Does Section 958 Attribution Rules Impute the Value of Stocks Owned by a Nonresident Spouse to a U.S. Citizen/Resident for Expatriation Tax Purposes?
By Anthony Diosdi IntroductionAn individual who terminates citizenship or long-term residence could be subject to an expatriation tax. In part, an expatriate individual is automatically subject to an expatriation tax if the individual’s average annual tax burden exceeds $171,000 for the preceding five years or if they have a net worth of over $2 million when they expatriate. In many cases, individuals seeking to expatriate from the United States have spouses that are not U.S. citizens or residents. It is not uncommon for these individuals to own shares in foreign corporations. Recently, Congress enacted sweeping changes to Internal Revenue Code Section 958 “attribution rules.” Under Internal Revenue Code Section 958, stock owned directly or indirectly by a U.S. Person’s spouse is considered owned proportionately by the U.S. person for controlled…