Divorce, Expatriation and International Sanctions


A current article in the WSJ (http://finance.yahoo.com/news/the-renouncers–who-gave-up-u-s–citizenship–and-why-.html) discusses the 189 U.S. citizens and Permanent Residents who formally and recently expatriated. The article implies that underlying all these expatriations lies a tax driven motive. The tax reasons, whether income tax, estate and gift or all of them,may be a dominant factor in most cases, although it must be unstated for legal purposes. Another reason, applicable in far fewer cases, however may be U.S. imposed international sanctions.

Sanctions, like those imposed on Iran, (there are actually 20+ countries with sanctions) and its financial institutions legally impair fund transfers without an Export License from the Office of Foreign Asset Control (OFAC). The result is that dual nationals who have retained citizenship in sanctioned countries may have difficulty in liquidating funds from assets owned offshore in order to satisfy divorce settlement agreements, estate transfers and estate and gift tax liabilities. Now, with Form 8938 Statement of Foreign Financial Asset, required as part of Form 1040, dual nationals with assets in sanctioned countries may have asset disclosure and valuation issues as well. Some of these U.S. taxpayers will consider expatriation a logical, but painful method of dealing with the complexity and cost of U.S. compliance. It remains to be seen how many of these people with go through formal expatriation process.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Sanford Millar
Law Offices of Sanford I. Millar

Experience and Qualifications: Over 30 years of experience in domestic and international tax... View Profile »

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