While I was reading a forum thread titled "Are we on the verge of serious economic collapse?" I came across a post that stated that Congress had just passed into law a little provision that allows taxation of property when you renounce US citizenship. My first reaction was Wait a minute, wouldn't we have heard about this one?, and then I went hunting.
Look what I found!
The so-called "Heroes Earnings Assistance and Relief Tax Act of 2008", which is supposedly all about "[amending] the Internal Revenue Code of 1986 to provide benefits for military personnel, and for other purposes.", hides a little gem in Sections 301-303.
I didn't read the whole thing, because it's a lot of legalese and politikspeak and references other bills that I haven't had the time and energy to muddle through, and I can't understand half of it without sitting down and writing it all out on paper 3 or 4 times paraphrased in normal human speech and then asking someone else if I got it right. I'm pretty sure they do that on purpose. >.> Anyway, the basic idea, if I understand correctly, is that if you leave the country or otherwise declare yourself no longer a US resident, you're to be taxed on all assets (home, car, 401k) that you have in this country as though they had been sold on the day before your expatriation, and at "market value" (which to me sounds a heck of a lot like "as high as we can appraise it"). Now, I -think- there's a $600k 'gain' limit before they start taxing you, which gives you a pretty good base if you actually had that $600k in cash and not invested in your in-ground pool and your car(s)... and they obviously won't tax you if you're taking a loss. They also make exceptions if you have lived here less than 10 years or are under 18 1/2 years old at the time of expatriation (oh how kind!). However, it's still awfully shady, and it seems to me that the articles pointing this out were right - there's really no reason to start taxing expatriation unless they expect a lot of it to happen. What are they preparing for?