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Author: TravelerAtLarge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: How do you give up your US citizenship Date: 7/4/2008 12:53 PM
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and keep the shirt on your back?

When I was in the US Army we called a soldier a GI, "Government Issue". I served my time and became a civilian. I have come to realize that a civilian is Government Property too.

Here is the latest --

http://www.nypost.com/seven/07032008/business/the_feds_have_...

Traveler
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Author: fleg9bo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101249 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/4/2008 1:33 PM
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Here's what the article says at the end:

"In general, the provision imposes tax on certain US citizens who relinquish their US citizenship and certain long-term US residents who terminate their US residency. Such individuals are subject to income tax on the net unrealized gain in their property as if the property had been sold for its fair market value."
____________________________________________________________________

I can understand this since the person has benefited from the US system in order to earn the gains in the first place. Not fair to take the money and run.

But does this mean that if you pay the gains tax you will no longer be subject to ten years of taxes after relinquishing citizenship? Or will they hit you both ways?

Right now a US citizen is liable for US tax no matter where he lives up to ten years after giving up citizenship. But it might be worth it for a non-citizen to pay this tax on unrealized gains if it got you free from future tax obligations. My Canadian DW could legally move her share of our assets to an offshore no-tax jurisdiction after paying the gains tax, then join me in Costa Rica where she would owe no taxes anywhere (Canada does not tax ex-pats and CR does not tax money that comes from outside the country).

--fleg

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Author: kazuki Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101254 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/5/2008 5:55 AM
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"I can understand this since the person has benefited from the US system in order to earn the gains in the first place. Not fair to take the money and run."

I don't know, fleg... I'd question this one long and hard. Aren't my wages the fruit of my labor? Haven't I already paid federal and state income taxes from my wages, and haven't I already paid various local and property taxes? If I am lucky enough, or perhaps smart enough, to still have money for investments after I've paid these taxes, and if my circumstances force me to return to my family peat farm in Ireland, I don't get why I should have to pay taxes on that gain if I'm not a US citizen?

Sounds to me like its just a revenue grab masquerading as patriotic fervor. As a US citizen, if I buy a peat farm in Ireland, and I make some money off of it, I owe the IRS taxes on that capital gain. So if we're saying that US capital gains come with a moral obligation to pony up for the glorious system that made those gains possible, how is it that Uncle Sam can justify taking taxes from gains that were made in places that have nothing to do with the US? The IRS wants it both ways, and Americans will go along because it taxes a vulnerable population that they could care less about.

Not meaning to harp on you fleg, since it sounds like you and I are on the same side of the fence. And you are spot on about the many questions this raises: what if there is a capital loss? Someone who invested his/her hard-earned, after-tax bucks in a property in Sacramento at the height of the property bubble, and who now wishes to return to their home country. Does that person get retroactive tax breaks for incurring a capital loss on that property? What if they do not wish to return, but are simply forced by circumstance to return - do we still assume he/she owes the US some sort of debt for living here? I liked the concept of the US better when it was the Land of the Free, and not the land of, "We'll bill you for our generosity when you're ready to leave".

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101255 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/5/2008 8:39 AM
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As a US citizen, if I buy a peat farm in Ireland, and I make some money off of it, I owe the IRS taxes on that capital gain. So if we're saying that US capital gains come with a moral obligation to pony up for the glorious system that made those gains possible, how is it that Uncle Sam can justify taking taxes from gains that were made in places that have nothing to do with the US? The IRS wants it both ways, and Americans will go along because it taxes a vulnerable population that they could care less about.

Why are you blaming the IRS?

They didn't make the rule. They just have the unfortunate role of inforcing it.

From the link

"Thanks can be given to a bill that passed Congress recently and was quietly signed by President Bush two weeks ago."

I have alot of sympathy for the IRS, they can only inforce the rules they are given, but they seem to take all the heat for the rules.

Jean

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Author: AlisonWonderland Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101256 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/5/2008 9:13 AM
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Why are you blaming the IRS?

They didn't make the rule. They just have the unfortunate role of enforcing it.
. . .
I have alot of sympathy for the IRS, they can only enforce the rules they are given, but they seem to take all the heat for the rules.


