Form 8854 Exit Tax Calculations and Reporting: Minimizing the IRC 877A Expatriation Tax

Determining Covered Expatriates, Navigating the Mark-to-Market Tax on Unrealized Gains, Reporting Elections

Recording of a 110-minute CPE webinar with Q&A

Conducted on Thursday, October 26, 2017

Recorded event now available

or call 1-800-926-7926
Course Materials

This course will provide tax advisers and compliance professionals with a practical guide to the calculations and reporting requirements needed for U.S. taxpayers and exiting green card holders. The panel will discuss the rules of Section 877A, as well as strategies for minimizing the impact of expatriation taxes. The panel will also address the complexities of Form 8854.

Description

The number of U.S. citizens expatriating from the United States has increased by an annual rate of 20% over the past several years. As part of Treasury’s effort to eliminate tax avoidance through expatriation, Congress passed Section 877A, which imposes various taxes on U.S. taxpayers who renounce their citizenship or a long-held green card.

Section 877A creates an exit tax regime for certain U.S. taxpayers who renounce their citizenship, have intentionally relinquished their U.S. citizenship when they become naturalized citizens of another country, or surrender a green card that has been held for more than seven years and whose income or net worth exceed certain thresholds. The exit tax rules also apply to expatriates who fail to certify U.S. income tax compliance for the five years preceding the year of expatriation.

Taxpayers subject to the exit tax must file IRS Form 8854 Initial and Annual Expatriation Statement. This is a detailed and complex form that requires taxpayers to declare a balance sheet reflecting U.S. property owned at the time of exit. The exit tax reporting form is a multi-year filing obligation. Late or incorrect filing of Form 8854 carries a steep $10,000 penalty. Tax advisers need to know the form requirements to avoid expensive tax consequences.

Listen as our experienced panel provides a comprehensive and practical guide to navigating the exit tax regime and completing Form 8854 for U.S. citizens planning expatriation.

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Outline

  1. Exit tax provisions of Section 877A
  2. Who is a covered expatriate?
    1. The 3 tests
    2. The exceptions
    3. Determining net worth when trust assets are involved
  3. Components of Form 8854
    1. Reporting expatriating acts
    2. Part III—prior year mark-to-market calculations prior year deferrals
    3. Part IV—current year expatriation
      1. Net worth and tax liability
      2. Property owned on date of expatriation
      3. Eligible and ineligible deferred compensation items
      4. Tax-deferred accounts
      5. Trust interests and elections
      6. Mark-to-market calculations
    4. Part V—balance sheet and income statement
  4. The inheritance tax under Section 2801
  5. Pre-exit planning strategies

Benefits

The panel will review these and other key issues:

  • Which taxpayers are subject to section 877A and must file Form 8854
  • How to calculate the mark-to-market tax on capital gains
  • The types of deferred compensation that are subject to the exit tax
  • How to defer exit tax payments
  • Strategies for avoiding or minimizing the taxes imposed under Section 877A

Faculty

Hodgen, Philip
Philip D. W. Hodgen
Attorney
Hodgen Law

Mr. Hodgen specializes in the international tax arena. He counsels clients on international tax issues arising when...  |  Read More

Seller, Ann
Ann M. Seller
Kohnen & Patton

Ms. Seller's work focuses primarily in estate planning and probate administration. As part of her practice, she...  |  Read More

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