Prologue – November 2014:
Boris @MayorOfLondon Johnson interviewed on Diane Rehm show about his U.S. capital gains tax bill http://t.co/JPqoHzb05H
— U.S. Citizen Abroad (@USCitizenAbroad) January 23, 2015
Boris Bows – January 2015:
London mayor bows to ‘outrageous’ demand to pay US tax bill – http://t.co/MuJY3rV3Ka http://t.co/ylcQPe8RJN via @FT
— U.S. Citizen Abroad (@USCitizenAbroad) January 22, 2015
The article from the Financial Times includes:
Mr Johnson has previously said he wanted to renounce his American citizenship but that it was “very difficult to give up”.
The clearance of his debt to the US government should remove the major obstacle to him renouncing his American passport, but his spokesman refused to comment on whether he would now do it.
Mr Johnson’s decision to pay up was taken grudgingly but will ensure that his visit to the US — intended to drum up investment for London — is not dogged by questions about his tax affairs.
All US citizens, including those with dual citizenship, are legally obliged to file a tax return and pay US taxes wherever they are living. Capital gains tax on the sale of a primary residence is not applied by UK tax authorities, but is levied in the US.
Mr Johnson’s troubled relationship with the land of his birth emerged last November on a tour of the US to promote his new biography of Winston Churchill, when he revealed he had been hit with a demand for capital gains tax.
Asked whether he would pay it, he said: “No is the answer. I think it’s absolutely outrageous. Why should I? I haven’t lived in the United States since I was five-years-old. I pay my taxes in full in the United Kingdom, where I live and work.”
London Mayor Boris Johnson is the author of – The Churchill Factor – a book about Winston Churchill. While on tour in America, Mr. Johnson announced that he would NOT pay a U.S. tax bill on the sale of his London residence. This announcement was particularly newsworthy. After all, the plight of Boris Johnson is the same as the plight of any “U.S. born person” who has tried to live outside the United States. They will learn that the U.S. regards them as “property” and not as “persons”. Those born in the U.S. do NOT have rights as human brings, but have only such rights as the U.S. allows.
Boris has bowed. He has acknowledged U.S. jurisdiction over him.
What does this mean for Boris? What does this mean for the U.K.? What does this mean for the world?
The end of the beginning …
I am reminded of an oft quoted remark by Winston Churchill:
Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.
The article generated a number of comments of interest, including:
Well done Boris. You are a great model for other politicians to follow. Great to see that he has put the interests of his adopted country ahead of his own selfish interests. May he go far?
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I was so hopeful Mr. Johnson would have had the courage to stand up to this bullying and protect assets that belong in the UK. He was the poster child for the hypocrisy being a UK citizen placed against the backdrop of the American Revolution. The scene I wrote had him dumping Starbucks coffee in the Thames! Guess the 7.6 million US deemed tax slaves living abroad must look for another hero.
Such a shame, he was perfect and I actually thought he had the guts to do it.
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The US scheme (in both the US and UK senses of the word) taxes not only US citizens resident in other countries but also the countries in which they reside. Why these countries put up with this virtually unique transfer of their national incomes to the US is beyond me. They should pass laws forbidding the payment of such taxes.
Boris is NOT only the latest casualty, he is the greatest casualty …
Boris Johnson is the latest casualty of those with the bad luck to have been “Born In The U.S.”
The “Boris Johnson Chronicles” have provided:
– low grade entertainment (I am sure that there are plenty of “envy specialists” in around the world who believed that Boris should be punished “just because”)
– hope for those 7.6 million persons attempting to live their lives outside the U.S., with diminished value based on their “IRS Discount” and subject to “IRS Persecution”
– pain for Boris Johnson and his family (I feel particularly sorry for the family – don’t marry a U.S. citizen!)
– publicity for the U.S. policies of attempting to levy taxes on the residents of other countries
AND ESPECIALLY
– confirmation of the obvious fact that the U.S. believes it has ownership over anyone born in it’s borders.
