Form 8854 Exit Tax Calculations and Reporting: Minimizing the IRC 877A Expatriation Tax

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FOR LIVE PROGRAM ONLY Form 8854 Exit Tax Calculations and Reporting: Minimizing the IRC 877A Expatriation Tax THURSDAY, OCTOBER 26, 2017, 1:00-2:50 pm Eastern IMPORTANT INFORMATION FOR THE LIVE PROGRAM This program is approved for 2 CPE credit hours. To earn credit you must: Participate in the program on your own computer connection (no sharing) if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa, MasterCard, Discover. Listen on-line via your computer speakers. Respond to five prompts during the program plus a single verification code. You will have to write down only the final verification code on the attestation form, which will be emailed to registered attendees. To earn full credit, you must remain connected for the entire program. WHO TO CONTACT DURING THE LIVE EVENT For Additional Registrations: -Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Live Program: -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN.

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Form 8854 Exit Tax Calculations and Reporting Oct. 26, 2017 Philip D. W. Hodgen Hodgen Law, Pasadena, Calif. phil@hodgen.com Ann M. Seller Kohnen & Patton, Cincinnati aseller@kplaw.com

Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

I. Exit Tax Provisions of Section 877A A Quick Overview of the Income Tax Rules 5

Personal Status: Citizen or Long-Term Resident Start Paperwork Paperwork Plus Tax Citizen or Long-Term Resident Expatriation Event Expatriate Three Tests Covered Expatriate IRC 877A(g)(2) IRC 877A(g)(2) IRC 877A(g)(2) IRC 877(a)(2) IRC 877A(g)(1) 6

Something Happens: That Personal Status Ends Start Paperwork Paperwork Plus Tax Citizen or Long-Term Resident Expatriation Event Expatriate Three Tests Covered Expatriate IRC 877A(g)(2) IRC 877A(g)(2) IRC 877A(g)(2) IRC 877(a)(2) IRC 877A(g)(1) 7

Result: You are an Expatriate Start Paperwork Paperwork Plus Tax Citizen or Long-Term Resident Expatriation Event Expatriate Three Tests Covered Expatriate IRC 877A(g)(2) IRC 877A(g)(2) IRC 877A(g)(2) IRC 877(a)(2) IRC 877A(g)(1) 8

And If You Are Rich (Unless Exempt) or Bad... Start Paperwork Paperwork Plus Tax Citizen or Long-Term Resident Expatriation Event Expatriate Three Tests Covered Expatriate IRC 877A(g)(2) IRC 877A(g)(2) IRC 877A(g)(2) IRC 877(a)(2) IRC 877A(g)(1) 9

You Are a Covered Expatriate Start Paperwork Paperwork Plus Tax Citizen or Long-Term Resident Expatriation Event Expatriate Three Tests Covered Expatriate IRC 877A(g)(2) IRC 877A(g)(2) IRC 877A(g)(2) IRC 877(a)(2) IRC 877A(g)(1) 10

Income Tax at Exit: Three Special Rules Specified Tax-Deferred Accounts - (IRAs, for example). Deemed distribution (no early distribution penalty). IRC 877A(e). Deferred Compensation - ineligible taxed as a deemed present value lump sum distribution; eligible has 30% withheld from distributions. IRC 877A(d). Trust Distributions - 30% withholding on the taxable portion of the trust distributions when paid. IRC 877A(f). 11

Income Tax at Exit: Everything Else Everything Else - deemed sale; gain/loss recognized. IRC 877A(a)(1). The first $699,000 of capital gain is exempted from taxation (2017 expatriations). IRC 877A(a)(3), Rev. Proc. 2016-55, 3.33. Indexed for inflation. 12

II. COVERED EXPATRIATES Ann M. Seller Kohnen & Patton LLP aseller@kplaw.com 513-381-0656

Covered Expatriate: How do you become one? Who can become one? 1. U.S. Citizens and certain Green Card Holders a. Green Card for 8 of the previous 15 years i. Dual Resident Rule Objective Test: three prongs 1. Compliancy Test: Must be able to certify compliance with all requirements under the Internal Revenue Code for the past five years (Title 26) 2. Average Income Tax Liability over the previous 5 years : $162,000 (2017) 3. Net Worth Test: $2,000,000 Objective Test: Exceptions to the application of the financial prongs 1. Dual citizens at birth 2. Minors (age 18½) 14

