Introduction and context
I have written numerous posts about the double taxation and the Net Investment Income Tax on my citizenship solutions blog.
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On August 3, 2026 Petros wrote about how the U.S. taxation of the gains on the sale of a principal residence causes Americans abroad to do things that may be contrary to their interest. His post was about an American abroad wishing to avoid U.S. taxation on the sale of her principal residence. An August 31, 2026 ruling from the United States Court of Appeals has made the U.S. taxation of the gains on the sale of a principal residence even more of a problem.
On August 31, 2026 the United States Court of Appeals, per Judge Stark, delivered the long anticipated rulings in the Bruyea (Canada) and the Christensen (France) rulings.
Mr. Bruyea and the Christensen’s are U.S. citizens living outside the United States. As a result, this decision reflects an unusually vicious assault (even by U.S. standards) on the lives of U.S. citizens who are tax residents of another country.
This means pure double taxation on Americans abroad with non-U.S. investments
Specifically the court ruled that the U.S. tax treaties with Canada and with France (and by extension other countries) do NOT prevent the United States from subjecting Americans abroad to double taxation on their “non-U.S. source” investment income. This is accomplished by denying U.S. citizens (wherever they may live) the opportunity to use tax paid in Canada, France (or any other country) as a “foreign tax credit” to offset the 3.8% Obamacare surtax on Net Investment Income (“NIIT”). Note that the “NIIT” is designed to fund Obamacare. In general, Americans abroad cannot participate in Obamacare.
To put it simply, Judge Stark’s ruling means that:
If a U.S. citizen generates “foreign” income subject to the 3.8% “Net Investment Income Tax”,
THEN the individual must pay a 3.8% tax to the United States PLUS any tax payable to the foreign country.
This can reasonably be viewed as a 3.8% tariff on investing on non-U.S. investments!