Userid: CPM Schema: Leadpct: 100% Pt. size: 9.5 Draft Ok to Print instrx AH XSL/XML Fileid: … ions/I8854/2020/A/XML/Cycle04/source (Init. & Date) ______Page 1 of 8 16:33 - 13-Nov-2020
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Department of the Treasury 2020 Internal Revenue Service Instructions for Form 8854 Initial and Annual Expatriation Statement
Section references are to the Internal Revenue use the 2018 Form 8854 and the 3. The date the State Department Code unless otherwise noted. Instructions for Form 8854 (but modify issued a certificate of loss of nationality. the year on the form by crossing out 4. The date a U.S. court canceled Future Developments 2018, and entering the year of actual your certificate of naturalization. For the latest information about filing) for purposes of filing their initial developments related to Form 8854 and and/or annual expatriation statements Long-term resident defined. You are its instructions, such as legislation pursuant to section 877 going forward. an LTR if you were a lawful permanent enacted after they were published, go to Individuals who expatriated before resident of the United States in at least IRS.gov/Form8854. June 17, 2008, who have previously 8 of the last 15 tax years ending with the filed a Form 8854, but who still have an year your status as an LTR ends. In What's New annual reporting requirement in 2020 determining if you meet the 8-year Increase in average annual net in- under section 877 should also use the requirement, don't count any year that come tax liability. The average annual 2018 Form 8854 but modify the year on you were treated as a resident of a net income tax liability for the 5 taxable the form by crossing out 2018, and foreign country under a tax treaty and years ending before the expatriation entering 2020. didn't waive treaty benefits applicable to date, which is used to determine residents of the country. whether an individual is a covered Who Must File Lawful permanent resident. You expatriate has increased to $171,000. You must file your initial Form 8854 are a lawful permanent resident of the For more information, see Covered (Parts I and II) if you relinquished your United States if you have been given the expatriate, later. U.S. citizenship in 2020 or you are a privilege, according to U.S. immigration Increase in threshold for net unreal- long-term resident (LTR), defined laws, of residing permanently in the ized gain on property. For 2020, if below, and terminated your residency United States as an immigrant. You you are a covered expatriate, the net status in 2020. generally have this status if you have gain that you otherwise must include in been issued an alien registration card, your income is reduced by $737,000. You must file your annual Form 8854 also known as a “green card,” and your For more information, see Taxation (Parts I and III) if you expatriated before green card hasn't been revoked or Under Section 877A, later. 2020 and you: judicially or administratively determined 1. Deferred the payment of tax, to have been abandoned, and you haven't 1) commenced to be treated as General Instructions 2. Have an item of eligible deferred a resident of a foreign country under the compensation, or provisions of a tax treaty , 2) waived the Purpose of Form 3. Have an interest in a nongrantor benefits of such treaty, and 3) notified Section 877A applies to U.S. citizens trust. the IRS of such a position on a Form who have relinquished their citizenship 8833 attached to an income tax return. If and long-term residents who have Expatriation. Expatriation includes the you were already an LTR at the time you ended their residency (expatriated) on acts of relinquishing U.S. citizenship cease to be treated as a lawful or after June 17, 2008. and terminating long-term residency. permanent resident, then you will be treated as having expatriated as of that Form 8884 is used by expatriates to Date of relinquishment of U.S. date. certify compliance with tax obligations in citizenship. You are considered to the five years before expatriation and to have relinquished your U.S. citizenship Date of termination of long-term comply with their initial and annual on the earliest of the following dates. residency. If you were a U.S. information reporting obligations under 1. The date you renounced your long-term resident (LTR), you section 6039G. U.S. citizenship before a diplomatic or terminated your lawful permanent consular officer of the United States residency on the earliest of the following Note. Individuals who expatriated for (provided that the voluntary dates. immigration purposes after June 3, renouncement was later confirmed by 1. The date you voluntarily 2004 and before June 17, 2008, but the issuance of a certificate of loss of abandoned your lawful permanent who have not previously filed a Form nationality). resident status by filing Department of 8854, continue to be treated as U.S. 2. The date you furnished to the Homeland Security Form I-407 with a citizens or U.S. lawful permanent State Department a signed statement of U.S. consular or immigration officer. residents for U.S. income tax purposes your voluntary relinquishment of a U.S. until they file a Form 8854. See section 2. The date you became subject to nationality confirming the performance 7701(n), as in effect before June 17, a final administrative order that you of an expatriating act (provided that the 2008. abandoned your lawful permanent voluntary relinquishment was later resident status (or, if such order has Individuals in this category are confirmed by the issuance of a been appealed, the date of a final subject to section 877 once they file the certificate of loss of nationality). Form 8854. These individuals should
Nov 13, 2020 Cat. No. 24874E Page 2 of 8 Fileid: … ions/I8854/2020/A/XML/Cycle04/source 16:33 - 13-Nov-2020
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
