Will Form 8865 Taxpayers 2024

Music. The topic we're going to cover now is what I call pre-immigration tax planning. You'll see what I mean by that through a story from early in my tax career. There was a gentleman who lived in Ecuador his whole life and collected Ecuadorian Indian art. He paid maybe fifty thousand dollars for that art. He came over to the United States, became a US taxpayer, and became a US citizen. Later, he sold the Ecuadorian art for three million dollars. However, because he was a US taxpayer when he sold the art, he had to pay a capital gains tax on two million nine hundred and fifty thousand dollars of his gains. Most of that gain did not accrue in the year or so he had been in America as it accumulated over many years before he even got his citizenship. But he only realized the gain when he sold his property after becoming a US taxpayer. This situation taught us a valuable lesson. People immigrating to the US and becoming US taxpayers from foreign countries need to look at their portfolios and income. They need to make sure they engage in tax transactions before coming here, so they can realize the gains they have had and their accumulated wealth from a tax standpoint. If this gentleman had sold his Ecuadorian art one day before becoming a US taxpayer, he would not have been subject to tax on that art. He would have been considered a foreign resident and sold the property as a foreigner. Therefore, our pre-immigration tax planning focuses on a couple of different things. First, we need to understand when a taxpayer becomes a US taxpayer or when a foreign national becomes a US taxpayer. They can become US taxpayers when they obtain a green card, which grants...