February 1, 2013
En route from Lima to Santiago
Let’s end this week with something that we haven’t done in many, many moons: a Q&A.
Each week, my staff receives hundreds of questions from the 100,000+ Notes from the Field readers… and given the utter insanity which pervades the West right now, it’s high time we reintroduce Q&A as a regular feature of this letter. It’s my intent that the answers will really help flesh out the concepts we discuss regularly.
The first question is from Erik, who writes, “Simon, there seem to be so many high profile people leaving the country these days. Do you foresee a time when it may be illegal to do this?”
Great question. There have been a lot of high profile people who have reached their breaking points. Tiger Woods and Phil Mickelson recently disclosed their contempt for California taxes. Tina Turner and Eduardo Saverin renounced their US citizenship.
Over in Europe, actor Gerard Depardieu and billionaire Bernard Arnault have announced their departure from France.
And these are just the famous people. Legions of other unknowns have seen the writing on the wall and quietly moved themselves and their assets out of dodge.
For now, the door is wide open. Will it be forever? No chance. Throughout history, politicians have always reviled those who left home in difficult times.
In the early 1790s in France, the government passed a law confiscating the property of all Frenchmen who had left the country after July 14, 1789 (the date which marks the start of the revolution.)
The US government currently has tax penalties imposed against ‘covered expatriates’, i.e. those who have a net worth above $2 million or average annual tax liability of roughly $155,000 for the last five years (this adjusts with inflation).
Expatriates aren’t exactly a strong voting block, and governments desperately need the cash. So, yes, given current fiscal conditions and the historical patterns, it’s quite likely that much, much steeper penalties will be imposed in the future. And the penalties will apply across the board to more people… not just the ‘wealthy’.
Next, Jennifer asks, “Simon, I know that you travel so frequently. How do you stay in shape while traveling?”
There are few things more important than health, and unfortunately it can be challenging to maintain while on the road a lot.
I go out of my way to hit the gym every day… and if there’s no gym, I torture myself with an exercise video series that my friend and fitness guru Craig Ballantyne put together. His routines are perfect for when you want to squeeze in some exercise after a long day of meetings or travel, or when there’s no gym available.
(If you’re interested, you can check out Craig’s videos here. I highly recommend them.)
Food is even more important, so I always research which restaurants serve the cleanest, most organically grown meats. Plus I typically rent a short-term apartment if I’m going to be somewhere for more than a few days, so at least I can cook for myself. AirBnB.com and AlwaysOnVacation.co.uk are great tools for this.
Last, Michael asks, “Simon, if I purchase over $10,000 from a gold dealer like GoldMoney.com or BullionVault, is that reportable to the IRS if I am a US citizen?”
The short answer is YES. This was really ambiguous for a long time, but within the last year or so, the Financial Crimes Enforcement Network (FinCEN) issued guidance suggesting that foreign gold depositories like BullionVault and GoldMoney should be included in the Report of Foreign Bank and Financial Accounts.
This form, TDF 90-22.1, is due to the Treasury Department each year by June 30th. So if you had a GoldMoney account in 2012, it should be reflected on the TDF 90-22.1 that you submit this year.
There are also rules related to the Foreign Account Tax Compliance Act, but we’ll have to delve into those another time, I’m off to catch a plane. Have a great weekend.