judicial order issued in connection with required in paragraph (3) (under Instead, item (1) is subject to such administrative order). Covered expatriate, earlier). withholding at source provided that you 3. The date you became subject to properly make an irrevocable waiver on Certain dual-citizens. You can your initial filing of this form of any right a final administrative or judicial order for qualify for the exception described your removal from the United States to claim any reduction in withholding above if you meet both of the following under an applicable treaty between the under the Immigration and Nationality requirements. Act. United States and a foreign country and • You became at birth a U.S. citizen timely notify the payor on Form W-8CE. 4. If you were a dual resident of the and a citizen of another country and, as To timely notify the payor on Form United States and a country with which of the expatriation date, you continue to W-8CE, you must file the Form W-8CE the United States has an income tax be a citizen of, and are taxed as a with the payor on the earlier of: treaty, the date on which you resident of, that other country. • The day prior to the first distribution commenced to be treated as a resident • You were a resident of the United on or after the expatriation date, or of that country under the treaty, did not States for not more than 10 years during • 30 days after the expatriation date. waive the benefits of the treaty, and the 15-tax-year period ending with the gave notice to the Secretary of such tax year during which the expatriation Item (4) is also subject to withholding treatment. See Regulations section occurred. For the purpose of at source, and you are treated as having 301.7701(b)-7 for information on other determining U.S. residency, use the waived any right to claim any reduction filing requirements. substantial presence test described in in withholding under an applicable treaty chapter 1 of Pub. 519. between the United States and a foreign Covered expatriate. You are a country, unless you elect to be treated covered expatriate if you expatriated Certain minors. You can qualify for as having received the value of your after June 16, 2008, and any of the the exception described above if you entire interest in the trust by obtaining a following statements apply. meet both of the following requirements. ruling from the IRS to that effect. See • You expatriated before you were 1. Your average annual net income Section C—Property Owned on Date of 181/2. Expatriation under Part II. tax liability for the 5 tax years ending • You were a resident of the United before the date of expatriation is more In the case of item (2), you are States for not more than 10 tax years treated as receiving the present value of than the amount listed next. before the expatriation occurs. For the a. $139,000 for 2008. your accrued benefit as of the day purpose of determining U.S. residency, before the expatriation date and you b. $145,000 for 2009. use the substantial presence test should include this amount on your c. $145,000 for 2010. described in chapter 1 of Pub. 519. Form 1040 or 1040-SR for the year that d. $147,000 for 2011. Taxation Under Section 877A includes your expatriation date. In the case of item (3), you are treated as e. $151,000 for 2012. If you are a covered expatriate in the receiving a distribution of your entire f. $155,000 for 2013. year you expatriate, you are subject to income tax on the net unrealized gain in interest in the account on the day before g. $157,000 for 2014. your property as if the property had your expatriation date and you should h. $160,000 for 2015. been sold for its fair market value (FMV) include this amount on your Form 1040 or 1040-SR for the year that includes i. $161,000 for 2016. on the day before your expatriation date (“mark-to-market tax”). This applies to your expatriation date. See paragraphs j. $162,000 for 2017. most types of property interests you (d), (e), and (f) of section 877A. k. $165,000 for 2018. held on the date of your expatriation. Deferral of the payment of l. $168,000 for 2019. But see Exceptions, later. mark-to-market tax. You can make an irrevocable election to defer the m. $171,000 for 2020. Gains from deemed sales are taken payment of the mark-to-market tax into account without regard to other U.S. 2. Your net worth was $2 million or imposed on the deemed sale of internal revenue laws. Losses from more on the date of your expatriation. property. If you make this election, the deemed sales are taken into account to 3. You fail to certify on Form 8854 following rules apply. that you have complied with all federal the extent otherwise allowed under U.S. internal revenue laws. However, section 1. You make the election on a tax obligations for the 5 tax years property-by-property basis. preceding the date of your expatriation. 1091 (relating to the disallowance of losses on wash sales of stock and 2. The deferred tax on a particular Exception for dual-citizens and securities) doesn't apply. For 2020, the property is due on the return for the tax certain minors. Dual-citizens and net gain that you otherwise must include year in which you dispose of the certain minors (defined next) won't be in your income is reduced (but not property. treated as covered expatriates (and below zero) by $737,000. 3. Interest is charged for the period therefore won't be subject to the Exceptions. The mark-to-market tax the tax is deferred. expatriation tax) solely because one or does not apply to the following. both of the statements in paragraph (1) 4. The due date for the payment of or (2) above (under Covered expatriate) 1. Eligible deferred compensation the deferred tax cannot be extended applies. However, these individuals will items. beyond the earlier of the following still be treated as covered expatriates 2. Ineligible deferred compensation dates. unless they file Form 8854 and certify items. a. The due date of the return that they have complied with all federal 3. Specified tax deferred accounts. required for the year of death. tax obligations for the 5 tax years 4. Interests in nongrantor trusts. b. The time that the security preceding the date of expatriation as provided for the property fails to be adequate. See item (6) below.
