HEART Act 2008 -- What is its intent?

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atrayapr1

Registered Users (C)
This act was passed last year and according to WSJ:
"once the bill is law, U.S. citizens and long-term residents who terminate their status will be taxed once on their unrealized gains, at current market rates. "Stock portfolios, real estate, art and most other types of assets will be captured by this new 'mark to market' tax,"
Don't exactly understand if this makes it cheaper or more expensive to expatriate. Residents who terminate ties, will need to liquidate assets if they have to pay this tax. Obviously this is bad for small businesses and their workers if their owners have to sell and move out. On the other hand hedge fund managers, AIG executives, traders etc. who usually have their profits payed out in cash will have a great time leaving the US. They are no longer subject to 10 year reporting requirement and they don't need to pay estate/gift taxes either.
The estate/gift tax is instead levied on US resident heirs upon receiving it. This actually motivates these heirs to move out as well and give up citizenship, taking with them all their assets.
Appears to be a huge gain to offshore tax havens. Was this really the intent of congress?
 
The intent is much the way canada taxes those who 'depart', which under the Cdn tax system means no longer being taxable on world-wide income: all investments are "deemed" to have been disposed of the day you leave.

The goal, and the result, is to have the profits you made under their tax system taxed as you leave. Since US tax system is not pureluy residence based (ie. US citizens remain taxable forever regardless of residence) there is the 'need' to find someway of ensuring that those who leave the tax system (by renunciation or other means) should pay tax on the unrwealized gains they made while resident in US.
 
nelsona said:
The intent is much the way canada taxes those who 'depart', which under the Cdn tax system means no longer being taxable on world-wide income: all investments are "deemed" to have been disposed of the day you leave.

The goal, and the result, is to have the profits you made under their tax system taxed as you leave. Since US tax system is not pureluy residence based (ie. US citizens remain taxable forever regardless of residence) there is the 'need' to find someway of ensuring that those who leave the tax system (by renunciation or other means) should pay tax on the unrwealized gains they made while resident in US.
Click to expand...

That is what it says on first reading. However, this makes it easier for people to expatriate and avoid taxes as they can sell US investments at lower tax rate of 15% and move over without worry.
 
Yes, but under the previous laws, if you waited to sell until AFTER you left, IRS got nothing. Treaties would often kick in which would prevent certain nationals from being taxed by US after departure.

Certainly, now selling beforehand may be cheaper, but , sometimes, you simply do not want to sell, or cannot sell right at will.
 
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