Facebook co-founder renounces US citizenship, escaping tax burden

I have helped plenty of people get rid of their U.S. citizenship.

This person is doing it for an obvious economic reason. When he terminated his U.S. citizenship, there was a "pretend" sale of his assets. Let's say he expatriated when his Facebook stock was worth $2.5B. He pays capital gain tax on the profit on his investment (probably 99.8% capital gain here, right?).

Then the stock goes IPO and his Facebook stock is worth $4B.

That extra $1.5B (from $2.5B when he terminated citizenship up to current market value) will never get taxed in the USA.

I have had conversations a number of times with founders who consider this strategy. (These are smaller exits -- $10M - $50M). They don't pull the trigger. The cost/benefit of giving up citizenship isn't worth it.

The two primary drivers (in my experience) for citizenship renunciation are the horrific tax enforcement policies currently rolling through the IRS. Go back to the start of this -- UBS and "secret bank accounts" and that launched Captain Ahab (the tax version, at least) off in search of Moby Dick (aka "tax cheats"). In the process, Captain Ahab has skewered thousands and thousands of goldfish.

The goldfish have noticed this. And are quietly slipping away.

The second reason people cite is the estate tax and its effect on family-owned businesses. This is especially true for dual citizens. Many families in the Middle East, for instance, deliberately had their children born in the USA to acquire US citizenship. Those children inherit the family business, then die. The U.S. estate tax imposed on a Saudi family-owned company will destroy the Saudi business.

U.S. international tax laws are batshit crazy. Unless of course your tax policy is to discourage U.S. enterprise abroad, discourage U.S. citizens from living and working abroad, and cause ridiculous legal and accounting fees to keep yourself clean with the government.