The clear lesson and message for all “U.S. Born” people …
Boris Johnson has “bowed” to President Obama, the U.S. Congress and the IRS. He has bowed deeply, respectfully and humbly. He has publicly agreed that he is subject to U.S. control wherever he may live in the world. He has assisted the President Obama in transferring “after tax” British capital to the U.S. Treasury. Mr. Johnson’s decision must be respected.
After all Boris Johnson never chose where he was born.
That said, Boris Johnson has agreed to become a conduit to facilitate the transfer of U.K. capital to the U.S. Boris has “set an example”for all U.S. born people. He has confirmed that their obligations to their “Birthland” are primary, permanent, and should receive priority.
The message is clear: If even Boris bowed, what hope is there for me?
It’s the end of the beginning. What should this mean for Boris and his future? What’s the next step?
I certainly understand WHY Boris agreed to pay his “tribute”. Yet, Boris Johnson is one of the few people with the resources and moral capital to fight the immorality of U.S. tax policies. But, he didn’t. If Boris didn’t, how could anyone else?
But, let’s not forget that:
Likes the quote: "To those whom much is given, much is expected." http://t.co/toSOJ35HDv via @goodreads
— U.S. Citizen Abroad (@USCitizenAbroad) January 22, 2015
Boris Johnson is the Mayor of London. He is a U.K. politician. It’s reasonable that he be held to a reasonable standard of behavior. Boris Johnson simply cannot be in a position where his is required to obey the laws of a foreign power. Boris has bowed. He has acknowledged his helplessness and his servitude. He has confirmed that he will both:
– accept that the U.S. has jurisdiction over him; and
– comply with whatever U.S. demands of him.
The conclusion for Boris Johnson is that …
Boris Johnson must resign his position as Mayor of London. He simply cannot both be the Mayor of London and the loyal and humble servant of the United States of America. One cannot both be the “Mayor of London” and assist in the transfer of U.K. capital to the U.S. Treasury. It’s a sad thing. But, the conclusion is inescapable.
Salvation lies only in renunciation of U.S. citizenship …
Boris must publicly announce his intention to renounce U.S. citizenship. He must then follow through in a public way. His obligations to the people of Britain demand nothing less. Only after he has renounced, will he be able to proudly say:
The name’s Johnson, Boris Johnson.
Without a CLN, he is nothing but U.S. property. It is not possible for him to serve in British Public Service.
The broader conclusion is that …
No Governments can allow “U.S. Born” people to run for or serve in public office. To do so is to cede the sovereignty of the nation to the United States of America.
The broader implications of a “U.S. place of birth” need to be considered by all governments.
More about Boris in the Daily Mail
http://www.dailymail.co.uk/news/article-2921505/Boris-caves-pays-outrageous-tax-bill-imposed-born-America.html
Well, he may be planning to relinquish his US citizenship after all. Future will tell.
Although he is in a delicat position as he may have to go back to the States regularly.
And, knowing that a person born in the US can only go back if he has a US passport, looks like the US treasury has him pinned down.
A clear signal from the IRS warning the rest of the world that it’s better to have nothing to do at all with a US person, wether it’d be marriage, employement or investment.
That is descriminating for US persons thus violating the 8th amendment of the US constitution.
But, worst of all is for the US economy.
FFI’s and companies all around the world will turn away US persons as if they were Nitroglycerine.
To say nothing of the foreigne investments in the USA that will slowly but surely decrease over time as organizations retreat.
The FATCA law and CBT have definitely broken the confidence the world had in USA and the US dollar.
Financial dictatorship of the US will see the BRIC countries only more numerous in the near future ready to give up the US dollar. And this is happening now.
Bravo IRS, for breaking the US economy.
We can only hope that Boris’ settling of his US tax bill is a necessary part of the process of renouncing US citizenship and cleanly exiting the US tax system. If we don’t hear he has renounced in a few months that will mean that he has admitted he is nothing more than a “US citizen habitually resident in the UK”.
