Today our sister website, Tax-Charts.com, published a new flowchart regarding the term “covered expatriate” under Code § 877A. Under this section, certain individuals that renounce their U.S. citizenship or cease to be long term U.S. residents are deemed to have sold their worldwide assets just prior to expatriation. Tax is due on the deemed sale to the extent that net gain exceeds $627,000 (for 2010).
Only “covered expatriates” are subject to the deemed sale rules. The flowchart guides one through the logic of whether an individual is an “expatriate” and then if the individual is a “covered expatriate.” The flowchart does not go through the details of calculating the gain or the special rules regarding deferral of the tax, deferred compensation, deferred tax accounts, and nongrantor trusts.
Tax-Charts.com now has a total of 11 flowcharts, including: