Academic journal article Journal of Accountancy

Congress Passes Expat Rules

Academic journal article Journal of Accountancy

Congress Passes Expat Rules

Article excerpt

Just before the Memorial Day holiday, the U.S. House and Senate passed by unanimous consent and voice vote, respectively, HR 6081, the Heroes Earnings Assistance and Relief Tax Act. The act provides benefits to military personnel, funded in part by new rules for taxing individuals who expatriate. The bill also alters the tax treatment of foreign subsidiaries of U.S. companies for employment tax purposes and increases penalties for failure to file returns. President Bush signed the bill on June 17 as Public Law no. 110-245 (http://frwebgate.access.gpo.gov/cgi-bin/ getdoc.cgi?dbname=110_cong_public_laws&docid=f:pub1245.110).

The legislation imposes a mark-to-market regime for taxing unrealized gain of U.S. citizens and long-term U.S. residents (defined at IRC [section] 877(e)(2)) who expatriate. Most property of a covered expatriate would be treated as sold on the day before the expatriation at fair market value. Gains in excess of $600,000--adjusted for inflation after 2008--would be includible in income and taxed. Also, a gift tax is imposed on U.S. citizens or residents who receive qualifying gifts or bequests exceeding $12,000 (indexed for inflation) from a covered expatriate (or an individual who immediately before death was a covered expatriate). In addition, the act imposes a 30% withholding tax on qualifying deferred compensation payments as well as distributions from certain nongrantor trusts that are paid to a covered expatriate. The withholding tax is imposed in lieu of a mark-to-market tax on such assets.

The provisions generally apply to individuals who expatriate on or after the date of enactment. The withholding approach included in the legislation with respect to deferred compensation and nongrantor trusts was suggested by the AICPA. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.