Bears repeating!

~~ Alison

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Author: fleg9bo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101263 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/5/2008 2:02 PM
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Sounds to me like its just a revenue grab masquerading as patriotic fervor. As a US citizen, if I buy a peat farm in Ireland, and I make some money off of it, I owe the IRS taxes on that capital gain.

When did Congress not engage in money grabs? That's the part I find the most unfair. Many nations don't tax their citizens who live elsewhere on money earned elsewhere. If the US stopped doing that, you'd see a rush for the doors.

While I'm hardly a fan of high taxes, I think it would be fair to extract an exit tax if the person was then off the tax roles as long as he lived abroad. Income from investments held in the US would still be taxable, of course. But the double whammy of an exit tax plus continued obligations on worldwide income is beyond punitive.

--fleg

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Author: maracle Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101267 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/5/2008 6:16 PM
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Many nations don't tax their citizens who live elsewhere on money earned elsewhere. If the US stopped doing that, you'd see a rush for the doors.

I think what you'd see is a lot of creative tax shelters. In most cases foreign taxes paid are credited against the US tax liability. Usually legitimate income earned overseas is taxed by someone (and the US actually has a fairly modest income tax relative to many places)) while only those trying to avoid paying taxes through shelters and havens have to pony up to the IRS.

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Author: TravelerAtLarge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101322 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/8/2008 7:05 PM
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Interesting comments, but I think it's more than a revenue grab. I think it's "shutting the door". I think they believe they have to close the door, because either to many are leaving the country or they have reason to expect that to many will want to leave.

Traveler

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101324 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/8/2008 9:24 PM
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Interesting comments, but I think it's more than a revenue grab. I think it's "shutting the door". I think they believe they have to close the door, because either to many are leaving the country or they have reason to expect that to many will want to leave.

Traveler

________________________________________________

First of all, I don't think THAT many are leaving. I think this measure actually has a fairly narrow focus.

For one thing, the US still has taxes among the lowest in the civilized world. If you can move to another country for lower taxes, you probably won't like living there.


Also, I'm guessing it's not aimed at citizens, but rather high-income "residents" or "green-card" holders, who are treated just like citizens for almost all purposes except voting.

And I'm not thinking about Mexican farm workers; more likely doctors from India and the Phillipines, who can retire, return home, and then cash in their investments free of US taxes.

Bill

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Author: TravelerAtLarge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 101355 of 121219
Subject: Re: How do you give up your US citizenship Date: 7/9/2008 8:25 PM
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Bill < For one thing, the US still has taxes among the lowest in the civilized world. If you can move to another country for lower taxes, you probably won't like living there. >

That's not what this Traveler has discovered. Brazil is doing very well. Individual tax rates 15-27.5%. Canada also. Individual tax rates 15-29% (federal) and 4-17.95% (provincial) for a max total of 46.95%. The highest rate in a high taxed country like Denmark is 63%. In the US it's currently a max of 35% (federal) and 10.3% (state) and 7.65% (federal payroll) for a total max of 52.95%. That max will be going up, however it's not the amount of tax one pays that counts. What counts is how equitable the levy is and what is returned to the citizen who pays it. In the US it's increasingly redistribution. Also, the flat tax is spreading. In Russia, one of the early flat tax adopters, it's 13%. The US has it's variation of the flat tax that's also spreading and is called the Alternative Min. Tax. The AMT is double and more the flat tax rate of other countries and quadruple the paper work of other flat tax countries. I'm not advocating the flat tax here. My aim is tax rates. There are many countries with lower taxes than the US and the number is quickly growing. Many people in the US would find many of those countries agreeable places to live, and many are already living there and working for US companies doing business there.

Bill < First of all, I don't think THAT many are leaving. I think this measure actually has a fairly narrow focus. >

Why would they see fit to levy a tax that won't collect much because it's narrowly focused or only affects a few because not many are leaving? I think they expect that a lot of people will want to leave. If that's not the case, then it must be that many people are already leaving. Regardless of the amount of tax that will be collected, they are closing the door. It is very apparent that they are discouraging anyone with money to come in or go out.

Traveler

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