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Robin D.
Robin D., Senior Tax Advisor 4
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Experience:  15years with H & R Block. Divisional leader, Instructor
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With regard to ending US permanent residency and filing form

Resolved Question:

With regard to ending US permanent residency and filing form 8854 along with my form 1040 (and form 1040NR for part of this tax year spent as non-resdient) I want to know how cash (bank accounts) assets are handled for US expatriation taxation purposes?

Specifically on form 8854 I need to declare amounts of cash I have as part of my net worth calculation. However, is there also a need to include the amount of cash I had on hand at the time I became a US permanent resident and the amount I have now? I am suddenly worried that the gain in cash value of bank accounts during my time spent as a permanent resident would be included in the "taxable gain" in the expatriation tax calculation?

I am fairly sure that cash is not considered part of "property" in the gain calculation but cannot find this written anywhere specifically in the form 8854 instructions (I understand that deferred compensation items etc are treated differently but there is no mention of cash). In my case the increase in cash in my bank accounts has occurred from saving from my salary (after paying income taxes where due) and from the sale of assets (and paying capital gains taxes as necessary when taxes were due in the year of sale). I have fully paid all US taxes due for the last 5 years on all earned income and capital gains but the money saved and realised now sits in my bank accounts.

I am in the process of trying to manage my expatriation from the US to make sure that the gain on any properties (company stocks and a house I bought only last year with no gain of significance) that I have remaining would be significantly less than the approx $650,000 gain allowance threshold for 2012. However, the result of all my saving and sales of assets is that I now have bank cash balances significantly higher than at the time I became a permanent resident. I will re-invest the cash after filing and exiting but I want to make absolutely sure I have not made a major error and will be expected to pay the "expatriation tax" on the increase in value of my "cash holdings" over the last ten years.
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.

Robin D :

Hello and thank you for using Just Answer,
The potion of the Form 8854 where you list your bank accounts is for calculating your net worth and is not meant to include your bank accounts in taxation. This really is used to determine if your net worth makes you required to file the 8854. The fact that your bank account is more now than it was when you became a resident alien is not a source for taxation. If the amounts are significanr then your attached statement will explain the reason.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7259
Experience: 15years with H & R Block. Divisional leader, Instructor
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