Tax Planning Issues for U.S. Expatriation: Minimizing the IRC 877A Exit Tax

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

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Wednesday, June 7, 2017
Recorded event now available


This CLE/CPE webinar will provide attendees with a comprehensive look at Section 877A, as well as strategies for minimizing the impact of expatriation taxes.

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.

Understanding the expatriation rules contained in Section 877A is critical for lawyers and tax advisors who counsel U.S. taxpayers with cross-border ties.

Section 877A creates an exit tax regime for certain U.S. taxpayers who renounce their citizenship, have intentionally relinquished their US 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.

The exit tax regime under Section 877A imposes an accelerated tax on unrealized capital gains and certain types of deferred compensation. The exit tax rules also imposes harsh gift and estate taxes on U.S. heirs of those affected by the law.

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

Outline

  1. Who is a Covered Expatriate?
    1. The 3 tests
    2. The exceptions
    3. Determining net worth when trust assets are involved
  2. The taxes applicable to a CE under Section 877A
  3. The inheritance tax under Section 2801
  4. Planning
    1. Getting below $2M in net worth

Benefits

The panel will review these and other key issues:

  • Who is affected by Section 877A?
  • How to calculate the mark-to-market tax on capital gains?
  • What types of deferred compensation are subject to the exit tax?
  • The effect of the expatriation rules on U.S. gift and estate taxes.
  • Strategies for avoiding or minimizing the taxes imposed under Section 877A.

Learning Objectives

After completing this course, you will be able to:

  • Identify individuals who qualify as “covered expatriates” subject to the exit tax regime of IRC 877A
  • Recognize assets, including deferred compensation, that are subject to withholding requirements on exit
  • Decide on pre-renunciation strategies to minimize the net impact of the exit tax on an expatriating client
  • Determine the filing requirements to expatriate
  • Discern circumstances under which a green card holder would be subject to exit tax

Faculty

Shannon P. McNulty, J.D., LL.M. (Taxation), CFP®
Law Office of Shannon P. McNulty, New York

Ms. McNulty is an estate planning lawyer in New York City. She works with clients to implement strategies for preserving their wealth, protecting their loved ones, and preparing for the eventual transfer of their assets. Shannon regularly counsels clients on the unique tax and estate planning issues that arise in the international context.

Michael J. Stegman
Kohnen & Patton, Cincinnati

Mr. Stegman's particular areas of focus include protecting assets from the claims of descendants’ creditors and divorcing spouses, preserving special assets, reducing or eliminating wealth transfer taxes on a multi-generational basis, using asset protection trusts, and advising on the ramifications of the clients' or decendants' dual nationality, marriage to a foreign person, residence abroad, and holding of foreign assets. He regularly represents nationals who reside in the U.S. or who have investment property here. He works with professionals in foreign jurisdictions to develop plans that respect both laws. He is familiar with the international treaties that pertain to practice in this area. 

Ann M. Seller
Kohnen & Patton, Cincinnati

Ms. Seller's work focuses primarily in estate planning and probate administration. As part of her practice, she concentrates on international aspects of estate planning including the creation of wills and trusts for multi-national families, estate and gift tax issues that arise with the ownership of cross border property, and advising clients about the U.S. Expatriation Tax. 

Stephen Flott, Principal
Flott & Co., Arlington, Va.

Mr. Flott advises businesses, individuals and non-profits on a wide range of international business and tax matters, including U.S. taxation of international business and transportation, of U.S. citizens residing overseas, of foreign estates with U.S. property, and of foreign persons and companies with U.S. income or property. He also assists clients with U.S. regulation of international shipping, trucking, bus and freight forwarding operations. He also focuses on U.S. citizenship issues, including expatriation and associated tax issues, and the special compliance challenges associated with long term non-filing of U.S. tax returns and financial reports by U.S. citizens who reside overseas.


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Tax Partner

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Edward Froelich

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J. Leigh Griffith

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BakerHostetler

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Arent Fox

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