cross-posted from citizenshipsolutions

This post is in 3 parts, published over 3 days.

Beginnings …

A recent comment at the Isaac Brock Society includes:

It’s too bad I didn’t put my Canadian corporation in an S Corp before I knew I was a US taxpayer. I must have misplaced my crystal ball at the time. As I had when I sold my house in Canada.

What a clusterfu@k!

On November 15, 2018 I did a second interview (first interview October 16, 2018 here) with Monte Silver and his Sec. 965 advocacy. The video was featured on a post at CitizenshipTaxation.ca.

Orwell observed that Some individuals are more equal than others: "John Richardson @ExpatriationLaw and Monte Silver @MonteSilver1: The Sec. 965 @USTransitionTax & Sec. 951A #GILTI Taxes – Next steps" https://t.co/iAlB3Rs472 via @CitizenshipTax

— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 17, 2018

If you have not watched the November 15 interview, I suggest that you begin by watching the video (click on the above tweet). The most significant part of the interview is where Sec. 965(I) is discussed. Interestingly Sec. 965(I) provides a transition tax exemption to individuals who are the shareholders of an “S Corp”. To understand the mechanism for the exemption, click on the link in the following tweet:

Good explanation of how the "Shareholders of S Corps can defer payment of the @USTransitionTax https://t.co/stbvc9cOWZ

— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 18, 2018

This interesting exemption is available only to individuals who are shareholders of S corporations and not to other individuals. The interview also included some discussion of the fact that “S Corp” shareholders have the benefit of lobbying from a powerful lobbying association – S-Corp. The interview ended with Monte Silver describing the probability that the Sec. 965 transition tax issue is headed to the courts.

But, in the “Pay To Play Casino” that America has become:

"All animals are equal, but some animals are more equal…" https://t.co/vPJyQeuOlW via @BrainyQuote

— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) November 17, 2018

Why are individuals who are the shareholders of an S corporation, which owns the shares of a CFC, more equal than those individual shareholders who own the shares of a CFC directly?

Let’s see …

Purpose of this post …

The purpose of this post is to explore the following issues/questions:

1. What exactly is an S Corporation?

2. How the requirements of an S Corporation reflect that that S Corps are the “small business corps” of America

3. How the S Corporation is taxed and why that taxation is consistent with the S Corporation as an entity for small business

4. An interesting history of the S Corporation

5. Why most Americans abroad are like most small business owners in America (and presumably should have similar tax treatment)

6. How the S-Corp association lobbying in DC has likely resulted in favourable “transition tax” treatment for S-Corps

7. The argument that – with respect to the “transition tax” that Americans abroad with small businesses should be treated the same way as shareholders of U.S. S-Corps

8. Should Americans abroad who don’t renounce U.S. citizenship consider using U.S. Corps to own and operate their businesses abroad?

John Richardson