PREP Podcaster - ”Success Favours The PREPared Mind”

Gifts And Bequests From A Former US Person: Avoiding A 40% Tax Payable By The Recipient

June 27, 2023 - Participants include:

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

As more and more people renounce U.S. citizenship or surrender their Green Cards the will take steps to avoid being a "Covered Expatriate".

A "Covered Expatriate" is an individual (subject to few exceptions) who meets any one of the following three tests:

- net worth in excess of 2 million USD

- U.S. tax liability exceeding an average of $190,000 USD in the five years prior to renunciation

- failure to certify U.S. tax compliance for the five years prior to renunciation.

The consequences of being a "Covered Expatriate" are two-fold:

1. Being subject to the 877A Expatriation Tax

2. Gifts/bequests made to "U.S. Persons" being subjected to a 40% tax (payable by the recipient of the gift) as per S. 2801 of the Internal Revenue Code.

It's important that the recipient of the gift be able to prove that the gift/bequest was NOT received by a "Covered Expatriate".

In this podcast we discuss common sense steps that can (and should) be taken to meet the burden of proof of showing that the gift/bequest was NOT received from a "Covered Expatriate".

 

Mi’Azhikwan: First Nation Status As Citizenship - Losing And Gaining Citizenship

May 22, 2023 - Participants Include:

 

Mi’Azhikwan - @MiAzhikwan

John Richardson - @Expatriationlaw

 

 

Latin American Opportunities: Whether Retiring Or Seeking A Digital Nomad Visa

May 27, 2023 - Participants include:

 

Vance - @MyLatinLife

 

John Richardson - @Expatriationlaw

 

There are many people who see the value in acquiring second citizenships or second residencies. There is a range of opportunities available that include: citizenship, permanent residence status, various visas and most recently the "digitial nomad visa". Each of these options has different costs and opportunities.

These opportunities exist all around the world. In this podcast you will be introduced to Vance of "My Latin Life" fame who has a special affection for the opportunities available in Latin America.

Vance describes a process for people who see the value in:

 

1. A second citizenship or residency; in

 

2. A location with a territorial tax system.

 

In this episode you will learn why. For more about "My Latin Life", visit:

https://www.MyLatinLife.com

 

 

 

 

Checking In With Coach Coutts: Leave The Calories To US!”

June 7, 2023 - Participants include:

 

David AKA "Coach" Coutts - @RealCoachCoutts

 

John Richardson - @ExpatriationLaw

 

 

The Mouse That Roared - Belgium Rules FATCA IGA Violates Europe’s GDPR

May 27, 2023 - Participants Include:

 

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

 

The decision may be accessed is here.

Last week a Belgian tribunal charged with investigating and determining violations of the GDPR "General Data Protection Regulation" ruled on a complaint brought two an "Accidental American" in Belgium and the Association of Belgium Accidental Americans.

The tribunal ruled that to send information to the IRS under the FATCA IGA did indeed violate the GDPR. The decision can (and certainly will) be appealed. The decision is long (77 pages), complicated and identified a number of different reasons why the FATCA IGAs conflicted with the GDPR. This is hardly surprising given the the whole purpose of the FATCA (expressed in the FATCA IGAs) is is to deprive US citizens of any and all rights with respect to their banking information.

The Belgium decision has now created a situation where as long as there are U.S. "reportable accounts" in Belgium the transference of FATCA data to the IRS will result in either:

- a violation of the FATCA IGAs (and therefore U.S. law); or

- a violation of the GDPR (and therefore Belgium law).

It would seem that the only way to avoid violating the law would be if there were NO FATCA data to report. This can be achieved by and only by either

- terminating the banking accounts of all U.S. citizens in Belgium; or

- relying on the provision in the IGA that does not require the reporting of "Depository" (not custodial) accounts with a balance of less than $50,000. (See page 8 of the U.S. Belgium FATCA IGA.)

"A. Accounts Not Required to Be Reviewed, Identified, or Reported. Unless the Reporting Belgian Financial Institution elects otherwise, either with respect to all New Individual Accounts or, separately, with respect to any clearly identified group of such accounts, where the implementing rules in Belgium provide for such an election, the following New Individual Accounts are not required to be reviewed, identified, or reported as U.S. Reportable Accounts: 1. A Depository Account unless the account balance exceeds $50,000 at the end of any calendar year or other appropriate reporting period."

https://home.treasury.gov/system/files/131/FATCA-Agreement-Belgium-4-23-2014.pdf

In any case, the real issue is whether Belgium is to be run by the United States (as a territory or vassal state) or whether Belgium is a "sovereign country".

It will be interesting to see how this develops.

 

 

Oral Argument: Association Of Accidental Americans - Hearing May 3, 2023

Appeal - May 3, 2023 - District Court Of Appeals

 

As many of you know the Association of Accidental Americans sued the U.S. State Department over the issue of limiting renunciation appointments during the Covid19 pandemic. 

This is a recording of the appeal heard on May 3, 2023.

 

https://www.cadc.uscourts.gov/recordings/recordings2022.nsf/2C2C9045951D8417852589A4005DB0D0/$file/22-5262.mp3

 

Coach Coutts - What Is Cortisol And Why Is It Important? Leave The Cortisol To US!

