Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two
Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part One
Calgary. That theory doesn’t much matter to most of us. Remember there are huge estates ( in the millions and billions) that interest the IRS and tiny estates ( most of us) that don’t interest them.
There would have to be a demonstrable tax owing by the decedent.
The vast majority of Brockers can worry about something else if they need to find something to worry about.
From Moodys Gartner Blog: “US citizenship renunciation could mean a steep inheritance tax”
For some this will mean nothing. For others, what will it mean?
@calgary411
Interesting. I’d also never seen their “Renunciation Knowledge Portal” before. I find their list of pros and cons somewhat amusing (despite my alias ;-)). My comments below are in italics.
CONS
Potential restrictions on travel to the US if you do not renounce properly.
Actual restrictions might be a con for some, but potential restrictions like the Reed amendment aren’t likely to deter anyone. Also, how do you renounce “improperly”? I’ve never heard of it.
Loss of US Consular Services.
Really? What US consular services could anyone who is no longer a US citizen possibly need. I think most will be quite thankful that they no longer required such “services”.
Publication of your name in the Federal Registrar as an individual who has lost their US citizenship.
Shouldn’t that be on the list of pros instead? In any case, not everyone’s name gets published. Mine never was.
Loss of privileges US citizens are afforded, such as protection abroad if travelling to unstable areas, the ability to vote in US elections and, in some situations, access to the US job market.
Seriously? My (non-US) country provides much better protection when traveling to unstable areas than the USA ever would. Why should anyone care about voting in US elections if they live abroad and have no representation in the USA? It’s much better to gain the ability to vote in elections where one lives! If one lives abroad why should they care about the US job market?
PROS
Elimination of:
US citizen-based taxation, reporting, and filing obligations.
The US citizen-based gift tax regime during life and estate tax regime at death.
Potential double taxation in life, as you will no longer be taxed as a US citizen on your worldwide income.
There are many, many other pros not included here…
Sorry about the bold text, formatting error…
notamused,
I agree that their Con’s might only be a concern for *Homelanders Abroad*. When we are finally listed on the Federal Register to be named and shamed, some of us had a bit of closure that our efforts to renounce / relinquish were actually recognized. (From other recent comments, it is significant that it is now stated this list is NOT just that of *Covered Expatriates*.) We won’t give those CONs another thought, but those who plan to go back as that is their only *home* will likely feel differently than I or you.
I’ll have to read this more carefully to see if there is any clue for what happens to the inheritance I (as a person who has renounced and has a CLN but who still has a relationship with a US-deemed US citizen non-compliant with US tax and reporting son who cannot renounce that status because of *lack of requisite mental capacity*) means for my children after I am gone and my *estate* is passed on to them. It feels to me that my family will not be protected from this absurdity and injustice until CBT is replaced by RBT. The procedure to pass my assets to my children may not allow anything but more of the same.
Calgary, these proposed regulations have been on the books for a long time, Now they are proposing to enforce them but they will have trouble doing so. It doesn’t affect you for 2 reasons. You are as protected as can be.
You are not a covered expatriate and your son doesn’t live in the US. They have no possible way to attack your son. You can continue not doing what you already are not doing.
I don’t know if there is a more relevant thread where this should be posted. A friend who lives in the U.S. is being chased for an overpayment made to her by the U.S. government as a result of summer employment 11 years ago. This is the third “error” they’ve found and demanded she repay. She posted a on Facebook to an even more bizarre story of the U.S. government pursuing an even older date. And we’re not talking big bucks here in either case. It may not be so safe to assume they aren’t interested in the small fish after all or that any statute of limitations may apply.
http://www.nbcchicago.com/investigations/us-treasury-irs-statute-limitations-tax-grab-208436421.html
About inheritance tax for renunciants- it is appalling that the US just wont let go. One renounces, one becomes a citizen of another country so one should then be considered french or german or dutch or whatever – and they still demand another tax grab should one leave something to a US citizen within America. It makes no sense really- if one has renounced then one should then be a foreign citizen in all definitions of the term. Any other german could leave inheritance to some America without huge deductions claimed by the US treasury. So- one renounces but never stops having those strings attached. It just sounds beyond the general rule of law which applies to any other foreign citizen. All of this is so unfair.
