CARIBBEAN TODAY


-usw^caribbeantodj..c..


Reconsidering U.S. citizenship or long term residency rules


(CONTINUED FROM PAGE 17)
to put in place.
 Therefore, we think that it
is time for all who have ever
considered expatriation to go
through the analysis once
again.

OVERVIEW
 The following is a general
overview of some of the major
aspects of the expatriation tax
regime and the major change
that is proposed.
 As an initial matter, an
 XpI r uk is generally
defined as: 1) a U.S. citizen
who renounces his or her U.S.
citizenship; or 2) a long-term
lawful permanent resident
alien (a so called "green card"
holder) who has held such sta-
tus for eight of the prior 15
years and who then relin-
quishes his or her "green
card".
 In either situation, an
expatriate is not automatically
subject to the expatriation tax-
ation regime, but instead,
must violate certain qualifying
tests meant to determine
whether or not he has as one
of his or her principal purpos-
es in expatriating the avoid-
ance of U.S. taxes.
 Under current law, an
expatriate needs to violate
one of three tests to be con-
clusively considered to have a
tax avoidance purpose the
"Net Income Tax Test", the
"Net Worth Test", or the
"Failure to Comply Test".
Under the relevant law, the
only exceptions to these
objective standards are for
certain adult and minor indi-
viduals with dual citizenship.

CAVEAT
 However, these excep-
tions have a significant caveat,
in that such an individual can-
not have any "substantial con-
tacts" with the U.S. at the
time of expatriating, meaning
generally that the individual
a) never was a resident alien
(RA) under the three-year
weighted average substantial
presence test; b) never held a
U.S. passport; and c) was not
present in the U.S. for more
than 30 days during any calen-
dar year which is one of the 10
calendar years preceding the
individual's loss either of U.S.


citizenship or his or her green
card.
 Once it has been deter-
mined that an individual has a
tax avoidance purpose in
expatriating from the U.S., the
individual then becomes sub-
ject to the "Alternative Tax
Regime" for the 10-year peri-
od subsequent to the taxpay-
er's expatriation (the "tainted
period") where he will be
taxed, generally speaking, in a
somewhat hI brid manner
that is both more comprehen-
sive than the taxation scheme
for taxing a typical nonresi-
dent alien/nonresident alien
domiciliary (NRA/NRAD),
but less comprehensive than
the worldwide tax scheme that
applies to a U.S. citizen or res-
ident alien/resident alien
domiciliary (RA/RAD).
 However, even if an indi-
vidual has given up his or her
U.S. citizenship or green card,
that individual will continue to
be taxed as a U.S. citizen or
RA until he or she gives prop-
er notice to certain prescribed
U.S. agencies and files an
information statement with
the Internal Revenue Service
on IRS Form 8854. The indi-
vidual is then required to file
the same form for each year
during the "tainted period".
 With a limited exception,
should the expatriate during
the "tainted period" be physi-
cally present in the U.S. on
more than 30 days in any cal-
endar year, the individual will
be taxed as a U.S. citizen or as
an RA/RAD during that year,
and will, therefore, be subject
to worldwide taxation for U.S.
income, estate, and gift tax
purposes for such year.

RULES REVISION
 The U.S. Senate has now
proposed a major revision of
these rules. Under the Senate
bill, generally, a "covered
expatriate" will, with certain
exceptions, pay tax on the net
unrealized gain in all of their
property as if the properties
were sold at fair market value
on the day before expatria-
tion. The first $600,000 of gain
would be exempted from tax.
 Special rules are provided
for interests in trusts and
retirement plans as well as
certain U.S. real property
interests.


 While, in order to avoid
immediate payment of the tax,
it would be possible to make a
special election to continue to
be taxed as a U.S. citizen with
respect to the property
owned, that election would
"lock in" continuing U.S.
income, estate, gift and gener-
ation skipping transfer tax lia-
bility with respect to the prop-
erty and require the posting of
security for the payment of
the deferred tax (including
interest, penalties and certain
other items). An individual
would alternatively be permit-
ted to elect to defer the pay-
ment of the mark-to-market
tax on any one or more prop-
erties for which the election is
made. Interest would be
charged and security would
need to be posted. The defer-
ral would end upon the dispo-
sition of the property or the
death of the taxpayer.
 Obviously, these rules
would be a marked change in
the way in which expatriates
are taxed. Most importantly,
outlasting the 10-year "tainted
period" or restructuring assets
so that they would not be sub-
ject to the alternative tax
would no longer be sufficient
to avoid the new tax regime.
 However, as proposed,
these rules would only apply
after the date of enactment
and, as of the date this article
was written, it appeared
as though the House of
Representatives would not
include this provision in the
tax provisions they were pro-
posing.
 In any case, as we noted
at the beginning, it would
appear that this mark-to-mar-
ket tax regime is being looked
at as a future source of funds
that can be used to offset tax
cuts elsewhere. Therefore, for
anyone who has or would at
all consider expatriating, it
becomes critical to reconsider
that action now.

Dennis Ginsburg and
Michael Rosenberg are share-
holders with the Coral
Gables, Florida law firm of
Packman, Neuwahl &
Rosenberg and can be
reached at 305-665-3311.
0


 RAGS TO RICHES



















 Businessman Vincent HoSang, left, receives a special award from Albert Lettman,
 president of the Greater Caribbean American Chamber of Commerce, during the
 GCACC's annual banquet and officer installation ceremony last month in Florida.
 HoSang is the president and chief executive officer of Caribbean Food Delights Inc.,
 a division of Royal Caribbean Bakery Inc. He was born in Jamaica and dropped out
 of high school to help in the family business. He migrated to Bronx, New York in the
 1960s and began his first job in the U.S. earning $1.60 an hour assembling briefcas-
 es in a factory. HoSang currently owns and operates two factories with multi-million
 dollar sales. He was the guest speaker at the function.


 Getting back to budget basics Tips

to create a realistic, workable budget


Financial experts have a
 myriad of tools and
 resources at their dispos-
al detailed reports, econom-
ic outlooks and market analy-
ses that can be too complicat-
ed for the rest of us to com-
prehend.
 But for your own personal
finances, the most useful tool
is actually one of the easiest to
understand and often over-
looked.
 It's the personal budget.
A document that simply meas-
ures the amount of money
that comes in, and the amount
of money that goes out. Mike
Sullivan, director of education
for Take Charge America,
says you don't have to be a
finance guru to create a work-
able budget.

EASY
 "Budgets are easy to cre-
ate, especially with the free
templates that are available
online," he said. "Putting
your budget on paper helps
you track your expenses, rec-
ognize poor spending patterns
and establish a savings plan."
 In the United States,


where the average household
has racked up more than
$9,000 in high-interest debt, it's
obvious that many consumers
are living well outside their
means. Sullivan says a work-
able budget can help con-
sumers prevent financial blun-
ders, such as acquiring exces-
sive credit card debt and not
saving. He offers four tips:
 Establish goals Before
you create a budget, establish
short and long-term financial
goals. Are you trying to get
out of debt? Do you hope to
retire early? Do you want to
put your children through col-
lege? Are you a travel enthu-
siast? It's important that your
budget provides for avenues
to accomplish these goals.
The sooner you start working
toward your goals, the easier
they will be to accomplish.
 Layout A budget can
be easy to understand and
create.
 The "extras" You
budget needs to include
\Iri| outside of monthly
bills. This includes entertain-

(CONTINUED ON PAGE 20)


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