International Tax Blog

A Brief History of U.S. Tax Expatriation Rules

The first tax expatriation rules were enacted in 1966. The rules were created because Congress instituted a flat 30% tax on U.S.-sourced investment income for nonresident alien individuals. At the time, the top graduated rate for individuals was 70%. Congress was concerned that high income individuals would move abroad and renounce their U.S. citizenship so that they could be taxed at a flat 30% rate on their U.S. investment income. The special expatriation rules required... Read more →

U.K. Pension Lump-Sum Distributions

Individuals that have lived in the U.K. but then move to the U.S. may have U.K. pensions. One question that arises at times is whether a lump-sum distribution from the U.K. pension is tax-free in the U.S. under the U.K.-U.S. Income Tax Treaty (the “Treaty”). Unfortunately, the distribution is not tax-free. The issue is whether Article 17(1)(b) or Article 17(2) of the Treaty applies to the distribution. If Article 17(1)(b) applies, then U.S. tax should... Read more →

7 New Tax Charts Published

Today we published 7 new situational tax charts to AndrewMitchel.com (charts listed in topical order and charts listed in alpha-numeric order). We have over 1200 charts for FREE on our website. The recently published charts include: Reg. 1.1291-1(b)(8)(iv), Example 1 (Indirect Ownership of a PFIC Partly Thru a U.S. Corp) Prop. Reg. 1.1291-1(b)(8)(iv)(B), Example 2 ("Top-Down" Approach For Ownership of a PFIC Thru Foreign Partnerships) Prop. Reg. 1.1297-1(b)(2), Example (Consolidated Group Dividends Not Excluded From... Read more →

2021 Inflation Adjustments for Individuals in the International Tax Arena

Last week the IRS published Revenue Procedure 2020-45, setting forth inflation adjusted items for 2021. In the international arena, some of the important inflation adjustments include: $172,000 --- Code § 877(a)(2)(A) --- The average annual net income tax that must be imposed for the five taxable years ending before the date of the loss of United States citizenship (or cessation of long-term permanent residency) for an individual to be considered a “covered expatriate” under Code... Read more →

IRS Delinquent International Information Return Submission Procedures Have Been Updated

Yesterday the IRS updated its web page containing the delinquent international information return submission procedures. Under the prior procedures, taxpayers were required to have a reasonable cause statement and taxpayers were required to certify that foreign entities were not engaged in tax evasion. Under the new procedures, taxpayers file through “normal filing procedures”, and taxpayers “may” attach a reasonable cause statement. The updated website says: [P]enalties may be assessed without considering the attached reasonable cause... Read more →

Famous Tax Quotes - Memory Dulled by a Penitentiary Term Served

Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is: [A witness’s testimony] was in the main a repetition of “I don’t remember”. * * * The witness’s memory may have been dulled by a penitentiary term served as the result of income tax troubles of his own which were totally unrelated to the case... Read more →

2020 Third Quarter Published Expatriates – 2020 Is Already the Highest Year Ever

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the third quarter of 2020. The number of published expatriates for the quarter was 732. The total number of names published during the 3 quarters so far this year equals 6,047. Even without including the fourth quarter, 2020 is already a record year for names published. The previous annual record was in 2016,... Read more →

Famous Tax Quotes – Fictional Corporate Camouflage

Continuing our series on Famous Tax Quotes (quotes from court opinions and rulings with language that is colorful or that concisely states an important tax principle) today's tax quote is: We cannot escape the conclusion that Rayben Limited was acting as a mere agency or instrumentality * * *. The whole transaction is not “in fact what it appears to be in form”, and what was actually done “contradicts the apparent transaction.” * * *... Read more →

88% of Expatriates Have a Net Worth of Less than $2 Million

On September 28, 2020, the Treasury Inspector General for Tax Administration (“TIGTA”) issued a report on the IRS’s Enforcement regarding expatriates. In the report, TIGTA provided a graph showing the number of the names of expatriates published in the Federal Register from 2008 to 2018. If you add up the numbers for these 11 years, the total is 30,507. Interestingly, TIGTA then indicates that the IRS has an expatriate database which includes 41,058 records from... Read more →

FBAR Reporting For Indirectly Owned Foreign Bank Accounts

For years I have been unsure how to report a foreign bank account on an individual’s FBAR (FinCEN Form 114) when the account is owned by a foreign entity and the individual owns more than 50% of the foreign entity. For example, if a US citizen individual owns 100% of a controlled foreign corporation (“CFC”), and the CFC has a foreign bank account, the US citizen individual is treated as having a financial interest in... Read more →