@Polly
Yes, it’s absolutely repugnant. Many people (but far less than in the past) still have much too good an opinion of the USA. People are often astonished when I tell them what the USA does to its expatriates. Having said that, however, I think the inheritance tax only applies to so called “covered expatriates”.
@notamused
“only applies to “covered expatriates””
That makes it all the worse. Poor people dont have much to leave. Imagine all that hard earned money ( and yes- we all have to remember that many wealthy people made that money by working their asses off) is snatched up by a government that is no longer the dead person`s government. Repugnant is the right word for it. Slaves for life. Even the black slaves 2 centuries ago could flee to Canada and be free. Now the slavery is global, eternal…. beyond the grave even.
@Barbara….I am a little late to the fray but here are my two cents…(your choice of currency).
On the 8854, just as PortlandPLC says….KISS. Keep it simple…..you owe no tax and have few assets.
You talk about renouncing after you gain local citizenship.
First, take a look at your ancestors possibly up to great grandparent and see if you have an entitlement toi application somewhere? You could be Italian, Polish, Irish, German………
I would stop talking Renouncing and start thinking Relinquishing. The price is the same but public perception is different. You do not know what the future may bring and the land of nuts and fruits could come up with a law against renouncers versus relinquishers.
@George: Thanks for the two cents. I can use it. I can’t relinquish for sure. I’ve voted in every US election, gotten federally-back students loans for my kids years ago. It’s renounce or nothing for me. Believe me, I’ve looked into every ancestry I can find for me and the Hubby, and even spent some money on an immigration lawyer in an unnamed European country, who truly did his best for us, but we couldn’t squeeze around some of the requirements. Checked out countries where we could possibly even move to for half the year, yet in every one of our choices, we are past the age where any sort of immigrant visa is available. So we’re staying put, and will begin the long procedure of naturalization, followed by US renunciation, within this month, after getting some financial things in order.
Which brings up a question about the 8854, Part IV, Line 2: “Enter your net worth on the date of your expatriation for tax purposes”
Two questions: first, what is “net worth for tax purposes”? Is that the same as plain old “net worth” without the extra three words?
Second: How to calculate property in the sum for net worth? For example–we own our house, there is no mortgage on it anymore. We paid around $250,000 for it, spent another $50,000 on necessary structural renovations before moving in (still have the receipts), and paid out perhaps $10,000 in interest during the brief time we had the mortgage. Total cost = $310,000. Its so-called market value today is probably around $600,000. Speaking of the property only, is our “net worth” $600,000 because that’s how much money we’d have in the bank if we sold it today? Or is our “net worth” $290,000 because that’s the gain on our initial investment? I don’t see any guidance in the miserable IRS instructions. It makes no difference as to whether we are covered expatriates (we aren’t), but I don’t want to give the bastards any reason to catch (and fine) us over an error.
@George, I’ve often wondered if the U.S. may eventually introduce a new punishment tax on U.S.-sourced inheritances left by U.S. citizens to former citizens. I wouldn’t put it past the U.S. Govt to find a way to seize a sizeable portion of anything left to me by my parents, for instance. They seem to want to deter people.
My understanding is that some states already have their own death taxes whereby their person receiving an inheritance also pays an extra tax upon receipt of the legacy money, even though that estate would have already been subject to estate taxes.
Form 8854 is to determine whether or not a person is a *covered expatriate*. https://www.irs.gov/pub/irs-pdf/i8854.pdf
A formal assessment is not necessary. I used for my 8854 the City of Calgary property assessment for the end of the year prior (since that comes out once a year, at the end of the year).
@Barbara “So we’re staying put, and will begin the long procedure of naturalization, followed by US renunciation….”
Are you clear that when you naturalize with the intent to lose U.S. citizenship, by naturalizing you have automatically relinquished?
There is no need at that point to renounce…. you’re proposing to take an extra step to lose a citizenship you have already lost. Following naturalization with intent, you can document that automatic relinquishment with State and get your CLN.
George has a point: “You do not know what the future may bring and the land of nuts and fruits could come up with a law against renouncers versus relinquishers.”
Barbara. They don’t make it easy. If you are not a covered expat, you can probably do it yourself. The goal is to get your net worth under US$ 2 mill.
The instructions for 8854 tell you to use the balance sheet in Part IV schedule A to arrive at your net worth. The house isn’t too bad. As calgary did you can use the municipal evaluation if that is to your advantage. If your spouse is non American, put your share-which could be anywhere from 0 to 100%.
