I recently received the following alert from the AICPA. This could affect US citizens and greencard holders who give up their citizenship/greencard in the (near) future. The current system under IRC Sec. 877, Expatriation to Avoid Tax, has pretty much been a failure, and more of an administrative burden than an actual deterrent to giving up US citizenship (or greencards) to avoid US tax. These proposed new rule look more burdensome (from a tax perspective) than the current rules , since it is a mark-to-market regime (rather than a 10 year "special" tax on certain US-sourced income as under the current system).
New Expatriation Tax Rules Possible in 2008
Expatriate tax legislation will likely be enacted in 2008. In December 2007, the House and Senate passed similar military tax relief legislation (H.R. 3997) that would adopt new rules for taxing individuals who expatriate on or after the date of enactment. The proposed legislation would impose a mark-to-market regime for taxing gain of U.S. citizens and long-term U.S. permanent residents who expatriate. In general, all property of an expatriate would be treated as being sold at fair market value on the day before expatriation and would tax gains in excess of $600,000.
David Colvin is the US Tax Partner for TaXpat BV in Amsterdam (www.taxpat.com) and a Managing Director for Maxim Global Wealth Advisors in Amsterdam and Portland (www.maximadvisors.com). For more tax and investment issues see his blog at http://blog.taxpat.com.
Comments