Boris Johnson is a UK politician who has a once in a lifetime opportunity to show just how principled a man he really is. Let’s hope he doesn’t squander it.
The real problem is Boris is worth a few quid and he would be subject to the IRS’ rectal examination and possibly be subject to an exit tax.
That’s probably the reason why he’s held off renouncing. Is Boris really going to be happy paying capital gains on his investments being subject to a theoretical one-off sale which would be part of the calculation?
Maybe he’s planning to become “tax compliant” to renounce. Even if he has more than $2 million, he is not subject to the expatriation tax (dual citizen by birth who lived in the US for less than 10 years in the last 15 years). He can then easily travel to the US as a visitor with his UK passport.
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Shadow Raider,
Thanks for pointing out that Boris Johnson was, as other “Accidentals”, *born dual* so will not be subject to the Exit Tax no matter what his worth, unless he does NOT complete the requirements for back compliance (or go forward?) and his last US form to submit: his 8854. He could, essentially, still thumb his nose.
Does this imply that U.S. citizens must pay capital gains tax to the U.S. on the value of their homes in Canada when they renounce or relinquish?
Have any of the participants here had to pay tax to the U.S. on the value of their principle residences in Canada?
I guess I should clarify: I am not asking about those who were “born dual” but rather American-born citizens who have lived much or most of their lives elsewhere — would they have to pay tax on their homes? As a homeowner in Canada, I’m a bit concerned.
marie, like so much else, it depends. In theory,a US citizen who wishes to correctly file her US tax returns would have to include capital gains on her Canadian home if and when it was sold. There are all kinds of complexities. There is a 250,000 exclusion; you can put your house in your non American spouses name and on and on. Since there is no capital gain tax in Canada on principle residence, there is no ‘foreign’ tax credit to offset any potential US tax. The capital gain rate varies from 0- 20 % depending on total taxable income. We won’t bother mentioning state taxes. It ain’t easy to figure it out.
I wonder how the IRS is feeling about this. Do they cringe or do they gloat? Obviously it is a victory.
But I wonder if in the long run (which nobody cares about in US politics) this is not a pyrrhic victory for the US.
People are awakening, as I am, to the notion that US citizenship is a burden (or even a curse) for those who don’t live there. Boris Johnson’s fate is important in publicizing this.
People will from now on (savvy people already have) progressively distance themselves from dealings with the US. Hearts and minds are being lost, as are business connections. And the “milking” of US citizens abroad will slowly yield less and less as those who are burned reorganize. I think many other Boris Johnsons have taken full notice, and will prepare to free themselves. In 10 years the US will be left with powerful financial laws that will apply to fewer and fewer people.
From the Daily Mail, his bill was likely much smaller in the end.
My guess is that he was able to prove/attribute that the ownership was not 50/50 with his spouse but skewed greater to his spouse.
He might have also been able to get penalties waived.
“Now it has emerged that Mr Johnson has settled the bill, said to be much less than the £100,000 rumoured last year.”
@Marie
Yes, Bubblebustin
If your renounce you will end up with a “pretend” sale of your home (on 8854). If your spouse is Canadian, only put 1/2 the value and thus, 1/2 the gain. As long as you are under the $2million (the asset test), you are ok. Presuming of course, that you do not fail the income test (having ~$150K+ tax liability) nor the certification test (5 yrs compliance etc).
Pretty disappointed in him. The guy had the resources to fight that in court in the UK. Instead, he bowed to this injustice. I agree, he should just resign. I wonder what prompted him to comply.
Nothing prevented him to renounce without being tax compliant. The guy should have used his money to make this right.
Remember Boris got bad advice when he got the US Passport.
His tax bill might not have been bad and he needs to cleanly relinquish when he becomes a MP again.
Some math scribbles…..