-2- Instructions for Form 8854 (2020) Page 3 of 8 Fileid: … ions/I8854/2020/A/XML/Cycle04/source 16:33 - 13-Nov-2020
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
5. You make the election in Part II, 2. If you are required to attach the former U.S. resident). See Date of Section D—Deferral of Tax. original Form 8854 to a Form 1040-NR, relinquishment of U.S. citizenship or 6. You must provide adequate Form 1040, or Form 1040-SR send a Date of termination of long-term security (such as a bond). copy of your initial or annual Form 8854, residency, earlier. marked “Copy,” to the address listed 7. You must make an irrevocable below. Line 6 waiver of any right under any treaty of List all countries (other than the United the United States that would preclude 3. If you elected to defer the payment of any tax due, see the States) of which you are a citizen and assessment or collection of any tax the date on which you became a citizen. imposed by section 877A. instructions under Part II, Section D, Line 5, later, and send your tax deferral Line 7 When To File agreement request to the address listed If you are a former U.S. citizen, indicate Attach your initial Form 8854 to your below. how you became a U.S. citizen. income tax return (Form 1040, 1040-SR, or 1040-NR) for the year that Department of the Treasury Line 8 includes your expatriation date, and file Internal Revenue Service If you are or were a U.S. lawful your return by the due date of your tax Philadelphia, PA 19255-0049 permanent resident, indicate the date return (including extensions). Also send on which you became a U.S. lawful a copy of your Form 8854, marked permanent resident. “Copy,” to the address under Where To Specific Instructions File, later. If you are not required to file Identifying number. Generally, this Part II—Initial Expatriation an income tax return, send your Form number is your U.S. social security Statement for Persons 8854 to the address under Where To number. An incorrect or missing File, later, by the date your Form identifying number may result in a Who Expatriated 1040NR (or Form 1040 or 1040-SR) penalty of $10,000. If you were never During 2020 would have been due (including issued a social security number, please extensions) if you had been required to attach a statement explaining the Section A—Expatriation file. (See Resident Alien or Nonresident reason. Information Alien in the Instructions for Form This section must be completed by all 1040-NR.) Part I—General individuals who expatriated in 2020. File your annual Form 8854 if you Information expatriated before 2020 and you: This section is to be completed by all Line 2 1. Deferred the payment of tax on filers. You can use the Part II, Section B, any property on a Form 8854 filed in a Line 1 balance sheet to arrive at your net previous year; worth. If you have a P.O. box, enter your box 2. Reported an eligible deferred number instead of your street address compensation item on a Form 8854 filed Line 3 only if your post office does not deliver in a previous year; or mail to the street address. Check the “Yes” box if you became at 3. Reported an interest in a birth a U.S. citizen and a citizen of nongrantor trust on a Form 8854 filed in Line 2 another country and, as of the a previous year. Enter the information in the following expatriation date, you continue to be a order: street address, city, province or citizen of, and are taxed as a resident See Part III—Annual Expatriation state, and country. Follow the country's of, that other country. Statement for Persons Who Expatriated practice for entering the postal code. After June 16, 2008, and Before Don't abbreviate the country name. January 1, 2020, later. Line 5 For each year that you are required Line 3 Check the “Yes” box if: to file a Form 1040-NR (or Form 1040 or Enter the country of which you are • You expatriated before you were 1 1040-SR), attach your annual Form considered a resident for tax purposes if 18 /2, and 8854 to your Form 1040-NR (or Form it is different from the country in which • You have been a resident of the 1040 or 1040-SR) and send a copy, your principal foreign residence is United States for not more than 10 tax marked “Copy,” to the address under located. years before you expatriated. For the purpose of determining U.S. residency, Where To File, later. For each year that Line 4 you are not required to file Form use the substantial presence test 1040-NR (or Form 1040 or 1040-SR), Check the appropriate box to indicate described in chapter 1 of Pub. 519. send your Form 8854 to the address whether you expatriated in 2020 and are under Where To File, later, by the date filing your initial expatriation statement, Line 6 or if you expatriated before 2020 (but your Form 1040-NR (or Form 1040 or Check the “Yes” box if you have after June 16, 2008) and are filing an 1040-SR) would have been due complied with your tax obligations for annual statement. (including extensions) if you had been the 5 tax years ending before the date required to file a Form 1040-NR (or Line 5 on which you expatriated, including but Form 1040 or 1040-SR). Your expatriation date is the date you not limited to, your obligations to file Where To File relinquish citizenship (in the case of a income tax, employment tax, gift tax, former citizen) or terminate your and information returns, if applicable, 1. Send your original initial or annual and your obligation to pay all relevant Form 8854 to the address listed below. long-term residency (in the case of a
Instructions for Form 8854 (2020) -3- Page 4 of 8 Fileid: … ions/I8854/2020/A/XML/Cycle04/source 16:33 - 13-Nov-2020
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
