treaty closely follows the U.S. Model income tax treaty.
Treasury’s announcement focuses on the mutually beneficial aspects of the US Croatia tax treaty. Notably Treasury’s announcement fails to comment on the inclusion of the enhanced “saving clause” which is identical to the following provisions in the US Croatia tax treaty.
4. Except to the extent provided in paragraph 5 of this Article, this Convention shall not affect the taxation by a Contracting State of its residents (as determined under Article 4 (Resident)) and its citizens. Notwithstanding the other provisions of this Convention, a former citizen or former long-term resident of a Contracting State may be taxed in accordance with the laws of that Contracting State.
5. The provisions of paragraph 4 of this Article shall not affect:
a) the benefits conferred by a Contracting State under paragraph 3 of Article 7 (Business Profits), paragraph 2 of Article 9 (Associated Enterprises), paragraph 7 of Article 13 (Gains), subparagraph (b) of paragraph 1, paragraphs 2, 3 and 6 of Article 17 (Pensions, Social Security, Annuities, Alimony and Child Support), paragraph 3 of Article 18 (Contributions to Pension Funds), and Articles 23 (Relief From Double Taxation), 24 (Non-Discrimination) and 25 (Mutual Agreement Procedure); and
b) the benefits conferred by a Contracting State under paragraph 1 of Article 18 (Contributions to Pension Funds), and Articles 19 (Government Service), 20 (Students and Trainees) and 27 (Members of Diplomatic Missions and Consular Posts), upon individuals who are neither citizens of, nor have been admitted for permanent residence in, that Contracting State.
This represents a significant expansion of the “saving clause” to allow the US to impose US taxation NOT only on its” residents (as determined under Article 4 (Resident)) and its citizens” but also on “a former citizen or former long-term resident” which may are permitted to be subjected to any relevant future provisions of the Internal Revenue Code.
From the perspective of Croatia, the “saving clause” found in Paragraph 4 of Article 1 means:
4. Except to the extent provided in paragraph 5 of this Article, this Treaty shall not affect the taxation by the United States of its residents (as determined under Article 4 (Resident)) and residents of Croatia who happen to be US citizens. Notwithstanding the other provisions of this Convention, a former US citizen or former long-term US Green Card holder who is a resident of Croatia may be taxed by the United States according to the Internal Revenue Code.
Wednesday Dec 14, 2022
Wednesday Dec 14, 2022
December 8, 2022 - Participants Include:
Anthony Parent - @IRSMedic
Keith Redmond - @Keith__Redmond
John Richardson - @ExpatriationLaw
__________________________________________________
In 1996 Dodge began selling the "Dodge Stratus" which replaced the "Dodge Spirit" in the Dodge product line. In 1996 I saw a brilliant piece of marketing for the "first generation" Stratus. It read:
"You're not losing a sports car. You're gaining two doors."
I have been frequently reminded of this ad when I discuss renunciation with people who feel they must renounce US citizenship to escape the burdens (financial, psychological and emotional) of the US regulatory tax, form and penalty regime.
The tweet that was the impetus for this podcast is here.
https://twitter.com/ExpatriationLaw/status/1600814678485368834
Listen to this podcast. Do you agree?
Friday Dec 09, 2022
Friday Dec 09, 2022
December 9, 2022 - Participants include:
David Coutts - @RealCoachCoutts
John Richardson - @Expatriationlaw
The basic message:
"Boys react and men respond ..."
Earlier podcasts with Coach Coutts include:
Coutts At 37, So You Want To Be A Personal Trainer
Sunday Dec 04, 2022
Sunday Dec 04, 2022
Podcast 1- November 12, 2022:
Podcast 2 - December 4, 2022:
Americans who live abroad are renouncing their United States citizenship in large numbers. What part does the current fairness or unfairness of the United States Tax code play in this? What do U. S. citizens need to consider regarding the renunciation of their citizenship? What are "accidental Americans" and how are they treated under the rules of taxation by the U.S. I talked with Keith Redmond and John Richardson to gain clarity on these issues, and I'm happy to share them with you!
Get part 1 of my THE AMERICAN WAY? series here: https://www.podbean.com/ew/pb-epb7d-1309179
or on any podcast platform or on my YouTube channel here: https://www.youtube.com/@cominhomewithjohnalan9103/videos
John Richardson and Keith Redmond are co-founders of https://seatnow.org/
John RICHARDSON can be contacted at www.citizenshipsolutions.ca and citizenshipsolutions@proton.me
Keith Redmond can be reached at https://www.facebook.com/groups/AmericanExpatriates and US_Overseas_Advocate@outlook.com
MY AUDIOBOOK SUBSCRIPTION IS NOW AVAILABLE! Get into it HERE
* If you'd like to support The Comin' Home Podcast With John Alan, you can do that at one of the links here: https://patron.podbean.com/JohnAlan
https://www.buymeacoffee.com/johnalanpod
Go check out my new comic strip "Loyal Oak" at https://johnalanpod.com/loyal-oak-the-comicstrip/
You can find my music here: https://open.spotify.com/artist/5F4Jgrwy2fMa54webx5yzk?si=TTCDdVjdQCSf4GsRM7UyZg
More info and my blog are here at https://johnalanpod.com/
#CominHomeWithJohnAlan
#Taxation
#AmericansAbroad
Sunday Nov 20, 2022
Sunday Nov 20, 2022
November 20. 2022 - Participants Include
Andrew Grossman - @AndyGr
John Richardson - @Expatriationlaw
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I am always grateful for the opportunity to catch up with Andrew Grossman who is a UK based former US Foreign Service Officer. Mr. Grossman has compiled the best research in the area of FATCA and FBAR which is available here:
https://www.nyulawglobal.org/globalex/Fatca_Citizenship_Based_Taxation1.html
Previous interviews with Mr. Grossman 2014 and 2016 may be found on Youtube:
https://www.youtube.com/watch?v=X1Avi8QJygQ&t=1s
https://www.youtube.com/watch?v=MhMBmz8gt0Y&t=4s
_________________________________________________
Our discussion today included:
- phantom capital gains
- the consequences of Brexit
_____________________________________________
Here is the phantom capital gains provision of the Internal Revenue Code:
https://www.law.cornell.edu/uscode/text/26/988
Except as otherwise provided in this section, any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss (as the case may be).
