Glossary

IRC Section 877A (exit tax)

Section 877A imposes the expatriation tax, treating a covered expatriate's worldwide property as sold for fair market value the day before expatriation and taxing the net gain above an inflation-adjusted exclusion.

How it works

Section 877A treats a covered expatriate’s worldwide property as sold at fair market value the day before expatriation and taxes the net gain above an inflation-adjusted exclusion. Deferred compensation is handled through withholding on later payments, specified tax-deferred accounts are treated as distributed, and interests in non-grantor trusts are taxed on distribution. The tax is reported on Form 8854 with the final return.

Why it matters

The covered expatriate tests (net worth, tax liability, and compliance certification) are avoidable with planning and filing before renunciation.

Related: exit tax, Form 8854.

Guides that cover iRC Section 877A

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Definitions are general information, not legal advice, and may not reflect the most recent changes in law.

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