Posted by joesinclar , 1 reply

Here the situation of a friend of mine.

He his a French National
He has been naturalized in 2005 US citizen
He left the US in 2009
Been living Abroad, in Europe and West Africa since then
Haven’t been filing his US tax return as an Expat living abroad

He recently signed to be part of a company in Benin west africa at 25% shares using his french Passport.

He has been wanting to renunce his Citizenship for some time and would like to do it now since he hasn’t been living in the US since 2009, doesn’t plan to work there in the near future and doesn’t want the hassle to have to file every year for his taxes on revenues made in Benin. The revenues will not be generated in the US or come from the US. He will straighten out his past taxes and pay whatever penalties he owes before renuncing to be clear with the IRS.

Is it a relatively safe situation if he renunces his Citizenship at this point. Meaning a pretty straightforward process.
as kind of a “deadbeat”, no asset, no income over $25k per year in the past 10 years ?. Or could it be a problem that he recently signed as a shareholder in a company in Benin. No activity yet on the company which has a capital of 2,000$ only.

Should he declare owning 25% of that company at the time or renunciation ? if so, what are the consequences of declaring it ? would it cost him just the value of that 25% at the time of renunciation ? or would it flag him as renuncing for suspicions of future Tax avoidance. ? and have other consequences.

or should he let it go and not declare it at the time of renunciation since the company is not in activity and made no money at the time of Renunciation. If so, could the IRS after having finalized the Renunciation decides if they find out that this company post renunciation has been making my friend money, to consider it perjury and go back and tax him for his current revenues and future or worse. He his a bit paranoied now. 😉

Or is the worse for him, to pay an exit tax of the value of his share in the company at the time of renunciation. (without being flagged)

Bottom line should he declare his participation in that company or not and what would be the best course of action for him.

I assume the delay for getting the renunciation approved his 3 months max but the renunciation take effect at the time of the oath.

Thank you so much for shedding some lights.

He knows that the IRS laws are changing fast so he wants to leave now as unscathed as possible.

1 reply
Greenback Expat Tax Services

Hello,

After reviewing the above situation, I would recommend that your friend declares his ownership in the foreign company, becomes fully compliant on all of his past tax filings, and completes the renunciation process at the Embassy. This way he’ll be fully transparent to the IRS (should anything be scrutinized). Also, I don’t foresee any problems being caused by his ownership in the French company.

I hope this helps! If he would like more detailed information, I would recommend he speak with an expat tax specialist to go over the specifics of his situation.

Sincerely,

The Greenback Team
http://www.greenbacktaxservices.com
This reply was edited by a moderator at 21st August 2013 15:05 GMT