Covered Expatriate: Net Worth Test Net Worth Test: $2,000,000 I. Only guidance available is Notice 97-19 1. Use gift tax valuation rule under IRC 2512 to value assets 2. Valuation of Beneficial Interest in Trusts a. Two Steps: i. First, allocate all interest in trust property to the beneficiaries 1. Facts and Circumstances 2. Intestacy rules under the Uniform Probate Code, as amended ii. Second, value the allocated interest under IRC 2512 b. Example: B s father established a Trust for the benefit of B and C. Facts: Trust income and corpus may be distributed at the trustee's discretion to either B or C - All of the interests in property owned by Trust 2 must first be allocated to either B or C - If the facts and circumstances do not indicate how to allocate the trust's property, use the rules of intestate succession (determined by reference to B's father's intestacy) in the Uniform Probate Code (UPC) - If B's father died intestate, the UPC would allocate his property equally between B and C Conclusion: B will be treated as owning half of the interests in property owned by Trust 15

III. Components of Form 8854: Overview A Quick Overview of Form 8854 16

Why Form 8854 Exists Required by IRC 6039G Different parts apply depending on your expatriation date. Filing Form 8854 is not necessary to terminate U.S. tax status as a resident alien or U.S. citizen. 17

III. Components of Form 8854: Part I Expatriating Acts (Line 5) 18

Form 8854, Part I, Line 5: Expatriation Date 19

Citizen: What Is Your Expatriation Date? 20

Citizens: How to Relinquish Nationality U.S. citizens have U.S. nationality. An expatriate is a U.S. citizen who relinquishes U.S. nationality. IRC 877A(g)(2)(A). Relinquish means doing one of six voluntary acts with the intention of relinquishing U.S. nationality. 8 U.S.C. 1481(a). Most common: renunciation. 8 U.S.C. 1481(a)(5). 21

Citizens: Expatriation Date (Renunciation) The date an individual relinquishes citizenship. IRC 877A(g)(3)(A). Expatriation date for relinquishment by renunciation is the earlier of: The date of renunciation. IRC 877A(g)(4)(A). The date the State Department issues a Certificate of Loss of Nationality. IRC 877A(g)(4)(C). 22

Citizens: Expatriation Date (Other Relinquishment) Earlier of: The date the individual furnishes a signed statement of voluntary relinquishment of United States nationality under 8 U.S.C. 1481(a)(1)-(4). IRC 877A(g)(4)(B). The date the State Department issues a Certificate of Loss of Nationality. IRC 877A(g)(4)(C). 23

Retroactive Relinquishment is a Problem Question: you file paperwork in 2017. The Certificate of Loss of Nationality is issued in 2017 and says Your U.S. nationality terminated in 1978. When did you expatriate? Answer: I think your expatriation date is 1978. Desirable: don t have to worry about IRC 877A. Logic: See prior IRC 7701(n) that explicitly said you remain a citizen until Form 8854 filed. Eliminated when IRC 877A replaced IRC 877. 24

Prior IRC 7701(n)(1) - Continued Citizenship (n) Special Rules For Determining When An Individual Is No Longer A United States Citizen Or Long-Term Resident For purposes of this chapter (1) United States Citizens An individual who would (but for this paragraph) cease to be treated as a citizen of the United States shall continue to be treated as a citizen of the United States until such individual-- (A) gives notice of an expatriating act (with the requisite intent to relinquish citizenship) to the Secretary of State, and (B) provides a statement in accordance with section 6039G (if such a statement is otherwise required). 25

Long-Term Resident: Abandon/Revoke Visa 26

Long-Term Resident Defined: IRC 877(e)(2) Status (green card) plus time: Lawful permanent resident (means someone with permanent resident status; see IRC 7701(b)(6)). In at least 8 of the 15 year period ending with the expatriation year. Six years and two days is all it takes to be a long-term resident. 27

