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Whichever Way SCOTUS Rules in Moore Case, The Result Will Be More US Citizenship Renunciations · IMI Podcasts

• 0:00
  SPEAKER_00: This episode first appeared as an article titled Whichever Ways SCOTUS Rules in More Case, the result will be more U.S.
• 0:07
  SPEAKER_00: citizenship renunciations, and authored by David Lesperance on IMIDAily dot com.
• 0:13
  SPEAKER_00: Subscribe to the newsletter and become an IMI pro to get exclusive access to our data center, private briefings, the citizenship catalog, as well as your very own professional profile in IMI, and many more pro members only tools and resources.
• 0:29
  SPEAKER_00: Over the last six months, there has been significant press in the U.S.
• 0:33
  SPEAKER_00: about a particular tax-related case called Moore verse United States.
• 0:38
  SPEAKER_00: We can summarize a deep dive explanation of the case as can the U.S.
• 0:43
  SPEAKER_00: federal government tax unrealized capital gains?
• 0:47
  SPEAKER_00: The Supreme Court of the United States heard the verbal arguments on december fifth, twenty twenty three, but their written decision is not expected until June or July of twenty twenty four.
• 0:58
  SPEAKER_00: The issue I want to explore in this article is how the upcoming SCOTIS decision in the Moore case will impact wealthy Americans who are contemplating triggering a fire escape plan to expatriate from the U.S.
• 1:13
  SPEAKER_00: For those who are unfamiliar with expatriation planning, I recommend that they review the IMI report on this issue that Melvin Warshaw and I co-authored.
• 1:24
  SPEAKER_00: Who is and and is not on the expatriation list?
• 1:30
  SPEAKER_00: As the most recent expatriation list notes, the pace of wealthy Americans who are renouncing U.S.
• 1:36
  SPEAKER_00: citizenship has continued to accelerate.
• 1:39
  SPEAKER_00: Will the decision in Moore increase or decrease the trend of wealthy Americans who are expatriating?
• 1:45
  SPEAKER_00: To properly understand the much misunderstood list, I recommend that readers take some time to review my article on how the list is compiled.
• 1:53
  SPEAKER_00: Record numbers of Americans renouncing citizenships has nothing to do with the pandemic.
• 2:00
  SPEAKER_00: How will the SCOTUS decision in the Moore case impact the expatriation trend?
• 2:05
  SPEAKER_00: Leaving the constitutional arguments to others, it is worthwhile to look at the predictable consequences of this forthcoming decision on the phenomenon of expatriation, no matter which way the SCOTUS comes down.
• 2:18
  SPEAKER_00: SCOTUS decision option.
• 2:21
  SPEAKER_00: A lower court is overturned.
• 2:24
  SPEAKER_00: In other words, taxing unrealized capital gains is unconstitutional.
• 2:30
  SPEAKER_00: This would have the impact of opening the expatriation floodgates as Internal Revenue Code S eight seven A, also known as the expatriate exit tax, would be deemed unconstitutional.
• 2:44
  SPEAKER_00: With the exit tax eliminated, the major cost barrier holding back ultra high net worth Americans from expatriating would be eliminated.
• 2:53
  SPEAKER_00: A dramatic example would be if Elon Musk renounced his U.S.
• 2:57
  SPEAKER_00: citizenship, he would no longer need to pay a gigantic capital gains bill.
• 3:02
  SPEAKER_00: With Canadian and South African citizenship in hand, he wouldn't even need an ESTA to visit the U.S.
• 3:08
  SPEAKER_00: in the future.
• 3:11
  SPEAKER_00: SCOTUS decision option B.
• 3:14
  SPEAKER_00: Lower Court is upheld.
• 3:16
  SPEAKER_00: In other words, taxing unrealized capital gains is constitutional.
• 3:22
  SPEAKER_00: There has been a significant amount of discussion about how SCOTUS upholding the lower court's decision in Moore would allow the U.S.
• 3:30
  SPEAKER_00: government to introduce a future wealth tax.
• 3:33
  SPEAKER_00: If this is the decision of SCOTUS, the billionaire tax proposal could quickly become the law of the land.
• 3:39
  SPEAKER_00: The section of this potential future tax law on covered expatriates is horrendous.
