Capital Gains and Losses
Capital Gains Tax Questions? Ask a Tax Advisor for Answers ASAP
Hi, my name is ***** ***** my goal is to provide you with the most complete and accurate answer possible.
Congress has passed what is known as the “expatriation tax” which basically mean that individuals that try to avoid U.S. income tax by renouncing their citizenship and moving abroad will still be subject to U.S. income, gift, and estate taxation for ten years after leaving the United States. This is an interesting issue because many people because the tax is unconstitutional under the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States. The Supreme Court has ruled that states cannot tax a business unless is has a physical presence within the state. In other rulings it has also maintained that the Due Process Clause applies equally to both the federal and state governments. This is reason the expatriation tax is believed by some to be unconstitutional, however it has never been tested in the court.
However, in your case however, the sale of restaurants, since they are physically located in the United States, will almost certainly be taxable by the U.S. under the Due Process Clause. Once you pay the tax and leave the United States however, the IRS would have to try to enforce the law by issuing a deficiency notice so the law could be challenged in the Tax Court. Even then, once your assets are outside the United States, the IRS will have difficulty collecting, unless you happen to return to the U.S. at some point.
I hope this answers your question. Please let me know if I can clarify anything or answer any additional questions. I always appreciate positive feedback. Thanks, Jonathan