Nando.net on expatriate tax issue

Of course, the mainstream media is failing to question why such taxes
should be in existence at all.
	-Allen

>Billionaires' tax loophole could complicate passage of health reform
>---------------------------------------------------------------------------
>Copyright 1996 Nando.net
>Copyright 1996 The Associated Press

>WASHINGTON (Apr 28, 1996 1:47 p.m. EDT) -- A once white-hot, but still
>smoldering, partisan dispute over taxation of expatriate billionaires could
>further complicate enactment of a popular measure making health insurance
>portable from job to job.

[...]

>But an effort to plug a loophole that's allowed a handful of wealthy people
>to avoid taxes by renouncing their citizenship could put another hurdle
>before a health bill all sides say they want.

>Competing expatriate billionaire provisions are tucked into separate health
>bills that cleared the Senate last week and the House in March.

>In an approach recommended by the Clinton administration, the Senate would
>impose an immediate capital gains tax on the assets of wealthy people when
>they renounce their citizenship.

>However, the House bill, crafted by Ways and Means Chairman Bill Archer,
>R-Texas, takes an entirely different approach that Democrats and the
>administration say leaves the loophole wide open.

>House and Senate lawmakers haven't met yet to work out the differences
>between the two health bills. But if past negotiations on the expatriation
>issue are any indication, the House version will emerge victorious.

[...]

>Instead of imposing a large and immediate tax on wealthy citizenship
>renouncers, the House version tightens current law. It requires expatriates
>with a net worth of $500,000 or more to pay taxes on capital gains and
>other income from U.S.-based assets for 10 years after they renounce their
>citizenship.

>But critics say it will accomplish little more than forcing accountants and
>lawyers to find more creative ways around the rules on behalf of
>billionaire citizenship renouncers such as Campbell soup fortune heir John
>Dorrance III and Dart Container Corp. President Kenneth Dart.

>The House version would be extremely difficult to enforce and would allow
>patient expatriates to avoid the tax by holding their assets for 10 years
>before selling, they say. In the interim, they could raise cash by
>borrowing against the assets.

[...]

>However, Archer says his committee's version is actually tougher. The
>administration's proposal would create an incentive for people who had
>recently inherited their wealth to expatriate before their newly acquired
>assets started to appreciate, he said.

>"The reality is their proposal is weaker than ours," Archer said. "Some of
>the most egregious cases are where there have been heirs that have been
>recipients of estates who can under their proposal leave and never pay
>anything."

On Sun, 28 Apr 1996, E. ALLEN SMITH wrote:

> 	Of course, the mainstream media is failing to question why such taxes
> should be in existence at all.
> 	-Allen
> 
> >Billionaires' tax loophole could complicate passage of health reform
> >---------------------------------------------------------------------------
> >Copyright 1996 Nando.net
> >Copyright 1996 The Associated Press

[...]

> >Instead of imposing a large and immediate tax on wealthy citizenship
> >renouncers, the House version tightens current law. It requires expatriates
> >with a net worth of $500,000 or more to pay taxes on capital gains and
> >other income from U.S.-based assets for 10 years after they renounce their
> >citizenship.

Uh.  Hmmmmm.

I refer you to section 877 of the current tax law.

(a)  In General.- Every nonresident alien individual who at any time after
March 8, 1965, and within the 10 year period immediately preceding the
close of the taxible year lost United States citizenship [unless he shows
non-tax avoidance intent with the burden on taxpayer to make such showing]
shall be taxable for such taxable year in the manner provided in
subsection (b)...

(b) Alternate Tax:

[Imposes the larger of normal taxation calculation and the calculation
with the source rules in (c)].

(c)  Special Rules of Source.- For purposes of subsection (b), the
following items of gross income shall be treated as income from sources
within the United States:

[Sale of real property or stocks and debt obligations]

(end)

In other words, you get taxed on capital gains and sale of stock or
property as well as real income for 10 years after your expatriation if
you cannot show you renounced citizenship for non-tax purposes.

What precisely does this reporter think is being "tightened" in his or her
version of the House bill?  (Note that in current law there is no $500,000
floor).  In fact the reporter hasn't bothered to describe what the
provision really does.  (Imposes a expatriation is taxable event
analysis).  Talk about a snow job.  I won't say it is or is not advertant,
but it's bloody annoying.


> >The House version would be extremely difficult to enforce and would allow
> >patient expatriates to avoid the tax by holding their assets for 10 years
> >before selling, they say. In the interim, they could raise cash by
> >borrowing against the assets.

Which is the law today.  What is with this guy?  Get your facts straight
media.

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