Any mortgage goes at the bottom under liabilities.
The hard part is line 6 and 7- pensions. If they are defined benefit, I defy any normal person to arrive at the present value of a stream of future pension earnings unless they have actuarial experience. Actuaries charge a lot.
RRSPs are another case. The present value is the market value. RRIFs are the same unless they have an annuity ( see above). Who knows what to do with government pensions such as CPP and OAP?
There is a tiny paragraph hidden in the instructions for part V ,schedule A -balance sheet- on page 8. This should make it easier.
You can use good faith estimates of fair market value and basis. Formal appraisals are not required.
If you are under the magic US$2 mill., you probably only need to fill in column a of part V. Good luck.
@Barbara…..”We will apply for local citizenship and then renounce the US. Looking for advice.”
Time out……George blows whistle……………….
You have too many plates up in the air spinning right now……………….
It does not matter all that you did in the past….voting….student loans….singing star spangled banner at baseball game eating a hot dog.
Once you apply for “local citizenship” then and only then must you stop acting like an American.
After you take the Oath of Citizenship in __________ , you have relinquished under US Code.
Its done…..finished……….as of that date.
As long as you do not act like an American from that date forward it counts as a relinquishment.
Whilst I have nothing against renouncing, the act of relinquishing does sound better from a homelander perspective so might as well get that just in case they pass some new screwball rule.
See how confusing this stuff can be even when it directly affects us? We can’t ever expect the majority of homelanders to begin to even understand. Better to pass/change laws to improve the lives of American abroad without their knowing it. They wouldn’t even know the difference, and think is was that way all along.
@Bubblebustin
The founders of the U.S. took the easy way out. They did it with armed revolution.
@ Shovel RE @Bubblebustin “The founders of the U.S. took the easy way out. They did it with armed revolution.”
Good (and dark humorous) point; we just have to keep in mind that so many of those founders died in the process (YIKES).
No kidding!
Re defined benefit pension Present Value, this was a valuable comment from LM, information from her knowledgeable-on-this-subject husband: http://isaacbrocksociety.ca/renunciation/comment-page-174/#comment-5936899
I don’t know about OAP, but would probably be the same — Government of Canada CPP and OAS were not included in my 8854.
I am new to the Isaac Brock blog. I have read that starting nov 9th/2015 the U.S. will begin charging $2, 350 U.S. Dollars to relinquish citizenship. I have not been able to determine if the charge is related to the processing date and if relinguishment requires my in-person confirmation before the consular general. If this is the case, then it is already too late to get an appointment or be processed before the fee takes effect. However, My impression is that I need only courier my written statement of relinquishment along with a completed form 4079 to the consular general this week (nov 1-5/2015) if I wish to avoid the fee. I understand that it would still need to be forwarded for “approval” and later be issued a CLN if so approved. Can anyone confirm what the truth is? Do I still have this week to avoid the fee? If so, what are the complete steps you would recommend I take.
thanks in advance for your replies
Giles
Welcome to Isaac Brock Society, Giles. It is unlikely you will be able to get an appointment in time, but you might check with the US Consulates (Canada) below or in other countries to see if, by some chance, a cancellation comes up that you could take advantage of. See below, *Step Three: Go to the Embassy or Consulate Where You Scheduled Your Appointment* — unfortunately cannot be done by mail.
From the US Embassy in Ottawa, the process for expatriation of US citizenship / renunciation or claim to relinquishment both US$2,350 effective November 9, 2015.
http://canada.usembassy.gov/service/loss-of-nationality.html
Also see: See post and comments at http://isaacbrocksociety.ca/2015/09/06/state-department-extends-us2350-citizenship-renunciation-fee-to-relinquishers/
@Shovel & George: Are you clear that when you naturalize with the intent to lose U.S. citizenship, by naturalizing you have automatically relinquished?
Unfortunately, “act like you’ve relinquished and don’t bother paying for U.S. documentation” has never been an option for those of in Asia like Barbara or myself. Nearly all countries here disallow dual citizenship for immigrants, and demand that naturalisation applicants get documents from their previous country’s government proving loss of that citizenship, either within a year after naturalisation (Japan, S. Korea), after approval-in-principle but before the naturalisation ceremony (Hong Kong, Singapore, and IIRC Malaysia), or before you even apply (Taiwan).