Received Permanent Resident Status In 2010 Permanent Resident Status = Yes Number of Years Toward Long- Term Resident Status 2010 1 2011 2 2012 3 2013 4 2014 5 2015 6 2016 7 2017 8 28

Lawful Permanent Residents and Treaty Elections In computing your in 8 of the last 15 years do not count years if: you are not yet a long-term resident, and you make a valid treaty election for the entire calendar year to be a nonresident alien. IRC 877(e)(2), 877A(g)(5). 29

Permanent Resident Status Received in 2010 Permanent Resident Status = Yes Years Counted Toward Long-Term Resident Not a Long-Term Resident 2010 1 1 2011 2 2 2012 3 Treaty Election 2013 4 3 2014 5 4 2015 6 5 2016 7 6 2017 8 7 30

Long-Term Residents: Visa Status Terminated Abandoned: the individual voluntarily gives up permanent resident status. File Form I-407. Revoked: the government terminates permanent resident status by administrative or judicial proceedings. Your green card expired? You are still a permanent resident and a U.S. taxpayer. 31

Long-Term Resident: Visa Status Effective Date Abandon: the day you hand in your Form I-407. Revoke: final administrative ruling date; if you appeal to a court, a final judicial order is required. Regs. 301.7701(b)-1(b)(3). 32

Long-Term Resident: Treaty Election 33

Long-Term Resident: Treaty Election An individual shall cease to be treated as a lawful permanent resident of the United States if such individual commences to be treated as a resident of a foreign country under the provisions of a tax treaty between the United States and the foreign country, does not waive the benefits of such treaty applicable to residents of the foreign country, and notifies the Secretary of the commencement of such treatment. IRC 7701(b)(6), flush language. 34

Long-Term Resident: Treaty Election Effective Date The date you commence to be treated as a resident of the other country. Supported by your claims on Form 8833. Note that this is not necessarily January 1. 35

III. Components of Form 8854: Part III For Covered Expatriates Who Expatriated In Prior Years 37

Form 8854, Part III 38

Form 8854, Part III: Keeping Track of You Covered expatriates only. Expatriated in a previous year. One or more of: Mark-to-market capital gain tax payment is deferred. IRC 877A(b). Deferred compensation received. IRC 877A(d). Distributions from a nongrantor trust. IRC 877A(f). 39

III. Components of Form 8854: Part IV, Section A Are You a Covered Expatriate? 40

Form 8854, Part IV(A): Covered Expatriate? 41

Covered Expatriates Fail At Least One Test Start: Expatriate Title 26 Obligations OK? Yes Net Worth < $2 Million? Yes 5 year Tax Liability < $162,000? Not a Covered Expatriate Prior Five Years Tax Obligations Not Satisfied Net Worth Above $2 Million Prior Five Years Average Tax Liability > $162,000 Dual Citizen or Young Adult Exception Applies? No Exception Applies Covered Expatriate 42

Line 1: Net Income Tax Liability Test 43

Line 1: Net Income Tax Liability Test Average income tax liability for prior 5 years $162,000 (2017 expatriations). Adjusts annually for inflation. IRC 877A(g)(1)(A), 877(a)(2)(A); Rev. Proc. 2016-55, 3.32. Use the rules in IRC 38(c)(1) to compute tax liability. Notice 97-19, III, Notice 2009-85, 2(B). Foreign tax credit reduces tax liability. IRC 38(c)(1) flush language; IRC 27. No net investment income tax, no selfemployment tax, etc. 44

Net Income Tax Liability Test: MFJ Married filing jointly? Do not divide the individual s average tax liability by two. Notice 97-19, III; Notice 2009-85, 2(B). 45

Line 2: Net Worth Test 46

Line 2: Net Worth Test Net worth $2,000,000. (Not indexed for inflation). IRC 877(a)(2)(B), 877A(g)(1)(A). Measure value on the day before expatriation. Assets = if giving it away would be a taxable gift if you were a U.S. citizen, include it. Also include the value of beneficial interests in trusts. Notice 97-19, III, Notice 2009-85, 2(B). Subtract liabilities to get net worth. 47

