EDUARDO SAVERIN AND DENISE RICH — EXAMPLES OF US “EXIT TAX” ON RENOUNCING US CITIZENSHIP

You can leave the US, but it will cost you……

In a prior post I described the US exit tax on US persons who renounce their citizenship or green card status and move overseas.  Two recent examples are Eduardo Saverin (co-founder of Facebook) and Denise Rich (songwriter and husband of a billionaire commodities trader).  A recent CNN article describes the exit tax on Ms. Rich.

Cutting to the dollars, Ms. Rich will pay US income taxes on all net unrealized appreciation in excess of $636,000.  In other words, all of her wealth is treated as having been sold at fair market value, and the gain in excess of $636,000 is taxable income.

What she avoids, however, is the US estate tax (and the local estate tax of her home state) when she dies.  The CNN article indicates that the estate tax savings (payable when she dies) is likely to exceed the extra income taxes (payable now).   Perhaps this is because much of the exit tax gain is capital gain taxed at only 15% for US purposes.  This compares favorably with the US estate tax rate of 35%.

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