New & old tax traps for Green Card holders, new US persons, and those thinking of expatriating


The new proposal in tax reform that can really hurt US expats

Of concern in the current tax reform package – a one time 14% excise tax on deferred income for Controlled Foreign Corporations. The purpose of this excise tax is to end deferral that some large companies can take advantage of…but…people that live and work overseas that have their own corporation could get hit with this tax. This tax could ruin the smaller guys.


The old tax traps of the 1986 law

While we are glad that people are paying to tax reform and disputing what they think are "unfair" suggestions, there is a glaring terrible tax law already in place that we think people should be outraged about. If someone comes to US with substantial assets and becomes a US person, they are taxed from date of acquisition of their assets, not the date they become a US person. And if they expatriate after that, even if the assets declined in value, they will pay the exit tax even if their assets lost money while they were a US person. Potentially, someone could inherit a property overseas while they were not a US person, do nothing with it, but have to pay an exit tax based on the entire increase in its value even though they were only a US person for a short time.


For more on this tax trap see Anthony's updated article here.

We think the basis should be when you become a US person. So what’s the fix? Sell before you become a US person, they buy right back after. Get tax advice before becoming a US person…get tax advice before expatriating.