In Uncategorized on 03/14/2023 at 17:09

Taken to Canada as a lad of ten years, naturalized as a Canadian, and not divested of his natural-born US citizenship until fifty-six (count ’em, fifty-six) years later, successful stockbroker and investor George B. Dengin, T. C. Memo. 2023-31, filed 3/14/23, finds the price of his relinquished citizenship to be very high.

GB was beneficiary of three (count ’em, three) Canadian RRSPs, the north-border equivalent of an IRA. Like US IRAs, Canada only taxes distributions from RRSPs, not accumulations within; but US taxes RRSP accumulations in the years they take place, even if the beneficiary cannot or does not draw them down. There is, of course, a treaty, and IRS promulgated various Rev. Proc.s to help out people like GB, who never filed US income tax returns until IRS audited him. The treaty and Rev. Proc.s let a Canadian elect to have his RRSPs taxed for US purposes at distribution.

Although Judge Ronald L. (“Ingenuity”) Buch doesn’t so state, the audit probably resulted from GB’s relinquishment and the Section 877A expatriation tax.

GB filed a bunch returns late. IRS says that’s insufficient as untimely, but Judge Buch reads Rev. Proc. 2014-55 to omit the requirement that the returns be timely, as its predecessors required. So GB’s belated returns are sufficient.

Next, GB claimed substantial compliance. He did substantially comply for two RRSPs, filing for every year he had them, but not for the last. The last goes back years before GB ever filed.

I’m not sure of my arithmetic, but it looks like GB’s US citizenship, of which he was unaware for fifty-six years, will cost him around $9 million in deficiency and add-ons.

USA is the land of the free, but citizenship sure isn’t.


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