Purchase price 470,000
?Improvements? 130,000
?Cost to Sell? 120,000
Sale price 1,200,000
TOTAL GAIN 480,000
He will be taxed on half or less.
Half Gain 240,000
Homestaed sale exclusion 150,000
Taxable gain 90,000
Capital Gain Tax Rate 2009 15%
Tax due £13,500 (UK) plus interest and late payment penalty.
So is it better to fight that or get out cleanly?
But Boris needs to relinquish and if not it should be a campaign political issue.
A dual US citizen owing allegience is not fit to serve in the UK Parliament.
Once again, I’m surprised that someone with Johnson’s wealth and power was so badly advised – he had an excellent case for a backdated relinquishment until he got a U.S. passport. Huge mistake.
Yes, an MP who also holds the citizenship of another country unquestionably has a fatal conflict of interest. I’m surprised UK law would even allow such an individual to stand for election.
Regardless of what UK law actually says, if Boris is serious about running for Parliament he must renounce his US citizenship. The opposition would be sure to make an issue of it.
@Broken man
Yes, it is surprising that there was this problem, but he was hardly alone. I have heard of wealthy Americans in Britain had actually been advised by qualified financial advisors in Britain to opt out of their employers’ pensions and put their retirement money into a self-invested pension plan instead, with no warnings about the problems that arise with PFICs. I don’t think that many advisors really understood all the complications involved in CBT.
He should relinquish ASAP.
Call me cynical, but am I the only one to smell a rat here? Me thinks Boris has been offered a deal. His standing up to the IRS would have been a PR thorn in their side. We know it’s not strict rule of law that guides their actions, so giving up some of the potential largesse and accepting a token amount to make this go away seems a pretty good deal for both parties. How would we know, after all? Well, we won’t. But there’s a pretty good litmus test. If he totally acquiesced to their thievery, he has earned the right to at least a whinge or two about it. If he decides to STFU, then I suspect he got a deal which would have required him to do so.
Tricia Moon, it is reassuring to hear that there is a $2 million threshold (whew!). Thank you. I have no spouse, but I do not own any assets even nearing that value and have been in compliance with my tax filings for more than a decade. Again, thanks.
I just remembered- Boris wont have to pay any exit tax. There was some clause that said if you move back to your original country – then no exit tax is due. I think it even went that if your mother was say german at the time of your birth in USA (and later became american) that you were considered dual at birth. And then if you live in Germany later – then you dont have to pay any exit tax either.
Read the Blog titled: “Reed Amendment, Logan Act: why worry about unenforced & unenforceable laws?” Consider this versus Boris Johnson … present Mayor of London … expected soon to be Member of Parliament … and a front runner to be Leader of the Conservative Party and thus a probable Prime Minister in the fullness of time. Yet subject to the Logan Act ?
In Jamaica, the Constitution forbids a person to be a Member of Parliament IF one is a citizen of any country which is not one of the Commonwealth countries (thus excluding folk with US or Venezuelan or similar non Commonwealth citizenship … Canadian duals would be ok). Surely Britain has a similar requirement … in which case Boris Johnson will have to relinquish his US slave chains IF he is to pursue higher office in Britain.
Polly and to remind others,
Here is what would apply to Boris Johnson, no matter what his net worth: http://hodgen.com/chapter-4-are-you-a-covered-expatriate/
Yes, this is Boris Johnson’s own personal decision, whether he is Mayor of London or another Joe Schmoe like me. He must do what is best for himself and his family just as all of us must make our own decisions on what our course of action will be based on the best research, advice, weighing of options available to us. I am sure he feels the same way about his and his family’s right to privacy as we do ours and our families’.
@a broken man on a halifax pier
Exactly and a perfect example of the fact that the compliance industry more or less, ends up determining what the law is, no matter how wrong they are.
@Publius
He is going to have trouble relinquishing and likely will have to renounce. If he’s already completely tax compliant not that big of a deal- since he’s a dual since birth he should be exempt from the exit tax.