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
Gone Soon
I wonder if the IRS might be wanting you to file the trust forms for the account on the usual gameplaying type of suspicion that if your NRA son could have a claim to US citizenship, he could turn 18, take his money from the fund, and then apply for US citizenship, thus (rightly, of course, but they won’t see it that way) denying the IRS a whack.
Just a thought. Doesn’t matter since you’re renouncing. But perhaps a good reason not to discuss the issue with them.
“The IRS can’t seize “foreign” assets. They would have to ask the local tax agency for assistance in collection. Which the CRA might indeed agree to do.”
A distintion of no difference.
“Just a note re Swiss banks, they are now very anti non resident accounts of any Nationality. I have a British friend who owns a ski apartment here and she has to prove she declares the account to HMRC. She also has to pay much larger bank charges.”
Yep, soon to visit us all.
@Patrick
Just emailed the bundle to Embassy London — all except CRBA which I don’t have but included my British birth certificate and my parents’ US ones & their marriage certificate — just what would be needed for the consul to have issued a CRBA in the first place.
Feeling a little better already. I told them my reason is that I want to run for public office and be free to do financial planning. Both true, and avoids the tax issue. (I didn’t have to say anything, and won’t talk more than I have to at any appointment, but these are safe, maybe disarming, reasons if the consular officer is negative or hostile.)
A distinction with a major difference: if the IRS could seize non-US assets they wouldn’t hesitate to do so, regardless of whether the person had citizenship in the country where the assets were located.
@Japan T: They could seize my Roth IRA, not a great deal of money objectively but a lot for me.
@Heidi: It’s exactly what I don’t want to do — I don’t plan to mention either Switzerland or child. Although the legal presumption is that he’s an alien https://openjurist.org/661/f2d/814/corona-palomera-v-immigration-and-naturalization-service-corona-cruz (paragraph 9) I don’t want to be put to any proof that I never spent 365 uninterrupted days in the USA, ever. How could I do that? At least one of the British schools I went to has shut down. He doesn’t need proof of anything except that he is British and Swiss. The issue is that my family wants put money in his disability trust and the IRS seems to want a piece of it. Fortunately the 2017 income of the trust was only $8. They threatened a $10,000 fine if I didn’t do certain things I don’t understand. And ditto over a JISA he has. A CLN should make the IRS go away. No more FBARs, no more exotic tax forms not intended to be filled out by anyone except an expensive CPA.
@GoneSoon
You are not required to give a reason. I had mine all typed up but when I handed it to the Consul she said she didn’t need it, they pretty much knew why so many were renouncing!
I insisted anyway as I wanted something documented.
I don’t think you will meet any hostility, most reports now are postive, efficient and professional.
@Plaxy wrote: “he could turn 18, take his money from the fund”
IRS Ogden has categorised the trust as a Special Needs Trust, so they know it’s a discretionary one (they have a copy of it anyway). The difference is that in the USA Medicare/Medicaid can get reimbursement from a SNT at death. In the UK the trust isn’t counted for means testing either but there is no reimbursement. The NHS is free,
The other kind of English trust is an “interest in possession trust”. Kessler, the treatise writer and QC, doesn’t recommend that. Third-party SNTs are generally discretionary ones too.
@Plaxy:
The only power he has is a power of appointment by will to any family member, as defined in the trust. I.e. to his children if he has any, otherwise to collateral relatives, This is quite normal with SNTs if the beneficiary is compos mentis.
@GoneSoon
I am not au fait with the way trusts are handled but I would assume if there was any US person connected in any way with the management, contribution or signature authority over it, the IRS would want their pound of flesh. Can it be completely American free?
Gone Soon – I was only musing about how the IRS hive mind works. Not important since you’re renouncing. Good that you’ve written to London – let’s hope they’ll see you quickly and you’ll soon be free.
@Heidi:
I’ve done even more research into trusts than I have into renunciation. There are 3 parties in a third-party SNT: settlor, trustee, beneficiary(ies). They are used for disabled children (a qualified disability trust is for seriously disabled within the meaning the SSDI, my son is not that, he’s autistic. Depending how the trust is written, the grantor (settlor — person putting up the money — usually but it could be anyone with certain powers) can be taxed. A “grantor trust” or an “intentionally defective grantor trust” is deliberately taxed to the donor. Since the donor is still a US citizen we don’t want that. I think the key is here: https://www.law.cornell.edu/uscode/text/26/674 (Power to control beneficial enjoyment) and whether I am a “non-adverse party” so my discretionary power is attributable to those putting up the money. I don’t think that can happen with a SNT. And neither the trustee (me) or the beneficiary (my child) will be a US Person. One problem is that English trusts are modelled differently from the U.S. kind. As for JISAs, which only some people think are trusts (they are a form of Uniform Gifts to Minors Act fund, and PFIC could be an issue) there’s only me as guardian and my child as owner, so the IRS can whistle. No more FBARs.
This is what Embassy London says about timing:
“Appointments are scheduled approximately one month in advance, on a first come, first served basis. Please request an appointment only if you are able to attend.