tax liabilities, interest, and penalties. categories on this balance sheet) from included in determining the amounts on You will be subject to tax under section your interest in each partnership. line 5. 877A if you have not complied with these obligations, regardless of whether Line 9 Line 23 your average annual income tax liability or net worth exceeds the applicable For purposes of determining your net Attach a statement describing and threshold amounts. worth, you are considered to own assets listing the total value of any other held in trusts that would be subject to liabilities you have that aren't included Section B—Balance Sheet U.S. gift tax if you had transferred your on lines 21 and 22. interest by gift immediately before your The financial information in this balance Section C—Property Owned sheet is required under section 6039G. expatriation date, but without regard to The balance sheet can be used to arrive sections 2503(b) through (g), 2513, on Date of Expatriation at your net worth. 2522, 2523, and 2524. List the total fair Complete Section C only if you are a market value and basis of such property covered expatriate (see Covered For purposes of determining your net on line 9. Attach a statement to Form expatriate, earlier). If you need worth, you are considered to own any 8854 describing each asset. Include the additional space for the description of interest in property that would be EIN (if any) for the trust in which the property, or if you need additional entry taxable as a gift under Chapter 12 of asset is held. lines, attach a continuation statement. Subtitle B of the Code had you transferred it immediately prior to Line 10 Line 1 expatriation, but without regard to the List the total value of your beneficial sections 2503(b) through (g), 2513, None of the amounts checked on line 1 interest in a trust. You must attach a 2522, 2523, and 2524. To determine the are subject to the mark-to-market tax. statement to Form 8854 that lists each value of your interests in property, use Don't include them on line 2. Instead, trust separately. Include the EIN (if any) the valuation principles of section 2512 you must attach a statement to the form for each trust. Describe the assets and and the regulations thereunder. that separately identifies each amount liabilities (using the categories on this checked on line 1 as of the day before Note. If there have been significant balance sheet) from your interest in your expatriation date. each trust of which you have a changes in your assets and liabilities for Some of these amounts may be beneficial interest. the period that began 5 years before TIP otherwise taxable or subject to your expatriation and ended on the date Note. To determine the value of your income tax withholding at that you first filed Form 8854, you must beneficial interest, use the two-step source. You must provide Form W-8CE attach a statement explaining the process described in Section III of to the payor of the relevant items. See changes. Notice 97-19. paragraphs (d), (e), and (f) of section 877A for more information. Columns (a) and (b) Lines 11 and 12 Line 1a. Generally, a deferred List in U.S. dollars the FMV (column (a)) Intangible property includes any of the compensation item is one of the and the U.S. adjusted basis (column following items that have substantial following. (b)) of your assets and liabilities as of value independent of the services of any your expatriation date. 1. Any interest in a plan or individual. arrangement described in section • Patent, invention, formula, process, You can use good faith estimates of 219(g)(5). This includes a qualified design, pattern, or know-how. pension, profit-sharing (including FMV and basis. Formal appraisals are • Copyright, literary, musical, or artistic not required. 401(k)), annuity, SEP, and SIMPLE composition. plan. • Trademark, trade name, or brand 2. Any interest in a foreign pension Line 5a name. plan or similar retirement arrangement • Franchise, license, or contract. List the appropriate amount in each or program. column for all nonmarketable stock and • Method, program, system, securities issued by foreign procedure, campaign, survey, study, 3. Any item of deferred corporations that would be controlled forecast, estimate, customer list, or compensation, whether or not foreign corporations if you were still a technical data. substantially vested. This is any amount U.S. citizen or resident. Note that these • Any similar item. of compensation if, under the terms of amounts are already included on line 5. the plan, contract, or other arrangement Don't include amounts on this line in the Line 19 providing for such compensation, the following conditions were met. total on line 20. Attach a statement describing and a. You had a legally binding right on listing the total value of any other assets your expatriation date to such Line 8 you have that aren't included on lines 1 compensation, List the total value of all your partnership through 18. interests. If you hold an interest in one b. The compensation has not been or more partnerships, you must attach a Line 20 actually or constructively received on or before the expatriation date, and statement to Form 8854 that lists each Combine lines 1 through 5 and 6 partnership separately. Include the c. The compensation is payable on through 19, not including any amounts or after the expatriation date. employer identification number (EIN), if on line 5a. The amounts on line 5a are any, for each partnership. Describe the Examples of items of deferred assets and liabilities (using the compensation include: a cash-settled
-4- Instructions for Form 8854 (2020) Page 5 of 8 Fileid: … ions/I8854/2020/A/XML/Cycle04/source 16:33 - 13-Nov-2020
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