Line 3: Dual Citizen Exception (Dual Citizenship) 48

Dual Citizen Exception: What It Is... became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country. IRC 877A(g)(1)(B)(i)(I). 49

Dual Citizen Exception: Known Unknowns Became a citizen at birth.... probably (!) means citizenship was automatically possible due to the fact of birth in the right circumstances, even if it took a while to do the paperwork to perfect citizenship status.... continues to be a citizen... probably (!) means citizenship status has been uninterrupted since birth.... taxed as a resident... of such other country is confusing. What if the country has no income tax? Is it impossible to qualify for the dual citizen exception? 50

Line 4: Dual Citizen Exception (Residence) 51

Line 4: Dual Citizen Exception (Residence)... has been a resident of the United States (as defined in section 7701(b)(1)(A)(ii)) for not more than 10 taxable years during the 15-taxable year period ending with the taxable year during which the expatriation date occurs[.] IRC 877A(g)(1)(B)(i)(II). IRC 7701(b)(1)(A)(ii) is the substantial presence test. 52

Line 5: Young Adult Exception 53

Line 5: Young Adult Exception... the individual s relinquishment of United States citizenship occurs before such individual attains age 18½... IRC 877A(g)(1)(B)(ii)(I).... the individual has been a resident of the United States (as so defined) for not more than 10 taxable years before the date of relinquishment... IRC 877A(g)(1)(B)(ii)(II). 54

Line 6: Certification Test 55

Line 6: Certification Test What It Is [S]uch individual fails to certify under penalty of perjury that he has met the requirements of this title for the 5 preceding taxable years or fails to submit such evidence of such compliance as the Secretary may require. IRC 877(a)(2)(C). This title = Title 26, United States Code. (AKA the Internal Revenue Code). 56

Line 6: Certification Test What It Means Can you certify full compliance with all Federal tax obligations if you have normal minor errors on your tax returns in the five-year period? Or does the certification test only cause you to fail if you have major compliance failures? I do not have an answer. Nor does the IRS (yet). 57

Line 6: Certification Test What I Think If the IRS published a form for it (e.g., Form 8621, Form 3520) and you didn t file that form, that s a major failure that will cause you to fail the certification test. Fix it. If you did something and the noncompliance penalty is large or creates an open statute of limitations, that s a major failure. Fix it. Small mistakes? Disallowed deductions? It might be OK, but who knows? Why not be bulletproof? Why rely on the kindness of strangers? 58

III. Components of Form 8854: Part IV, Section B For Covered Expatriates Only: What s Taxed, and How Much 59

Form 8854, Part IV(B): The Exit Tax Itself (Sort of) 60

Form 8854, Part IV(B): Mark-to-Market 61

III. Components of Form 8854: Part IV, Section C Deferral of Tax on Mark-to-Market Gain 62

Form 8854, Part IV(C): Tax Deferral 63

III. Components of Form 8854: Part V, Schedule A The Expatriate s Balance Sheet 64

Form 8854, Part V(A): Assets 65

III. Components of Form 8854: Part V, Schedule B The Expatriate s Income Statement 66

Form 8854, Section V(B): Income Statement 67

IV. IRC 2801 COVERED GIFTS & BEQUESTS

Background Generally, 2801 imposes a tax on any U.S. citizen or resident who received a covered gift or bequest (aka a gift or bequest from a covered expatriate). IRC 2801 was enacted to so that the estate and gift tax rules were not harsher on expatriates than non-expatriates. Current status: Notice 2009-85 provided that gifts or bequests on or after June 17, 2008, from a covered expatriate would be subject to a transfer tax under 2801 and further provided that satisfaction of the reporting and tax obligations under 2801 would be deferred pending the Service s issuance of separate guidance. The IRS issues proposed regulations on September 9, 2015. 70

2801 Inheritance Tax I. Inheritance tax on any U.S. citizen or resident who receives a covered gift or bequest. II. Tax Rate is the highest rate imposed for estate tax, or 40% III. I. Fair market value of interest received, not given The affected transferee is liable for the tax IV. Prop. Regs. Report the tax on a Form 708 V. No income tax basis adjustment is available for 2801 tax paid VI. Credit for foreign gift and estate tax paid I. Problematic for some countries (i.e. U.K.) VII. Exposure is indefinite VIII. Treaty Relief 71

