Patrick McCormick was recently interviewed by CoinTracking for a column titled “Giving up United States citizenship for Bitcoin: Is it worth it?”
In this article, which explores the effects of citizenship renunciation to avoid cryptocurrency taxation in the United States, Patrick provides potential workarounds for exit taxes. Here is an exerpt:
Even renouncing your citizenship won’t automatically disqualify you from US tax obligations. If your net worth exceeds $2 million, you’ll still have to pay an exit tax when you make your transition.
… exit tax is computed as if you sold all your assets on the day before you expatriated and had to report the gain. The exit tax rate might be as high as 23.8%, depending on a variety of factors.
On the other hand, there are some money saving tax strategies that Bitcoin investors can use if they are willing to make the leap.
Cross-border tax planning attorney Patrick J. McCormick, a partner at the Philadelphia offices of Culhane Meadows, mentioned a few potential workarounds:
“You can have more than $2 million in net worth – you’d just need to gift it away in the year prior to the expatriating event. You’re basically looking to make transfers in the year prior to expatriation of assets out of the expatriating individual’s “exit tax base” – which isn’t necessarily the same as relinquishing all future benefits from the asset. You can have things like intrafamily transfers, etc. which are beneficial here – where there’s still benefit retained, but you’re lowering your net worth (and, for those who can’t realistically gift to the point where their net worth is below $2 million, you’re at least lowering the actual exit tax hit). Transferring assets – particularly, highly appreciated ones – in the year prior to expatriation can be a huge benefit.”
The full article can be found HERE.