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Facebook Co-Founder Gives Up U.S. Citizenship

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Re: Facebook Co-Founder Gives Up U.S. Citizenship

#71

Post by _delirium »

planetguy wrote: post #48
tallanvor wrote: post #44

Earlier quoted context omitted.

It does not discourage US workers from spending some of their careers overseas. Most workers, even if working overseas, don't make enough that they have to pay taxes on foreign earned income. --Between the deduction for money earned overseas, deductions for housing, and other standard deductions, if you earn enough that you're going to get taxed by the US, you earn enough that you might as well pay an accountant to h…

The cutoff is, if I recall correctly, $80K. So it doesn't apply to most workers, only the competent ones.

The foreign income exclusion is currently $92k, but even above that, in any country which has a bilateral tax treaty with the U.S. (almost all developed countries), you can deduct the foreign tax paid from U.S. tax obligations. I'm an American expat in Denmark, and from what I've back-of-the-envelope calculated, there is almost no possible circumstance in which I would owe U.S. taxes, because I get a credit for Danish taxes on my U.S. taxes, and Danish taxes are always higher, which zeroes out the U.S. taxes. So even if I made $150k I would not owe U.S. taxes.

In fact I typically don't take the $92k foreign income exclusion, because excluded income isn't eligible for IRA contributions, and I'd like to keep contributing to an American IRA. So I report my full Danish income on the 1040, then subtract the Danish taxes, and end up owing $0 without even using the exclusion at all.

Re: Facebook Co-Founder Gives Up U.S. Citizenship

#72

Post by briandon »

darrhiggs wrote: post #28
wilfra wrote: post #10

He's going to regret this down the road. Yes taxing on Worldwide income is absurd but not more absurd than giving up your right to live in the US. There will come a day, probably not too far in the future, where being young and rich on a tiny island isn't fun anymore and he's going to want to do something with his life. He's going to be quite sad when doing it in the United States is no longer an option.

Singapore in not an island.

It's a state made up of 60+ islands. The largest is often called "Singapore Island":

http://en.wikipedia.org/wiki/Singapore#Geography

http://en.wikipedia.org/wiki/Geography_of_Singapore

Re: Facebook Co-Founder Gives Up U.S. Citizenship

#73

Post by rada »

blahedo wrote: post #59
Aloisius wrote: post #42

You can't escape US taxation by giving up citizenship. He will have to pay the exit tax instituted in the 2008 Heroes Earning Assistance and Relief Tax Act (HEART) on all unrealized gains he has worldwide because his net worth is likely greater than $2 million. I believe it is set at 30%. As Facebook has announced the strike price, the value of the company and what his tax liability is, already has a very dollar valu…

The article says he actually gave it up last September, so the numbers might have been fuzzier then. Regardless, he's protected from tax on any subsequent rise in stock price. You can't escape past or current tax, but you can "escape" future taxation. On the ten-year tax shadow: How would that even work? If you were no longer a citizen, what claim would the US have on your money?

There is a rule - quite reasonable in my opinion - that if you were to renounce your US citizenship but then come back for more than 120 days (per year) during the first 10 years following your "resignation", you are considered a resident of the US for tax purposes. It is designed to deter Americans from giving up citizenship solely for tax evasion purposes, as opposed to actually moving to another country. I imagine one enforcement mechanism would be the denial of entry.

Re: Facebook Co-Founder Gives Up U.S. Citizenship

#74

Post by _delirium »

forinti wrote: post #55

Brazilian law says that he should have lost his Brazilian citizenship for voluntarily acquiring the US citizenship (which also requires that you renounce all others). But I guess with so much cash it won't be a problem.

Both Brazil and the US have allowed dual citizenship for some years now, so he's fine on that front.

Re: Facebook Co-Founder Gives Up U.S. Citizenship

#75

Post by waterlesscloud »

wilfra wrote: post #43
waterlesscloud wrote: post #23

Earlier quoted context omitted.

Do you truly imagine this means he has to live on a tiny island? With billions of dollars? The man could easily maintain homes in wonderful places around the world and do whatever he wants with his life in any of them. He's not going to regret this for even a minute.

He wont have to live in Singapore forever but that appears to be his plan at the moment. He's been there for quite awhile and seems to be loving it. It is a great place to be young, rich and good-looking. It's going to get old if he tries doing it for the rest of his life though. 10, 15, 20 years down the road is where that regret will kick in. Sure there are plenty of other great places to live than the United State…

There are places other than California to do things in tech, believe it or not.

Facebook wasn't even founded in California, for example.

Re: Facebook Co-Founder Gives Up U.S. Citizenship

#76

Post by gammarator »

DanielBMarkham wrote: post #4
laconian wrote: post #3

Some friends of mine are yelling "see? our tax code is pushing capital overseas!" My argument is, that with $4B at stake, even if we had a "reasonable" income tax, people like this would still seek out tax havens where the burden is even lower still.

So you agree with your friends that people act in their best interests, including changing citizenship, when it comes to taxes, you just disagree on the amount of money it would take?

People regularly choose against their own best interests due to perceived obligations to family, organization, country, etc.

Re: Facebook Co-Founder Gives Up U.S. Citizenship

#77

Post by urbanturbanguy »

Does patriotism have anything to do with citizenship? or is the question of acquiring citizenship becoming a function of your financial/carrer plan? (I can see that in a lot of comments here. It is an easy logic too.)

In other words is "patriotism" or "nation state" a medieval concept that will, over the next century, morph into the "market-value-ism" or "market-states"? (In the hypothetical "market-value-ism": You will be able to enter exit & participate in civic activities an any place based on the education/wealth that you have &/or the corporation you are aligned with.)

Re: Facebook Co-Founder Gives Up U.S. Citizenship

#79

Post by sigkill »

planetguy wrote: post #9

US citizenship is a nasty trap from which it is extremely difficult to escape. The US is one of a very small number of countries which will happily tax its citizens on income earned overseas, thus causing them to pay double taxes on everything they earn. This has seriously bad consequences for US competitiveness, in particular: 1. It discourages competent foreign citizens from seeking US citizenship (a greencard is s…

re: Point 1, "If you are a resident alien, you must follow the same tax laws as U.S. citizens. You are taxed on income from all sources, both within and outside the United States"

From http://www.irs.gov/taxtopics/tc851.html

Re: Facebook Co-Founder Gives Up U.S. Citizenship

#80

Post by hnwh »

felipe wrote: post #60
planetguy wrote: post #9

US citizenship is a nasty trap from which it is extremely difficult to escape. The US is one of a very small number of countries which will happily tax its citizens on income earned overseas, thus causing them to pay double taxes on everything they earn. This has seriously bad consequences for US competitiveness, in particular: 1. It discourages competent foreign citizens from seeking US citizenship (a greencard is s…

Your assumption on #2 is not correct. Americans living abroad get a tax credit (almost $100k currently), so in practice average-income US professionals living abroad are US tax-exempt. Above that, there are many rules designed to prevent double-taxation. Also, US citizenship is not a "trap" in Eduardo's case. It was his choice to become an American citizen in the first place.

We're exempt on tax on "Earned Income" up until a certain level (and yes, there is a highly technical definition for the type of income that qualifies for this). As one of the other commenters mentioned, we still have to pay full on Social Security, Medicare, Self-Employment taxes
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