•  
  •  
 

Abstract

In the wake of September 11, 2001, several influential lawmakers have sought to pass tax legislation that would reduce the tax benefits that may result from an American citizen expatriating to a foreign nation. According to these congressional critics, certain wealthy American citizens are willing to relinquish their United States citizenship to save taxes (“tax expatriates”). The last major attempt to prevent tax expatriation was undertaken in 1995 when Internal Revenue Code (“I.R.C.”) § 877 was enacted. Several congressional critics have charged that I.R.C. § 877 is being easily circumvented by tax expatriates and their advisors. To stem the tide of tax expatriation, the Senate Finance Committee has added certain tax provisions to the Foreign and Armed Services Tax Fairness Act (Draft Fast Act) that would bolster the provisions existing under I.R.C. § 877. Under the Draft Fast Act, two of the ways tax expatriates would be punished are by: (1) treating all of the tax expatriate’s holdings as if they had been sold the day before expatriation, thereby triggering all inherent capital gains on the holdings and (2) requiring that estate taxes due from the death of a tax expatriate be collected against a domestic heir of the tax expatriate, rather than the tax expatriate’s estate. Currently, the Draft Fast Act is awaiting a floor vote in the Senate. As such, the time is ripe to analyze the Draft Fast Act and determine whether it will prevent tax expatriation.

Download

Share

COinS