stock appreciation right, a phantom includes the following language for each expatriation date. You are considered a stock arrangement, a cash-settled item: “I irrevocably waive any right to beneficiary of such trust if: restricted stock unit, an unfunded and claim any reduction in withholding for 1. You are entitled or permitted, unsecured promise to pay money or this eligible deferred compensation item under the terms of the trust instrument other compensation in the future (other under any treaty with the United States.” or applicable local law, to receive a than such a promise to transfer property Line 1b. Ineligible deferred direct or indirect distribution of trust in the future), and an interest in a trust compensation item means any deferred income or corpus (including, for described in section 402(b)(1) or (4) compensation item that is not an eligible example, a distribution in discharge of (commonly referred to as a secular deferred compensation item. The an obligation); trust). amount of this deferred compensation 2. You have the power to apply trust 4. Any property, or right to property, item (the present value of the accrued income or corpus for your own benefit; that you are entitled to receive in benefit) must be included on your Form or connection with the performance of 1040 or 1040-SR, or other schedule, for services (whether or not such property 3. You could be paid from the trust the portion of your taxable year that income or corpus if the trust or the or right to property is substantially includes your expatriation date. For vested) to the extent not previously current interests in the trust were more information, see section 5D of terminated. taken into account under section 83 or Notice 2009-85, 2009-45 I.R.B. 598, in accordance with section 83. available at IRS.gov/irb/ Unless you elect to be treated as Examples of these items include, but 2009-45_IRB#NOT-2009-85. having received the value of your are not limited to, restricted stock, interest in the trust, as determined for stock-settled stock appreciation rights, Note. If you have one or more ineligible purposes of section 877A, as of the day and stock-settled restricted stock units. deferred compensation item(s), you before your expatriation date, you must attach a statement to the form that cannot claim a reduction in withholding Note. A deferred compensation item separately identifies each ineligible on any distribution from the trust under does not include the portion of an item deferred compensation item and any treaty with the United States. Before that is attributable to services performed provides the present value of such you can make the election, you must get outside the United States while you ineligible deferred compensation item a letter ruling from the IRS as to the were not a citizen or resident of the as of the day before your expatriation value, if ascertainable, of your interest in United States. For more information, date. the trust as of the day before the see section 5 of Notice 2009-85, expatriation date by following the 2009-45 I.R.B. 598, available at Line 1c. A specified tax deferred account includes: procedures set forth in Rev. Proc. IRS.gov/irb/ 2020-1, 2020-1 I.R.B. 1, available at 2009-45_IRB#NOT-2009-85. 1. An individual retirement plan IRS.gov/irb/2020-01_IRB#RP-2020-01. Eligible deferred compensation item (except those described in section You must make this election by means any deferred compensation item 408(k) or 408(p)), checking the box under line 1d of this with respect to which: 2. A Coverdell education savings form and attaching a copy of the letter • The payor is either a U.S. person or a account, or ruling both to this form and to your non-U.S. person who elects to be 3. A health savings account or an timely filed tax return (including treated as a U.S. person for purposes of Archer medical savings account. extensions) for the 2020 tax year. Until section 877A(d)(1), and you obtain the valuation letter ruling and • The covered expatriate notifies the The amount of your entire interest in provide a copy of such letter ruling to payor of his or her status as a covered your specified tax deferred account on the trustee of the nongrantor trust expatriate on Form W-8CE, and the day before your expatriation date together with certification, under • Irrevocably waives any right to claim must be included on your Form 1040 or penalties of perjury, that you have paid any withholding reduction on such item 1040-SR, or other schedule, for the all tax due as a result of your election, under any treaty with the United States portion of your taxable year that any taxable distributions that you on Form 8854. includes your expatriation date. For receive from the trust will be subject to more information, see section 6 of The Secretary may provide separate 30% withholding. Notice 2009-85, 2009-45 I.R.B. 598, guidance providing a procedure for a available at IRS.gov/irb/ If you have an interest in a payor who is a non-U.S. person and 2009-45_IRB#NOT-2009-85. nongrantor trust, you must file wishes to elect to be treated as a U.S. Form 8854 annually to certify person for purposes of section 877A(d) Note. If you have one or more specified that no distributions have been received (1). tax deferred account(s), you must or to report the distributions you You must file Form 8854 attach a statement to the form that received. ! annually to certify that no separately identifies each specified tax CAUTION distributions have been deferred account and provides the Note. If you have an interest in one or received from your eligible deferred entire account balance of each more nongrantor trust(s), you must compensation item(s) or to report the specified tax deferred account on the attach a statement to the form that distributions you received. day before your expatriation date. separately identifies each nongrantor Line 1d. A nongrantor trust is the part trust and includes one of the following Note. If you have one or more eligible of any trust, whether domestic or statements for each interest. deferred compensation items, you must foreign, of which you were not 1. “I waive any right to claim any attach a statement to the form that considered the owner under sections reduction in withholding on any separately identifies each eligible 671 through 679 on the day before your distribution from such trust under any deferred compensation item and treaty with the United States.”, or
