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
@Medea Fleecestealer, @ALL
“….. As mentioned he could look at gifting some of his wealth/assets to bring them below the covered expat thresholds.”
Then after all the filing is done, the person whom he gifted his assets to could gift them back to him. 😉
IRS routinedly applies penalties to people, including those who are now non-US, why do you think they have filing penalties? They don’t care if you’re now a non-citizen, if they apply them they’re due until you cough up.
Don’t know if this got passed into law or not, but worth reading re gifts from covered expats.
https://www.taxesforexpats.com/articles/family-matters/regulations-on-gifts-from-a-covered-expatriate-may-be-changing.html
“IRS routinedly applies penalties to people, including those who are now non-US, why do you think they have filing penalties? They don’t care if you’re now a non-citizen, if they apply them they’re due until you cough up.”
Oh but they do care if you’re a non-citizen. Why do you think they pretend you’ve liquidated your worldwide assets the day before R-day?
The IRS is well aware of the limitations of its powers of enforcement.
@patrick
With that sort of money in play, your friend may be advised to seek different advice than we here are likely to offer. Though our perspectives are no doubt valuable ones!
@patrick
5,000,000 seems incredibly high.
Are you sure he has done his sums correctly!
Exit tax at the moment is 15% of any unrealised gains. To owe 5,000,000 would mean he would have 33. 3 million in unrealized (untaxed gains). His net worth is not taxed, just any untaxed gains above $ 650,000.
If this is really so he should see Hodgen or certainly move to France for a year!
@ Medea
“Yes, it’ll probably be painful, but being a covered expat could mean he’s barred from entering the States in future should the Reed Amendment ever be effectively applied or some other law does the same thing. ”
Even if he pays up, he will still be deemed a covered expat under the reed amendment.
When it boils down to it threats and penalties have to be grounded in reality and at the moment there is no way for them to collect as long as you are a citizen of another country when the so called debt was levied.
https://isaacbrocksociety.ca/2016/11/01/dual-citizens-of-sweden-france-netherlands-denmark-canada-take-note-your-country-will-not-collect-for-the-u-s/
Heidi: “…at the moment there is no way for them to collect as long as you are a citizen of another country when the so called debt was levied.”
As long as the 8854 is not filed, and assuming the renouncer has no US assets, they can’t even assess a debt, since no taxable event (such as the fictional sale of assets) actually occurred.
It’s the filed 8854 that allows them to assess a liability as if the assets had been sold. The 8854 is where the owner of the money agrees to join in the pretence.
“since no taxable event (such as the fictional sale of assets) actually occurred.”
Boy, if that don’t sum up how outlandish this is, nothing will!!
Would be funny in other contexts, but not in this one.
@plaxy, yes I agree, but I am not sure what Patrick’s friend has told them so far on his streamline returns and 8938. They obviously know he is a man of worth and also worth scrutiny, that’s why it might be difficult to convince them of a sudden ‘move’ to France.
@patrick
Exit tax is assed on all those who have a net worth of over $2,000,000.
It is assessed at 15% on unrealized gains ONLY, after a $650,000 gain allowance.
To be TAXED $5,000,000 your friend would have to have made $33,300,000 ( +650,000) in unrealized gains.
Heidi – indeed. Best not to file the 8854 at all. To file and try to claim exemption using such a lame lie would be unwise, IMO.
But in the end Patrick’s friend will have to make his own decision, and if he has got $$millions I agree with you and Nononymous – he should hire a good tax person to advise him (not the one who sent him into streamlined).
Hire a good tax person ; check. Lay out his options; check. Be prepared to disregard the advice.
Hiring the good tax person should be done by his lawyer to maintain confidentiality.
@heidi
yes i know ,about $30M
@patrick
If he decides to go the tax attorney advice route, Phil Hodgen seems to be a good guy and deals with high net worth expats.
With that kind of money he should have had much, much better advice than some clown sending him into the streamlined program.
Sorry to repeat, but I still wonder why he can’t take French residency for around two days. It sounds like he could afford to pay Italian taxes as an Italian resident for the entire year, pay French taxes as a French resident for around two days, and not care if neither of those two countries allows a foreign tax credit for taxes paid to the other of those two countries for the period when he’s resident in both.