“On the day of your appointment, you will meet with a Consular Officer and be given another opportunity to review the Statement of Understanding prior to taking the Oath of Renunciation or signing the DS-4079 questionnaire. Your completed packet will be returned to the Department of State for review and approval. If approved, the date of expatriation will be determined based on individual circumstances. In straightforward renunciation cases the Certificate of Loss of Nationality will be the date the Oath of Renunciation was administered. It is important to note that this process may take several months to complete.”
So the CLN is retroactive and once there is an Oath I am essentially free. Or so I think.
“So the CLN is retroactive and once there is an Oath I am essentially free. Or so I think.”
Yes you are effectively free once you’ve sworn; but not documented as free until you get the CLN. The payment receipt can be used to show you’ve renounced, or if you ask the Embassy staff, they’ll probably agree to give you a letter confirming that you’ve sworn thr oath.
My point about it being a distinction of no difference is that if it seized, whether it is the IRS or a local entity seizing it on behalf of the IRS, same result. You are out of your money.
Yes I know what you’re saying; you’re mistaken.
1. The IRS can’t seize non-US assets, regardless of whether the owner is a citizen of the country where the assets are located.
2. The IRS may be able to ask the tax agency of the country where the assets are located to assist in the collection of a properly assessed US tax liability (using the collection methods that are available in that country – not the US habit of pre-emptive seizure),
provided:
(a) there is a treaty agreement to that effect, and
(b) the sum is not FBAR penalties, and
(c) the person is not a citizen.
Quite a high level of protection from IRS confiscation – rightly.
@Plaxy
It is true that cross-border tax collection of the ordinary sort requires a treaty provision and assistance from the other country’s tax authority. But extraordinary cases of tax fraud, especially when recharacterised as money-laundering; or excise tax or VAT fraud; or tobacco, alcohol, arms and drug smuggling (to Canada, say, perhaps through a tribal reserve) has been enforced in various ways. HMRC can enforce its tax claims by making a (non-)taxpayer bankrupt, and the U.S. Bankruptcy Court might admit a Chapter 15 ancillary case. Here’s a Florida case enforcing a British tax claim for restitution in a criminal VAT evasion case: http://www.uniset.ca/lloydata/553So2d1344.txt
Gone Soon – yes, I agree tax fraud is a different kettle of fish.
Well hells bells, not hard to drum up tax fraud charges. What proof is required of the taxing authority of another nation? Doubt very much that one nation would suspect another’s tax court (leaving out a few known rogue states and dictatorships) of the type od shenanigans the IRS is pulling.
“not hard to drum up tax fraud charges”
Quite hard, in many countries. Not hard in America, I daresay.
“What proof is required of the taxing authority of another nation? Doubt very much that one nation would suspect another’s tax court (leaving out a few known rogue states and dictatorships) of the type od shenanigans the IRS is pulling.”
The requested authority doesn’t get involved in suspicions and speculations about the assessment. Unfortunately, expat USCs without citizenship of their residence country may have little protection from collection, if a significant liability has been assessed.
Gone Soon:
“A “grantor trust” or an “intentionally defective grantor trust” is deliberately taxed to the donor. Since the donor is still a US citizen we don’t want that”
Just wondering – might the FATCA provisions quoted at http://gswlaw.com/irs-offshore-trusts-fatca/ come into play? Out of my depth, but I mention it in case it’s relevant.
@Plaxy,
A SNT would not normally give rights to the grantor/settlor so no. There is only one bene. We are developing arguments for IRS Ogden but basically renunciation ends any real jurisdiction. Could also end my child’s chance to visit Calif. Disneyland but as he speaks French there is always Paris. I decided to spend the SNT down to zero before renunciation (prepay school fees). Then have it replenished subsequently via a non-U.S. relative. I spent an hour this afternoon before going to Costco filling out a dummy form 8854. I don’t know why I should have to give a balance sheet (I’m way under $2 mn, my only asset is my flat I’m trying to rent out) when I’m exempt as I was born here & have always lived here & am a citizen of here from day zero. BTW my grandmother had an “intetionally defective grantor trust” with the proceeds from sale of her home when she went into assisted living—which is why I know what they are. Estate planning.
Gone Soon:
“ I don’t know why I should have to give a balance sheet (I’m way under $2 mn, my only asset is my flat I’m trying to rent out) when I’m exempt as I was born here & have always lived here & am a citizen.”
You’re not the first to wonder that. 🙂
But personally I think it’s probably to give the US an opportunity to see if the sums you put down on the 8854 are consistent with what you reported while still subject to US taxation. 🙂
I’m glad those FATCA provisions don’t apply.
@Plaxo:
5 year tax history:
2013 0
2014 0
2015 0
2016 0
2017 798 (from a week’s project in the USA)
Gone Soon –
I don’t mean your US tax liability, but the values you list for any assets. But it’s not likely to cause you a problem – I was just commenting that IMO that’s probably why the statute requires exempt duals to list their assets – in case they can get a quick fine or three before the exemptee escapes beyond their reach.
Gone Soon. or Born Free
You could write ‘not applicable ‘ across the balance sheet with the words ‘ dual citizen from birth exception’. If you wanred to. Anything to make your life easier. OTOH you might not want any potential grief.