Instructions for Form 8854 (2020) -5- Page 6 of 8 Fileid: … ions/I8854/2020/A/XML/Cycle04/source 16:33 - 13-Nov-2020
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
2. “I elect under section 877A(f)(4) Column (e). Before you complete ($737,000) by a ratio of the deemed (B) to be treated as having received the column (e), you must allocate the gain attributable to each gain property value of my entire interest in the trust exclusion amount to the gain properties over the total gain of all the gain (as determined for purposes of section on a separate schedule. Attach a copy properties deemed sold. 877A) as of the day before my of the separate schedule to this form. To expatriation date. I attach a copy of my allocate the exclusion amount, Asset A valuation letter ruling issued by the IRS.” determine the gain of each gain property listed in column (a) and enter 1,800,000 × 737,000 = 663,300 Line 2 that gain in column (d). If the total gain 2,000,000 of all the gain properties exceeds the Column (a). An interest in property exclusion amount ($737,000 for 2020), Asset B includes money or other property, then allocate the entire exclusion regardless of whether it produces any amount to the gain properties by 200,000 income or gain. In addition, an interest × 737,000 = 73,700 multiplying the exclusion amount by the 2,000,000 in the right to use property will be ratio of the gain determined for each treated as an interest in such property. gain property in column (d) over the However, do not list the following. total gain of all gain properties listed in Step 3: Figure the final amount of 1. Deferred compensation items. column (d). After you have allocated the deemed gain on each asset by 2. Specified tax deferred accounts. exclusion amount to the gain properties, subtracting the exclusion amount subtract the exclusion amount allocated 3. Interests in nongrantor trusts. allocated to each asset. to each gain property from the gain You are considered to own any reported for that property in column (d), interest in property that would be and enter the resulting amount of gain in Asset A: 1,800,000 − 663,300 = 1,136,700 included in your gross estate for federal column (e). If the total gain of the gain Asset B: 200,000 − 73,700 = 126,700 estate tax purposes under Chapter 11 of properties in column (d) is less than the Subtitle B of the Code if you died on the exclusion amount (but greater than -0-), day before the expatriation date as a then you must use the total gain amount Column (f). Complete this column in citizen or resident of the United States. as the exclusion amount, and you must order to list the schedule or form on Whether property would be included in allocate the exclusion amount, as which you reported the deemed sale of your gross estate will be determined adjusted, to the gain properties under each property listed in column (a) (for without regard to sections 2010 through the method described above. The example, Form 4797 or Form 8949). 2016. For this purpose, you are exclusion amount allocated to each gain Column (g). Complete this column considered to own your beneficial property cannot exceed the amount of only for those properties for which you interest(s) in each trust (or part of a that gain property's built-in gain. are electing to defer the payment of tax. trust), other than a nongrantor trust See Notice 2009-85, section 3B, for First, complete Section D to line 4. On a subject to section 877A(f), that would more information. separate attachment, allocate the not be included in your gross estate as amount of tax eligible for deferral among described in the preceding sentences. Example. X, a covered expatriate, renounced his citizenship on Date 2. On all gain properties listed on line 2. The Your beneficial interest(s) in such a trust tax attributable to a particular property is shall be determined under the special Date 1, the day before X's renunciation of his citizenship, X owned three assets, determined by multiplying the amount rules set forth in section III of Notice on Section D, line 4, by the ratio of the 97-19, which is on page 40 of Internal which he had owned for more than one year. Asset A is business property and gain for that property entered on line 2, Revenue Bulletin 1997-10 at column (e), over the total amount of gain IRS.gov/pub/irs-irbs/irb97-10.pdf. assets B and C are personal property. As of Date 1, Asset A had an FMV of of all gain properties on line 4, column Column (b). Use the FMV on the day $2,000,000 and a basis of $200,000; (e). On line 2, column (g), enter the tax before your expatriation date. FMV is Asset B had an FMV of $1,000,000 and attributable to each property for which the price at which the property would a basis of $800,000; Asset C had an you are electing to defer tax. Then enter change hands between a buyer and a FMV of $500,000 and a basis of the total deferred tax for those seller when both have reasonable $800,000. X must allocate the exclusion properties from line 4, column (g), on knowledge of all the necessary facts amount as follows: Section D, line 5. and neither has to buy or sell. If parties Step 1: Determine the built-in gain or Example. Line 2 lists four assets, with adverse