Don’t Leave Me This Way. The Ramifications of Permanently Leaving the U.S. Tax System

The exit tax implications for certain covered expatriates in choosing to permanently leave the U.S.’s worldwide taxation system are economically unpleasant. The IRC applies an exit tax to the net unrealized gains on the covered expatriate’s worldwide assets (fair market value of the assets determined on the day prior to expatriation). I.R.C. § 877A. The rules do not require a formal sale; however, the rules deem a sale of worldwide assets at fair market value to occur, with net gain in excess of an applicable exclusion amount ($821,000 for 2023) exempt from the exit tax.  

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