April 28, 2023 - Participants Include:

 

Personal Trainer David Coutts - @RealCoachCoutts

 

John Richardson - @Expatriationlaw

 

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Note: Check back for the link to the Video version!

 

 

 

 

@MiAzhikwan - On The 41st Anniversary Of The Canadian Charter Of Rights

April 17, 2023 - Participants include:

 

Janine Seymour - @MiAzhikwan

John Richardson - @Expatriationlaw

 

It’s almost a half century since a Charter of Rights became part of Canada’s constitution. Has the Charter fulfilled its promise?

Many opinions are reflected as replies to Justin Trudeau’s “Happy Birthday Charter Tweet”.

https://twitter.com/JustinTrudeau/status/1648033598023299074

 

When It Comes To Penalties: Some Penalties Are ”Assessable” And Some Are Not And Why It Matters

April 17, 2023 - Participants include:

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

Prologue - Some Penalties are "assessable" and some are not

An excerpt from the 2023 Taxpayer Advocate Report included a discussion of "assessable" penalties which included:

 

"These “assessable” penalties are generally those that are due and payable upon notice and demand. Unlike penalties subject to deficiency procedures, assessable penalties carry no rights to a 30-day letter, agreement form, or notice requirements prior to assessment. Internal Revenue Manual 20.1. 9.1."

https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2023/01/ARC22_PurpleBook_03_ImproveAssmtCollect_11.pdf

Not all penalties are the same! Notably this excerpt makes a distinction between "assessable" penalties and penalties "subject to deficiency" procedures.

Generally, "assessable" penalties are payable because they are assessed and cannot be challenged without first paying the penalty and then using the judicial process to seek a refund.

Penalties "subject to deficiency procedures" can be challenged in tax court before they are paid. Although no taxpayer likes ANY penalty clearly penalties that are NOT "assessable" afford the taxpayer with more options for response.

Chapter 61 - Form 5471, Form 5472, Form 8938, Form 926 Form Penalties

These are significant penalties for taxpayers generally and especially for U.S. citizens living outside the United States. On April 3, 2023 in the Fahry case, the Tax Court ruled that Form 5471 penalties were NOT "assessable" penalties and that therefore the IRS had no jurisdiction to treat them as "assessable". (Practically speaking, this means that the U.S. would be required to embark on a separate legal proceeding to collect those penalties. This would also give the taxpayer the opportunity to defend against the penalty.)

The Taxpayer Advocate Blog of April 17, 2023

On April 17, 2023 the Taxpayer Advocate in a blog post discussing the Farhy case noted that ...

 

 

 

Since 2020, I have repeatedly recommended a legislative change under which Congress would make foreign information return penalties and assessable penalties subject to deficiency procedures for the benefit of both the IRS and taxpayers. This change would provide taxpayers with a more efficient, less costly, and more equitable regime governing the initial imposition of these penalties, as well as the mechanisms by which they can be challenged by taxpayers.

Continuing the Taxpayer Advocate notes that ...

This blog specifically addresses information reporting penalties in Chapter 61, Subchapter A, Part III, Subpart A (hereafter referred to as Chapter 61 for brevity’s sake).

Taxpayers who receive foreign gifts or control certain foreign corporations and partnerships and fail to file required information returns are subject to penalties under IRC §§ 6038 and 6039 (which are in Chapter 61 of the IRC). IRC § 6038 is one of several code sections that require similar filings and provide for similar penalties for taxpayers with various types of foreign corporations, partnerships, assets, and accounts. These Chapter 61 penalties are peculiar in that each section specifically imposes the penalties but provides no authority to assess and collect the penalties. I raised this concern in my 2020 Annual Report to Congress and recommended that the IRS take steps to protect the government fisc and also taxpayer rights by maximizing taxpayers’ access to administrative and judicial review.

______________________________________________

The Great Question Post Fahry is how to determine whether an penalty is an "assessable" penalty or a penalty "subject to deficiency procedures"

In this podcast, Virginia La Torre Jeker and John Richardson discuss:

1. How to determine whether a penalty is "assessable" or "subject to deficiency procedures"

2. That 5471 and 8938 penalties (affecting Americans abroad) are NOT "assessable" penalties

3. Why many 3520 penalties are "assessable" penalties

4. How taxpayers can take advantage of the Tax Court decision in Fahry which ruled that Form 5471 penalties are NOT assessable (there is a window of opportunity)

5. The absolute importance of reading and considering the language in the Internal Revenue Code!

Although this podcast is a bit technical, it is of great practical utility.

 

Coach Coutts -The Drama Triangle: Leave The Drama To US

April 14, 2023 - Participants include:

David (Coach Coutts) - @RealCoachCoutts

John Richardson - @Expatriationlaw

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"Drama" (defined in this podcast) as an "interference in our emotional equilibrium is a part of life. People have different relationships to "drama". Sometimes as the "victim", sometimes as the "persecutor" and sometimes as the "rescuer". All people play different roles in different aspects of their lives.

In this podcast, Coach Coutts discusses how to (1) recognize drama (2) recognize which of the three personality types you are exhibiting in this drama scenario and (3) the importance of "responding" to drama rather than "reacting" to drams.