interests place a value on loss of each asset by subtracting the each resulting in a deemed gain in property in an arm's-length transaction, basis from the FMV of the asset on Date column (d). The amount of tax eligible that is strong evidence of the FMV. 1. for deferral on Section D, line 4, is Column (c). Generally, the cost or $575,000. You must go back to line 2, column (g), to allocate the deferred tax other basis in this column cannot be Basis FMV Built-in Gain/ less than the FMV of the property on the Loss among the individual properties. date you first became a U.S. resident. Asset A 200,000 2,000,000 1,800,000 You must attach a computation However, if you are a naturalized citizen Asset B 800,000 1,000,000 200,000 ! to show how you figured the tax or LTR at the time you expatriated, you CAUTION Asset C 800,000 500,000 (300,000) attributable to each property. can make an irrevocable election under section 877A(h)(2) to determine basis See Section D—Deferral of Tax and without regard to this restriction. Print Notice 2009-85, section 3E, for more Step 2: Allocate the exclusion “(h)(2)” after any entry for which you information on deferring the payment of amount to each of the gain properties by make this election. tax. multiplying the exclusion amount
-6- Instructions for Form 8854 (2020) Page 7 of 8 Fileid: … ions/I8854/2020/A/XML/Cycle04/source 16:33 - 13-Nov-2020
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Note. The address listed in Section 3E Line 2 Note. The address listed in Section 3E of Notice 2009-85 for mailing your tax of Notice 2009-85 is no longer valid. Enter on line 2 the amount of tax on deferral agreement is no longer valid. line 5 of the first return. If the IRS deems your collateral See Procedure for requesting a deferral sufficient, and agrees to enter into a tax of the payment of tax, later, for the Line 3 deferral agreement, you can pay any tax correct address. deferred, together with interest, at any Reporting gain or loss. You must Enter on line 3 the amount of tax on time. However, the time for the payment report and recognize the gain (or loss) line 5 of the second return. of tax attributable to a particular deferral of each property reported in Section C, asset can be extended only until (a) the line 2, column (a), on the relevant form Line 5 year the asset is ultimately disposed of or (b) the year of death. or schedule of your Form 1040 or This is the amount of tax you elect to 1040-SR for the part of the year that defer. If you are deferring tax on all You must file Form 8854 includes the day before your properties, enter the amount from line 4. ! annually for years up to and expatriation date. The return to which If you are electing deferral on only CAUTION including the year in which the you attach your form or schedule will certain properties, go to Section C, full amount of deferred tax and interest depend on your status at the end of the line 2, column (g), to show how much is paid. year. See chapter 1 of Pub. 519 to deferred tax is allocated to each determine which form you should file. property. Attach a computation. Waiver of treaty benefits. As a The gain from column (e) or loss from further condition to making the election Procedure for requesting a deferral column (d) attributable to each property to defer the payment of tax on a of the payment of tax. In order to is reported in the same manner as if the particular asset, you must waive any defer any part of the mark-to-market tax, property had actually been sold. For right under any U.S. tax treaty that you must enter into a tax deferral example, gain recognized from the would preclude the assessment or agreement with the IRS and provide deemed sale of a rental property that collection of the tax. has been depreciated is reported on adequate security. Notice 2009-85 Form 4797 as if it had been sold. Gain contains a sample agreement Satisfying your deferred tax liability. recognized from the deemed sale of (Appendix A). Adequate security can be If you entered into an agreement for the personal property (such as stock or a either: deferral of tax with the IRS Advisory personal residence) is reported on Form 1. A bond that is furnished to, and Office and dispose of one or more 8949 as if it had been sold. Capital gain accepted by, the IRS, that is assets for which you elected to defer retains its character as capital gain; conditioned on the payment of tax (and tax, you must contact that office to make ordinary gain retains its character as interest thereon), and that meets the arrangements to satisfy your tax liability. ordinary income. requirements of section 6325; or The address for the Advisory Office is shown above. Section D—Deferral of Tax 2. Another form of security (including letters of credit) that is If you expatriated in 2020, and you acceptable to the IRS. Part III—Annual chose to enter into a tax deferral Expatriation Statement for agreement with the IRS with respect to You must contact the following office assets subject to the mark-to-market in order to make the appropriate Persons rules of section 877A, use lines 2 arrangements for providing security. Who Expatriated through 5 of Section D to figure the After June 16, 2008, and amount of tax you can defer. Before Internal Revenue Service completing lines 2 through 5 of SBSE Advisory Office Before January 1, 2020 Section D, you must fill out two 7850 SW 6th Court You must file Part III if you: hypothetical individual income tax Mail Stop 5780 1. Deferred the payment of tax on returns using Form 1040 or 1040-SR. Plantation, FL 33324-3202 any property on a Form 8854 filed in a The first return includes all income, Telephone: (954) 991-4455 previous year, including the section 877A(a) gain and 2. Reported an eligible deferred loss. The