Gifts And Bequests From A Former US Person: Avoiding A 40% Tax Payable By The Recipient

June 27, 2023 - Participants include:

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

As more and more people renounce U.S. citizenship or surrender their Green Cards the will take steps to avoid being a "Covered Expatriate".

A "Covered Expatriate" is an individual (subject to few exceptions) who meets any one of the following three tests:

- net worth in excess of 2 million USD

- U.S. tax liability exceeding an average of $190,000 USD in the five years prior to renunciation

- failure to certify U.S. tax compliance for the five years prior to renunciation.

The consequences of being a "Covered Expatriate" are two-fold:

1. Being subject to the 877A Expatriation Tax

2. Gifts/bequests made to "U.S. Persons" being subjected to a 40% tax (payable by the recipient of the gift) as per S. 2801 of the Internal Revenue Code.

It's important that the recipient of the gift be able to prove that the gift/bequest was NOT received by a "Covered Expatriate".

In this podcast we discuss common sense steps that can (and should) be taken to meet the burden of proof of showing that the gift/bequest was NOT received from a "Covered Expatriate".