• 3:45
  SPEAKER_00: As a result, any prudent wealthy American should immediately equip themselves with the ability to expatriate and should actually pull the trigger between the date of a Democratic trifecta in November 2024 and the swearing in of a new administration.
• 4:01
  SPEAKER_00: Why the billionaire tax bill would turn this expatriation flood into a tsunami.
• 4:10
  SPEAKER_00: Under the current expatriation tax rules, covered expatriates, for example, more than two million dollars in net worth, are required to mark all of their assets to market pursuant to IRC S eight seventy seven A.
• 4:24
  SPEAKER_00: However, the billionaire tax proposal ramps up the tax hit significantly in four major ways.
• 4:30
  SPEAKER_00: First, the billionaire tax proposal calls for the elimination of the current deferral election currently permitted by IRC S eight seventy seven A.
• 4:38
  SPEAKER_00: Second, the billionaire tax proposal calls for IRC S eight seven A to apply to covered expatriates for the 10-year period after expatriation.
• 4:49
  SPEAKER_00: Specifically, certain categories of income and gains that would otherwise not be taxed to a normal nonresident alien will continue to be treated as U.S.
• 4:58
  SPEAKER_00: sourced income and tax to the covered expatriate for 10 years after termination of U.S.
• 5:04
  SPEAKER_00: taxpayer status.
• 5:05
  SPEAKER_00: In practice, income on gains from sales of U.S.
• 5:09
  SPEAKER_00: stocks and securities are designated as having a U.S.
• 5:13
  SPEAKER_00: source and is taxable in the hands of a covered expatriate.
• 5:17
  SPEAKER_00: Third, the normal substantial presence test will not apply to covered expatriates.
• 5:23
  SPEAKER_00: Rather, if the covered expatriate spends more than 30 days in the U.S.
• 5:27
  SPEAKER_00: in any year during the 10-year period following expatriation, they will be treated as a U.S.
• 5:33
  SPEAKER_00: person for tax purposes, subject to U.S.
• 5:35
  SPEAKER_00: tax on worldwide income for that year.
• 5:38
  SPEAKER_00: As a final blow, the billionaire tax proposal states that all of a covered expatriate's worldwide assets will again be deemed sold once more at the end of the 10-year period.
• 5:50
  SPEAKER_00: In short, the exit tax hits covered expatriates upon renunciation of U.S.
• 5:56
  SPEAKER_00: citizenship or relinquishment of long-term green card status, and again ten years later to capture any gains in the decade after their departure.
• 6:05
  SPEAKER_00: When a covered expatriate compares the one and done deemed disposition, exit tax under the current expatriation tax regime to the proposed ramped up tax liability under the billionaire tax regime, the decision to expatriate before a new Democratic administration comes to office becomes obvious.
• 6:25
  SPEAKER_00: What should wealthy Americans do now?
• 6:31
  SPEAKER_00: The current version of the billionaire tax proposal is supposed to only apply to those American taxpayers who have more than$100 million in net worth.
• 6:41
  SPEAKER_00: However, historically, all tax proposals start by targeting the super rich.
• 6:47
  SPEAKER_00: But quickly, the definition of rich expands downward.
• 6:51
  SPEAKER_00: Therefore, wealthy Americans who are not yet worth$100 million would be well advised to equip themselves with the fire insurance of a second citizenship and a fire escape plan of an integrated tax and expatriation tax strategy.
• 7:06
  SPEAKER_00: Those who do not already possess the fire insurance of a second citizenship need to take note that the time needed to obtain the same is at least nine months in most cases.
• 7:17
  SPEAKER_00: That is why many high net worth Americans are already actively seeking second citizenships and not waiting until the Moore decision is rendered in June 2024, only five months from the November 2024 election.
• 7:31
  SPEAKER_00: In short, don't wait until the fire marshal confirms that the Tax the Rich Wildfire is about to engulf your fiscal house before seeking the fire insurance of a second citizenship and a fire escape plan.
• 7:45
  SPEAKER_00: Thanks for joining us today on IMI Podcasts.
• 7:49
  SPEAKER_00: Subscribe for free to the IMI Daily Newsletter for breaking news and updates from the investment migration industry.
• 7:56
  SPEAKER_00: And consider upgrading your membership to IMI Pro to get insider access to networking opportunities, industry events, data, and members only content.