Anthony Parent Shares His Insights On: Navigating the Maze of PFICs And Other U.S. Tax Regulations for Expats

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Now, Anthony Parent, you are the face and the voice of the IRS medic. I love your podcast.
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For these people who are basically living in fear of the IRS,
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living in fear of the U.S.
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Tax system, I think that your podcast, The IRS Medic, is good medicine in that
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it is quite informative.
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Talk to me, please, about what are you seeing out there?
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What work are you doing in relation
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to that and what effect are you
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having please so i think one of the and
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keith was sort of touching on this turn your mic up a little bit yeah you bet
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you bet so keith was touching on this a little bit and i mentioned before this
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is the problem us expats are also facing is the tax industry the tax industry
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that invents laws regulations and people will speak very as a matter of factly
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about well what something is and you know and Oftentimes,
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I'll catch these comments on Facebook or something.
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And if I'm feeling a little feisty, especially here's a big one,
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is passive foreign investment companies.
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What essentially the US tax industry has decided on their own is that any foreign
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mutual fund or an ETF is a passive foreign investment company.
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And this is a topic that John has just been incredibly helpful on going through
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the history of why that isn't the case. because the PFIC law was passed in 1986
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and John pointed out, hey, look, foreign mutual funds really weren't a big thing back in 1986.
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They were about to be. And foreign mutual funds certainly were not on anyone's radar.
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And really the purpose of the 1986
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law, PFICs, was to make it so wealth managers would happen in the U.S.
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And that if you tried to manage your wealth outside the U.S.,
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you were subject to a very aggressive tax regime.
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Now what happened, and I was there, I was there in the beginning of it, It was in 2009.
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It was a voluntary disclosure initiative. And it was really specific for people who definitely did it.
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They were part of UBS's outreach program to Americans who were looking to not
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be in compliance with the U.S. tax obligations.
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And so one of the products that they sold was basically, hey,
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what do you want to do? I want to invest my money with you tax-free.
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So what UBS would do is set the client up with a shell company.
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And that shell company would have have a broker buying and selling not just
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mutual funds, but stocks.
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And what happened was the IRS realized what they had.
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They didn't even know it at the time. And then on the fly, they created a special PFIC tax regime.
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Now, most of us were surprised by this and how the accounting for mutual funds,
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really, really aggressive way the IRS does it.
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The calculations are terrible when When someone's buying and selling mutual
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funds, tracking the basis, it's really...