4 ms·

His step 2 could then be to renounce his US citizenship.

garmaine 6y ago
In which case you pay an "exit tax" equivalent to the tax hit from liquidating all your assets, e.g. capgains on all held stock. Renouncing citizenship never works as a tax dodge, unless you have some reason to expect large future gains in your assets that aren't reflected in their current market prices.
- jedberg 6y ago
  Like what Facebook's cofounder did right before the IPO.
  - gamblor956 6y ago
    Unlike Schmidt, Saverin was not born a U.S. citizen. He only became a U.S. citizen when his parents emigrated to FL during his teenage years. Also, unlike Schmidt, Saverin has spent most of his adult life actually living outside of the U.S. and had been living outside of the U.S. for years before finally renouncing his citizenship.
- gnicholas 6y ago
  > Renouncing citizenship never works as a tax dodge, unless you have some reason to expect large future gains in your assets that aren't reflected in their current market prices. It also could make sense if you expect future income tax rates to be much higher, or if you expect new taxes (e.g., wealth taxes) to be enacted.
  - T-A 6y ago
    Or if you expect a major bear market and you were going to liquidate your holdings anyway.
    - gnicholas 6y ago
      Rich people don’t liquidate due to the huge tax consequences. They would purchase derivatives to de-risk their portfolio.
      - T-A 6y ago
        US long term capital gains taxes are between 0 and 20% [1]. The popular definition of a bear market starts at 20%; if you are really bearish, you might "expect the S&P 500 to lose about two-thirds of its value over the completion of the current market cycle" [2]. Either way, giving up 20% of your gains beats losing between 20% and 66% of your entire holdings (initial investment + gains). Regarding derivatives, they are (1) not free, (2) of limited duration [3] and (3) only as good as the counterparty [4]. They can make sense if you have good reasons to expect a short blip. The longer and deeper you think the downturn will be, the less useful they become. [1] https://www.bankrate.com/investing/long-term-capital-gains-tax/ https://www.bankrate.com/investing/long-term-capital-gains-t... [2] https://www.hussmanfunds.com/comment/mc200901/ https://www.hussmanfunds.com/comment/mc200901/ [3] https://en.wikipedia.org/wiki/LEAPS_(finance) https://en.wikipedia.org/wiki/LEAPS_(finance) [4] https://en.wikipedia.org/wiki/Option_(finance)#Counterparty_risk https://en.wikipedia.org/wiki/Option_(finance)#Counterparty_...

In which case you pay an "exit tax" equivalent to the tax hit from liquidating all your assets, e.g. capgains on all held stock. Renouncing citizenship never works as a tax dodge, unless you have some reason to expect large future gains in your assets that aren't reflected in their current market prices.

jedberg 6y ago
Like what Facebook's cofounder did right before the IPO.
- gamblor956 6y ago
  Unlike Schmidt, Saverin was not born a U.S. citizen. He only became a U.S. citizen when his parents emigrated to FL during his teenage years. Also, unlike Schmidt, Saverin has spent most of his adult life actually living outside of the U.S. and had been living outside of the U.S. for years before finally renouncing his citizenship.
gnicholas 6y ago
> Renouncing citizenship never works as a tax dodge, unless you have some reason to expect large future gains in your assets that aren't reflected in their current market prices. It also could make sense if you expect future income tax rates to be much higher, or if you expect new taxes (e.g., wealth taxes) to be enacted.
- T-A 6y ago
  Or if you expect a major bear market and you were going to liquidate your holdings anyway.
  - gnicholas 6y ago
    Rich people don’t liquidate due to the huge tax consequences. They would purchase derivatives to de-risk their portfolio.
    - T-A 6y ago
      US long term capital gains taxes are between 0 and 20% [1]. The popular definition of a bear market starts at 20%; if you are really bearish, you might "expect the S&P 500 to lose about two-thirds of its value over the completion of the current market cycle" [2]. Either way, giving up 20% of your gains beats losing between 20% and 66% of your entire holdings (initial investment + gains). Regarding derivatives, they are (1) not free, (2) of limited duration [3] and (3) only as good as the counterparty [4]. They can make sense if you have good reasons to expect a short blip. The longer and deeper you think the downturn will be, the less useful they become. [1] https://www.bankrate.com/investing/long-term-capital-gains-tax/ https://www.bankrate.com/investing/long-term-capital-gains-t... [2] https://www.hussmanfunds.com/comment/mc200901/ https://www.hussmanfunds.com/comment/mc200901/ [3] https://en.wikipedia.org/wiki/LEAPS_(finance) https://en.wikipedia.org/wiki/LEAPS_(finance) [4] https://en.wikipedia.org/wiki/Option_(finance)#Counterparty_risk https://en.wikipedia.org/wiki/Option_(finance)#Counterparty_...