What’s Tax Got to Do With It?

Allan Rolnick, CPA

Singer Tina Turner’s death last month at age 83 leaves an enormous hole in the genre of rock and roll. Turner cut her first record in 1958 on her way to becoming a star with husband Ike in the ‘60s and ‘70s. Then, at age 44, she launched a solo comeback. Tina Turner was born Anna Mae Bullock in Nutbush, Tennessee, which you can probably guess by its name is just a wide spot on State Route 19 with a population too small to support its own juke joint. She’s been many things in her life: a Baptist and a Buddhist, an award-winning singer and actress, and a domestic violence survivor. But one thing she was not, at the end, was an American citizen. In 1994, she moved to a Swiss villa on the shore of Lake Zurich. In 2013, she became a Swiss citizen. That move turns out to have huge tax consequences today. Giving up citizenship isn’t something you do casually, like forgetting to go to the dentist. You have to appear in person before a U.S. consular or diplomatic office in a foreign country. You have to sign an oath of renunciation and turn in your U.S. passport. You have to pay a $2,350 fee. And most important for some, you have to pay an “exit tax” on the value of any appreciated assets you own (above a $767,000 exclusion) when you leave. This means, essentially, you’ll be taxed as if you had sold everything you own on the day before you surrender that passport. You’ll file Form 8854 to calculate and report your tax. If you can’t afford to pay it on the spot, you can even finance it so long as you post adequate security.

In 2013, Turner was one of just 2,999 Americans to give up her citizenship. But it’s becoming more common, with 6,707 leaving in 2020. And immigration lawyers say that most do it to avoid taxes. That list includes Facebook co-founder Eduard Saverin, who unfriended Uncle Sam just months before his stock went public. It also includes actor Yul Brynner, British Prime Minister Boris Johnson, and Tupperware inventor Earl Tupper. How does Turner’s bottom line benefit from the move? Not much, on a day-today basis. Switzerland’s top federal tax is 11.5%; the Canton of Zurich’s top rate adds 13%; and her municipality of Küsnacht charges another 10.1%. There’s also a net wealth tax of 0.3-0.5%. That’s comparable to our own federal max of 37%. But the real savings come at death. Here, estates are taxed at 40% on amounts above $12.92 million not passing to a surviving spouse. In Switzerland, the rate tops out at just 26% — and it doesn’t apply at all to spouses, parents, or lineal descendants. Last year, Bilanz magazine estimated her net worth at $225 million, which suggests that whatever tax she may have paid at her exit could save her heirs $85 million today. That’s a lot of Toblerone! The good news is that you don’t have to trade baseball, hot dogs, and apple pie for chocolate and cuckoo clocks to save taxes. Yes, our rates are higher than in a lot of places where you could choose to move. But our code is littered with “green lights” where you can pay less. Call us before you call your travel agent, and see if we can save you an expensive move!

Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at allanjrcpa@aol.com

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