Expatriation as an Out-of-Body ExperienceExpatriation as an Out-of-Body Experience

Most U.S. cross-border tax advisors concentrate on the income tax side of expatriation. In the year when U.S. citizenship or permanent residence is given up, a special “mark-to-market” income tax is imposed on certain “covered expatriates.” They must file Internal Revenue Service Form 8854 listing their worldwide assets and potentially pay a special exit tax on the appreciation in such assets in excess of a baseline exemption amount. This so-called “exit” tax is imposed at the highest U.S. capital gains rate, currently 23.8%. The tax has been well publicized when compared to its cousin, the U.S. inheritance tax under Internal Revenue Code Section 2801, which is far more pernicious and dreaded by well-versed tax advisors because it’s more...