What is affected? I. Covered Gifts and Bequests (aka Covered Transfers) A. Any intervivos gift or testamentary bequest, whether direct or indirect, to an affected transferee 1. Prop. Reg. - any property that would have been includible in the gross estate of the covered expatriate ( CE ) under U.S. estate tax if the CE has been a U.S. citizen at the time of death 2. Situs is irrelevant 1. E.g. The gift of U.S. intangible asset is subject to inhertiance tax 3. Beware of 2036-2042, 2044 interests 4. Indirect Transfers. 1. Lapse of a general power of appointment held by a CE (e.g. Crummey) 2. Power of appointment granted by a CE but exercised by non-ce in favor of an affected transferee 72

What is affected? The Double Whammy Prop. Reg. 28.2801-3(f), example 3. - Covered gift in trust with grant of general power of appointment over trust property. A CE funds an irrevocable foreign trust for the benefit of the CE s child who is a U.S. domicile and CE s grandchild who is a U.S. citizen. CE's child has a lifetime GPOA over the trust assets, which he exercises to distribute $100,000 to CE s grandchild. The result: The $100,000 received by the CE s grandchild is subject to 2801. The $100,000 appointed by the CE s child is subject to gift tax. 73

Who is affected? I. Transferee is liable for the tax II. Who is the transferee? I. Any U.S. citizen or resident who received a covered gift or bequest I. U.S. resident means U.S. domicile II. III. IV. II. Not applicable to non-resident aliens Prop. Regs. - U.S. shareholders, partners, members or other interest holder of a domestic entity that receives a covered transfer Domestic Trust I. Trust pays the tax immediately regardless if there are any U.S. beneficiaries Foreign Trust I. Tax deferred until distribution to U.S. recipient II. U.S. recipient pays tax even if not a beneficiary of the trust (e.g. POA beneficiary) I. 164 deduction available for tax attributable to amount included in gross income of U.S. recipient of a distribution from a foreign trust 74

Who is affected? Foreign Trusts Foreign trusts continued... I. 2801 Ratio (similar concept to GST inclusion ratio) I. Inclusion ratio between 0 and 1, which determines the percentage of each distribution subject to 2801. II. II. Planning Opportunities: I. Structure foreign trusts to require segregation of covered transfers II. Foreign Trusts can report gifts on a timely filed Form 708 to preserve the 2801 exclusion. Available annual election to be treated as a domestic trust for 2801 only I. Requires the appointment of a U.S. agent. (Prop. Regs.) II. Purging election pays tax on all current and previous covered transfers. I. This also occurs upon the migration of a foreign trust. 75

Exceptions I. Exceptions for certain recipients. I. Spouse - Qualifying transfers to a spouse under 2056 and 2523 I. QDOTs for non-citizen spouses (aka green card holders) II. III. II. Traps: Bequest to a spouse by a CE whose estate does not consist of U.S. assets. Is a QTIP/QDOT election possible? II. Charities under 2055 and 2523 Exceptions for certain transfers I. Taxable transfers reported on timely filed Form 709 or Form 706. II. Transfers made during a year when the CE is a U.S. tax resident (aka domicile) Annual Exclusion Gifts I. Applies per recipient II. III. IV. No present interest requirement No medical or educational exemption Supersized annual exclusion for non-citizen spouse 76

Issues I. Issues: A. How does beneficiary know if decedent is a covered expatriate? 1. A Protective Form 708 is an option. B. How does a beneficiary of a foreign trust determine if the distribution is associated with the contribution by the CE? 1. Default is an inclusion ratio of 1. C. Will the inheritance tax remain intact if the estate tax is repealed? 77

V. Pre-Expatriation Planning Strategies How to Eliminate or Mitigate the Damage 78

1. Don t Be an Expatriate (Noncitizens Only) Do not become a permanent resident. Use any other visa category to live in the United States. Prevent long-term resident status. Abandon green card status before the 8th year. Use treaty elections to be a nonresident prior to the 8th year. 79