@Norman
In the EU one must be a resident in a country for at least 6 months to be considered a tax resident. Having said that, because there is free movement over EU borders , ie no checks, it may be that he could change his residency address to his flat in Paris, sign up to pay French taxes but continue to live in Italy. This would be a risk as if Italy realized he had been physically present there for over 6 months they could claim him as a tax resident too.
@ ps. Norman
The EU counts nights spent in a country as residence. He could fly to Paris every weekend, out on Fri back Mon am. That would give him 150 days in France. Then all he has to find would be 183-150=33days. This could be taken as a couple of two+weeks vacation and he has his 183 days French tax residency. He does not have to work there, just establish tax residency. Save all his boarding passes in case he needs proof.
I know a British Dr who does something similar to this.
To ‘move’ to France seems to me to be his safest bet.
I was born in UK and am British & US from birth; Swiss since 2014. Never married. My child was born in UK and is British from birth and Swiss since 2014. My parents lived in USA from a date 2 months after my birth until I was 34 months only but we traveled constantly: to Europe, Canada, Mexico. Of course I can’t prove that, but there is a presumption against US citizenship for a person born abroad. Child has never been declared to US authorities except on form 3520 in respect of a trust. Ongoing issue (what do the IRS know about citizenship law) and the prospect of having to file 1040s, FBARs, 5471s (no transition or GILTI tax however, all income paid to me as salary), 3520-As (if they consider me an “owner” of the SNT trust simply for being a trustee is so overwhelming (I’ve filed tax returns faithfully forever) and the fact that if exchange rate or property values changed substantially I could wind up with more than $2 mn in assets points me to renunciation. I have access to a family holiday flat in Switzerland; I am taxable in the UK but earn little, $20-25k. Embassy London proffers Form DS-4079; Embassy Bern a much simpler questionnaire https://ch.usembassy.gov/u-s-citizen-services/citizenship-services/lon/required-documents/ If I have to fill in form 4079 I intend to write that I have lived in the UK all my life (largely true), omit mention of child and not pretend I performed any expatriating act (I did work for a year for the Israeli government and got facilitated naturalisation in Switzerland). I plan to decline to answer any questions I don’t have to answer either in writing or in the consular section. (I would love to read all 360 pages of comments here but really can’t). Anything else I need to know? I have no assets in USA except a small Roth IRA.
@gonesoon
You can renounce anywhere you please if you do not wish to file 4079.
Just email the embassy in Switzerland for an appointment. Luxembourg is also a good choice and last time I heard has fast appointments available.
As a dual from birth it is difficult to claim an expatriating act. Renunciation is easier.
I think your child has little to worry about.
GoneSoon:
“If I have to fill in form 4079 I intend to write that I have lived in the UK all my life (largely true), omit mention of child”
Form 4079 is supposed to be used for relinquishing, and is not required for renouncing, yet some Consulates keep asking for it. You can decline to provide it, or choose a consulate that doesn’t ask for it.
I completely agree with you about 4079 and that nosy question that tries to get USC parents to hand over the personal details of their non-US children. Pernicious!
@gonesoon
Many here on Brock have renounced at non home Embassies just to avoid the 4079. I do not know why London persists with it for renunciation, maybe to extract more data from us!
As per the State dept, you could not have ‘infected’ your child with US citizenship as you did not live in the US for the prerequisite number of years before you were 18.
“I do not know why London persists with it for renunciation,”
My belief: they harvest the personal details of anyone who could possibly have a claim to US citizenship in order to inflate their budget demands. Grotesque vulgar new embassy buildings don’t come cheap.
I reckon that’s partly how their unsubstantiated claim of 9 million US expats emerges.
If the tax returns that Gone Soon filed faithfully forever include US Form 1040 (rather than 1040NR) for years after naturalizing in Switzerland, then Gone Soon didn’t have intention to relinquish US citizenship by naturalizing in Switzerland and therefore did not relinquish. It sounds like renunciation wouldn’t be a problem though.
It sounds like Gone Soon still lives in the UK despite naturalizing in Switzerland. If the US embassy in Switzerland refuses to make a renunciation appointment, and if the US embassy in the UK really insists on an irrelevant form, the irrelevant form isn’t really too hard.
“…the irrelevant form isn’t really too hard.”
It’s not a question of difficulty, it’s a question of rights. The non-US children of US citizens do have privacy rights, unlike their parents.