second return includes all You must send your original tax compensation item on a Form 8854 filed income except the section 877A(a) gain deferral agreement request, marked in a previous year, or and loss. Attach both hypothetical “Original,” with your Form 8854 for the 3. Reported an interest in a returns to this Form 8854. year that includes your expatriation date to: nongrantor trust on a Form 8854 filed in a previous year. Line 1 Department of the Treasury Line 1 If you aren't electing to defer the Internal Revenue Service payment of tax on the gain reported in Philadelphia, PA 19255-0049 If you deferred the payment of tax in an Section C, line 2, column (e), report on earlier year, refer to the Form 8854 you the appropriate income tax return If you are required to file a Form filed for that earlier year to complete schedule or form the gain amount 1040, Form 1040-SR or Form 1040-NR columns (a), (b), and (c). If you attributable to each particular property for the year that includes your expatriated in 2019, use the information as listed in Section C, line 2, column (e), expatriation date, please also attach a from Part II, Section C, line 2. If you and report the loss amount attributable copy of the tax deferral agreement expatriated in 2018, or earlier, use the to each particular property as listed in request, marked “Copy,” to the Form information from Part III, line 1, of the Section C, line 2, column (d). If you are 8854 that you include with your tax earlier year's Form 8854. electing to defer tax, go to line 2. return.
Instructions for Form 8854 (2020) -7- Page 8 of 8 Fileid: … ions/I8854/2020/A/XML/Cycle04/source 16:33 - 13-Nov-2020
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
If you disposed of any property in Line 3 sign it and include a preparer tax 2020 on which you deferred the Unless the exception at the end of this identification number (PTIN) in the payment of tax on a previous return, section applies, check the “Yes” box if space provided. The preparer must give also complete column (d). You must you received any direct or indirect you a copy for your records. Someone report the gain or loss from the property distributions of property (including who prepares Form 8854 but does not disposed of on the appropriate line (or money) from a nongrantor trust in 2020. charge you a fee should not sign it. schedule) of your income tax return. Enter the part of the distribution that you Paperwork Reduction Act Notice. You must pay the deferred tax, would include in gross income if you We ask for the information on this form plus interest, on any property continued to be subject to tax as a U.S. ! to carry out the Internal Revenue laws of CAUTION you disposed of, no later than citizen or resident. Also enter the total the United States. You are required to the due date (without extensions) of amount of tax withheld by the payor(s) give us the information. We need it to your 2020 income tax return. See of any distribution. ensure that you are complying with Satisfying your deferred tax liability, Don't include any distribution these laws and to allow us to figure and earlier, for information on arranging from a trust if your interest in the collect the right amount of tax. payment. trust was treated in an earlier year as a deferred compensation item You are not required to provide the See Section D—Deferral of Tax information requested on a form that is under Part II—For Persons Who or part of a specified tax deferred account. subject to the Paperwork Reduction Act Expatriated During 2020, earlier, and unless the form displays a valid OMB Section 3E of Notice 2009-85 for more control number. Books or records information on deferring the tax. Exception. Don't check the “Yes” box if you elected on a previously filed Form relating to a form or its instructions must be retained as long as their contents Note. The address listed in Section 3E 8854 to be treated as having received may become material in the of Notice 2009-85 for mailing your tax the value of your entire interest in the administration of any Internal Revenue deferral agreement is no longer valid. trust as of the day before your law. Generally, tax returns and return See Procedure for requesting a deferral expatriation date. information are confidential, as required of the payment of tax under by section 6103. Section D—Deferral of Tax, earlier, for Penalties the correct address. If you are subject to section 877 or The average time and expenses section 877A and required to file Form required to complete and file this form Line 2 8854 for any tax year, and you fail to file will vary depending on individual Check the “Yes” box if you received any or do not include all the information circumstances. For the estimated distributions of eligible deferred required by the form, or the form averages, see the instructions for your compensation items in 2020. Enter the includes incorrect information, you will income tax return. part of the distribution that you would owe a penalty of $10,000 for that year, include in gross income if you continued unless it is shown that such failure is to be subject to tax as a U.S. citizen or due to reasonable cause and not willful resident. Also enter the total amount of neglect. tax withheld by the payor(s) of any eligible deferred compensation items. Signature Don't enter the part of any Form 8854 is not considered valid payment that is attributable to unless you sign it. If you have someone services performed outside the else prepare Form 8854, you are still United States before or after the responsible for its correctness. expatriation date while you weren't a Paid preparers. Generally, anyone citizen or resident of the United States. you pay to prepare Form 8854 must
-8- Instructions for Form 8854 (2020)