2. Don t Be a Covered Expatriate Net worth test Net tax liability test Certification test 80

Net Income Tax Liability Test: MFJ MFS Filing Status Tax Liability Five Year Average 2012 (MFJ) 200,000 2013 (MFJ) 200,000 2014 (MFJ) 200,000 2015 (MFJ) 200,000 2016 (MFJ) 200,000 200,000 2017 (MFS) 100,000 180,000 2018 (MFS) 100,000 160,000 81

Net Worth Test: Gifts Assets H (Expatriate) W (U.S. or NRA) Cash 1,500,000 1,500,000 Stock 1,500,000 1,500,000 Individual Total 3,000,000 3,000,000 Cash 400,000 2,600,000 Stock 1,500,000 1,500,000 Individual Total 1,900,000 4,100,000 82

Transfers: Gift Tax Risks (Marital Deduction) Traditionally, interspousal gifts are not subject to gift tax. There is a marital deduction that reduces taxable gifts to zero. IRC 2523(a). The marital deduction is not permitted for gifts to noncitizen spouses. IRC 2523(i). 83

Transfers: Gift Tax Risks (Unified Credit) If you are relying on the unified credit, make your gifts in one calendar year and expatriate in the next. The amount of unified credit available for gifts depends on your citizenship/resident status on December 31. IRC 2505(a)(1). In the expatriation year you will be a nonresident noncitizen on December 31, and your unified credit available is zero. The small gift exclusion is still available ($14,000 in 2017). 84

Transfers: Capital Gain Tax Risk Non-gift transfers to nonresident alien spouses will be treated as a gain recognition event. IRC 1041(d). E.g., watch out for you get my half of the house, and I get your half of the bank account. That will be treated as the expatriate s sale of his interest in the house in exchange for cash in the bank account. Solve this problem by having the nonresident alien spouse elect under IRC 6013(g) to be a resident alien for income tax purposes in the year of transfer. 85

Net Worth Test: Green Card Holder s Strategy Gift tax rules apply to U.S. citizens and residents. Resident means domiciled in the United States. Regs. 25.2501-1(b). A green card holder domiciled abroad is subject to gift tax on U.S. real estate transfers and gifts of U.S.-situs tangible personal property. IRC 2501(a)(1), (2). Foreign assets and intangible personal property can be given away without concern for gift taxation or reporting to the U.S. 86

3. Mitigate Damage to Covered Expatriates Minimize mark-to-market gain by gift transfers. E.g., give away high capital gain assets, keep cash. Where exit tax is unavoidable, ensure foreign tax credit availability in the expatriate s home country. (Hint: it probably isn t). 87

Mitigate the Damage of Double Taxation The exit tax is a tax imposed on a fake (non)event. It will not generate a foreign tax credit in the other country, because no taxable event happened there. The asset wasn t sold. The fake (non)event for exit tax purposes will therefore not increase basis in the foreign country. Result: a covered expatriate pays tax twice, once to the USA to expatriate, and once again when a gain recognition event happens in his/her home country. 88

Double Taxation Example (Real Estate) U.S. citizen is a covered expatriate. One of the assets owned by the covered expatriate is real estate in France. The U.S. citizen pays mark-to-market exit tax to the United States for the unrealized capital gain on the French real estate. Later, when the (former) U.S. citizen sells the French real estate, he pays tax on the capital gain in France. 89

Double Taxation Example (Pension) A covered expatriate has a foreign pension. This is an ineligible deferred compensation item. The pension is treated as having made a lump sum distribution of the present value of the vested pension benefits at the time of expatriation. U.S. tax is paid on that pretend pension distribution. Later, the (former) U.S. citizen retires and starts receiving pension payments. Those pension payments are taxed in the home country of the (former) U.S. citizen. 90

Canada USA Expatriation If Canadians come to the USA, they can make an election for U.S. tax purposes that will allow them to eliminate double-taxation on assets that were subject to the Canadian departure tax. Rev. Proc. 2010-19. The Canada/U.S. Income Tax Treaty allows expatriating Americans in Canada to get the same double-taxation relief. Article XIII, Paragraph (7). 91