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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15183
Experience:  15years with H & R Block. Divisional leader, Instructor
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I was just online and noticed something about people who have

Customer Question

I was just online and noticed something about people who have lived and worked in the USA are supposed to file a form 8854 when they leave.
This question is in relation to a lady who was born in the USA but soon after moved to Australia. Although she was born in the States she has both a US and Australian passport (dual citizen). Their mother is Australian. They lived in Australia for 17 years and then came to the US for College for 4 years (1996-2000) and then went back to Australia. 1 year later they came to the States again and worked for 4 years 2001-2004 then decided to stop working to be a full-time mother and moved back to Australia permanently. She is married to an Australian and lives there. She did not fill in any forms when she left and although she doesn't earn any income at all (full-time Mother) she still files tax return in Australia with her husband. Since leaving the US she has not filed US tax returns. The big question is that her mother is Australian and quite wealthy. If her mother passed away and leaves money to her would the US try and enforce their own estate taxes even though her mother wasn't a US citizen and had no ties to US?
Submitted: 6 years ago.
Category: Tax
Expert:  Robin D. replied 6 years ago.
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Robin D :

Hello and thank you for using Just Answer.
A US citizen is taxed on their worldwide income. Since the lady in question has had no income in the years that she was living in Australia, she woud have had no income to report. Her husband, if he was not a US citizen, would not have been involved in the taxation of the US to her income. In other words, his income is not considered hers just because they are married. If she had earned income then she could have filed the Foreign Earned Income Exclusion with her return to exclude, up to the limit for each year, the income earned in the foreign (Not US) country.
As far as the US citizen receiving money or cash at upon the death of her mother, cash is not taxable when inherited. If the person were to inherit property the property if sold by the US citizen would be subject to taxation but not unless disposed of. If she inherited an account the interest would be taxable. Any estate tax would not be placed upon the NonUS citizen or their estate.
It bears mentioning that a US Citizen is required to report any

Report of Foreign Bank and Financial Accounts (FBAR), if

  1. The person has a financial interest in, or signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country and

  2. The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

    I hope this information is helpful,

JACUSTOMER-lprl6gy4- :

Thank you for this it is very helpful. Just to make sure I am understanding right regarding the inheritance tax. If the mother passed away (non-US citizen) and her stocks / share portfolio (on which taxes have always been correctly paid with the Australian tax office) were left to the daughter (with dual citizenship) the daughter would only be responsible for paying tax on the income generated moving foward? Also, would this be different next year..I think this year 2010 is a bit different than years past and future years.

JACUSTOMER-lprl6gy4- :

If I had to pay 55% or something to the US tax office if I sold her property in the future it would seem unfair as although I love the US I don't live there and she has never lived there. I wonder whether I should fill out one of those 8854 forms at least to let the US know that I am not living there anymore?

Robin D :

You are correct. If the rules change in the future it will more likely deal with what would be basis for the beneficiary. Still the estate of a nonresident is not tauchable by the IRS. The mother's estate would not fall under US taxation no matter how the rules changed for citizens or residents.

Robin D :

Read this before you decide to File 8854

JACUSTOMER-lprl6gy4- :

great - thank you! Sounds like it is all fine. Will read the link to learn more.

Robin D :

Best of luck and thank you again for using JA

Robin D. and other Tax Specialists are ready to help you