The “Phantom” Gain Exclusion from the “Mark to Market” Tax – Increases to US$690,000 for the Year 2015

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This website Tax-Expatriation explains throughout its contents, various articles and posts about the general U.S. federal tax law and rules applicable to those individuals, who are –

  1. U.S. citizens who “renounce” or “relinquish” their U.S. citizen (“USC”), or
  2.  Lawful permanent residents (“LPR”) who “abandon” that status (either intentionally or inadvertently by application of the law).

This website does not purport to provide legal advice and indeed cautions anyone from taking specific actions or steps based upon the explanation of Table of Mark to Market Gain from Expatriation Article p 52these very complex rules that are principally set forth in IRC Sections 877, 877A and 2801.  See – limitations.  The Table 1 in this post comes from my article that explains how the tax is calculated; which is itself out of date because (a) a change in the long-term capital gains rates, and (b) the inflation adjusted gain exclusion amount.

I have seen disastrous results for individuals who took steps without proper or good legal advice or counseling.

Enough of the “cautions” – “warnings” and “disclaimers.”

Today’s post simply explains that the amount of worldwide gain from the mark to market tax is indexed for inflation.  When the law was initially adopted in 2008, the gain exclusion was US$600,000, but is one of the rare provisions in the Internal Revenue Code that is indexed for inflation.

The 2015 amount of gain exclusion will be US$690,000, which is increased from the 2014 amount of US$680,000.  See, the IRS Revenue Procedure 2014-16, published this month that references those code sections which are indexed for inflation.

For an understanding of how this gain is determined and calculated, please see Table 1 in my article published in the International Tax Journal, Accidental Americans” – Rush to Renounce U.S. Citizenship to Avoid the Ugly U.S. Tax Web” , CCH Wolters Kluwer, Nov./Dec. 2012, Vol. 38 Issue 6, p52.  Specifically, the example in the table set forth on page 52, which is reproduced here, should help provide a better understanding of how it is calculated.

That article used old long-term capital gains rates of 15%, which is no longer the law.  It also used the original statutory exclusion from tax on the US$600,000 gain amount, which will increase to US$690,000 for the year 2015.

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