TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, April 14, 2018

WSJ: Meghan Markle’s U.S. Citizenship Will Cause Post-Marriage Tax Headaches For British Royal Family

Following up on my previous post:  Wall Street Journal, Look Out, Meghan Markle! The IRS Is Watching:

Dear Meghan,

Congratulations on finding your Prince Charming! I don’t want to be the bad fairy at the festivities, but we need to have a serious talk about taxes.

Meghan, I know you lived as a U.S. citizen in Canada and may be aware of tax issues faced by the seven million or so Americans living abroad. And I know you’re committed to Harry, because you’ve given up a lot since you two became serious, including your lucrative acting career and your lifestyle website.

But I don’t think you know the tax torment many American expats face when they marry non-U.S. citizens—as you’re about to do. Nearly every financial move they make, and other moves they don’t think of as financial, raises a U.S. tax issue.

In your case, this means that if Queen Elizabeth II gives—or merely lends—you a tiara or a diamond bracelet, you may need to tell the Internal Revenue Service about it. Your share of the free rent for that cute cottage at Kensington Palace where you and Harry will live? Its value could be reportable to the IRS as well. If you have a credit or debit card tied to Harry’s bank account and it has more than $10,000, his account has to be reported to U.S. authorities.

http://taxprof.typepad.com/taxprof_blog/2018/04/meghan-markles-us-citizenship-will-cause-post-marriage-tax-headaches-for-british-royal-family.html

Celebrity Tax Lore, Tax | Permalink

Comments

And people wonder why U.S. citizens renounce their citizenships. You'd think the U.S.A. is a country with a government rather than a government that has a country. Renounce!

Posted by: TS | Apr 14, 2018 7:43:21 AM

2018 is notable for two significant events which will illuminate the U.S. policy of: Imposing "worldwide taxation" on people who are "tax residents" of other countries and do not even live in the United States.

The first event is U.S. citizen Meghan Markle, marrying Prince Harry and moving to the U.K. to live with him. Wherever a U.S. citizen lives, he/she brings the Internal Revenue Code along. Although, it is likely that the Royal Family has taken steps to protect itself (to the limited extent that it can) from America's predatory tax policies, the Royal Marriage will shine a light on one of America's dirtiest little secrets - that is, imposing the Internal Revenue Code on people who don't live in the United States.

The second event is the attempt of the United States to effectively confiscate 17.54% of the "retained earnings" of those Canadian Controlled Private Corporations (and small business corporations in other countries), owned by Canadian residents who are also U.S. citizens. To learn about this issue see:

http://www.citizenshipsolutions.ca/2018/04/13/part-8-responding-to-the-sec-965-transition-tax-this-small-business-thought-it-was-saving-to-invest-in-business-expansion-wrong-they-were-saving-to-be-robbed-by-america/

The anger toward America is certainly reaching a "boiling point".


Posted by: John Richardson | Apr 15, 2018 6:12:24 AM

Why doesn’t Meghan simply renounce her U.S. citizenship?

Posted by: Talbert Michael A. | Apr 15, 2018 11:01:06 AM

She can renounce her U.S. Citizenship to prevent future income tax issues in the U.S.A. With all the money she will have access to marring Prince Harry, all of the above mentioned items that create tax issues for expats is a non-issue for her.

Posted by: Martha De la chaussee | Apr 15, 2018 12:58:51 PM

"She can renounce her U.S. Citizenship to prevent future income tax issues in the U.S.A. With all the money she will have access to marring Prince Harry, all of the above mentioned items that create tax issues for expats is a non-issue for her."

____________________________________________________________

Interesting. Would you care to comment on the "Exit Tax" issues found in Sec. 877A of the Internal Revenue Code? Assuming that she is a "covered expatriate", then the USA will want a share of her wealth simply because she renounces citizenship. Do you think that Prince Harry and the Royal family should simply be expected to pay that Exit Tax on Meghan's behalf? It's kind of like Prince Harry "buying Megan Markle" from the IRS, isn't it? Freeing her from her bondage perhaps?

(Google S. 877A Exit Tax)

Posted by: John Richardson | Apr 15, 2018 6:36:37 PM

Meghan Markle is not in a position to immediately renounce her U.S. citizenship. There is a minimum residence requirement of 3 years in order to receive U.K. citizenship and the Royal couple indicated a few months back, that they would not request waiving the time element. (Technically she could renounce immediately and be stateless; the U.S. does not like to do this but cannot prevent it). Considering she is unlikely to take that path, for at least the next three years, she will be in the same position as any other American expat; worse because of the large sums of money that she will have access to upon marriage in addition to her own income, savings, etc

As Mr. Richardson mentioned above, Ms. Markle may be a covered expatriate subject to the Exit Tax. If so, she will have to “pay” to leave the U.S. and be free of further tax obligations. Marrying into the Royal Family/having access to more money plus her own net worth makes her situation far more complicated and expensive than the average expat.

Posted by: Patricia Moon | Apr 15, 2018 10:28:46 PM