Expatriation – Specified Tax Deferred Accounts

The mark-to-market tax regime does not apply to specified tax deferred accounts.  Under IRC Section 877A(e)(1)(A), if a covered expatriate holds any interest in a specified tax deferred account on the day before the expatriation date, such covered expatriate is treated as having received a distribution of his or her entire interest in such account on the day before the expatriation date.

Within 60 days of receipt of a properly completed Form W-8CE, the custodian of a specified tax deferred account must advise the covered expatriate of the amount of the covered expatriate’s interest in his account on the day before his expatriation date.

IRC Section 877A(e)(2) provides that the term “specified tax deferred account” means an individual retirement plan (under IRC Section 7701(a)(37), a qualified tuition plan under IRC Section 529, a Coverdell education savings account (under IRC Section 530), a health savings account (under IRC Section 223), an Archer MSA (under IRC Section 220).

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