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Expatriation as an Out-of-Body Experience

Pitfalls and planning for the dreaded U.S. inheritance tax.

Most U.S. cross-border tax advisors concentrate on the income tax side of expatriation. In the year when U.S. citizenship or permanent residence is given up, a special “mark-to-market” income tax is imposed on certain “covered expatriates.” They must file Internal Revenue Service Form 8854 listing their worldwide assets and potentially pay a special exit tax on the appreciation in such assets in excess of a baseline exemption amount. This so-called “exit” tax is imposed at the highest U.S.


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