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Caution: DRAFT—NOT FOR FILING
This is an early release draft of an IRS tax form, instructions, or publication,
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collection through the Federal Register process; for more info, click here.2021 Department of the Treasury
Internal Revenue Service
Instructions for Form 8854
Initial and Annual Expatriation Statement
DRAFT AS OF
Section references are to the Internal Revenue 8854, continue to be treated as U.S. renouncement was later confirmed by
Code unless otherwise noted. citizens or U.S. lawful permanent the issuance of a certificate of loss of
residents for U.S. income tax purposes nationality).
Future Developments until they file a Form 8854. See section 2. The date you furnished to the
For the latest information about 7701(n), as in effect before June 17, State Department a signed statement of
developments related to Form 8854 and 2008. your voluntary relinquishment of a U.S.
its instructions, such as legislation
October 6, 2021
Individuals in this category are nationality confirming the performance
enacted after they were published, go to subject to section 877 once they file the of an expatriating act (provided that the
IRS.gov/Form8854. Form 8854. These individuals should voluntary relinquishment was later
use the 2018 Form 8854 and the confirmed by the issuance of a
What's New Instructions for Form 8854 (but modify certificate of loss of nationality).
Where to file. Mail Form 8854 to the the year on the form by crossing out 3. The date the State Department
address below. 2018 and entering the year of actual issued a certificate of loss of nationality.
filing) for purposes of filing their initial
and/or annual expatriation statements 4. The date a U.S. court canceled
Internal Revenue Service your certificate of naturalization.
3651 S IH35 pursuant to section 877 going forward.
MS 4301AUSC Individuals who expatriated before Long-term resident (LTR) defined.
Austin, TX 78741 June 17, 2008, who have previously You are an LTR if you were a lawful
filed a Form 8854, but who still have an permanent resident of the United States
See Where To File, later. annual reporting requirement in 2021 in at least 8 of the last 15 tax years
Increase in average annual net in- under section 877 should also use the ending with the year you are no longer
come tax liability. The average annual 2018 Form 8854 but modify the year on treated as a lawful permanent resident.
net income tax liability for the 5 tax the form by crossing out 2018 and In determining if you meet the 8-year
years ending before your expatriation entering 2021. requirement, don't count any year that
date, which is used to determine you were treated as a resident of a
whether an individual is a covered Who Must File foreign country under a tax treaty and
expatriate, has increased to $172,000. didn't waive treaty benefits applicable to
You must file your initial Form 8854
For more information, see Covered residents of the country.
(Parts I and II) if you relinquished your
expatriate, later. U.S. citizenship in 2021 or you are a Lawful permanent resident. You
Increase in threshold for net unreal- long-term resident (LTR), defined are a lawful permanent resident of the
ized gain on property. For 2021, if below, and terminated your residency in United States if you have been given the
you are a covered expatriate, the net 2021. privilege, according to U.S. immigration
gain that you must otherwise include in laws, of residing permanently in the
your income is reduced by $744,000. You must file your annual Form 8854 United States as an immigrant. You
For more information, see Taxation (Parts I and III) if you expatriated before generally have this status if you have
Under Section 877A, later. 2021 and you: been issued an alien registration card,
1. Deferred the payment of tax, also known as a green card, and your
2. Have an item of eligible deferred green card hasn't been revoked or
General Instructions compensation, or judicially or administratively determined
to have been abandoned. However, you
Purpose of Form 3. Are a beneficiary of a nongrantor are also no longer treated as a lawful
Section 877A applies to U.S. citizens trust. permanent resident if you (1)
who have relinquished their citizenship commenced to be treated as a resident
and long-term residents who have Expatriation. Expatriation includes the
of a foreign country under the provisions
ended their residency (expatriated) on acts of relinquishing U.S. citizenship
of a tax treaty, (2) did not waive the
or after June 17, 2008. and terminating long-term residency.
benefits of such treaty, and (3) notified
Form 8854 is used by expatriates to Date of relinquishment of U.S. the IRS of the commencement of such
certify compliance with tax obligations in citizenship. You are considered to treatment. See Regulations section
the 5 years before expatriation and to have relinquished your U.S. citizenship 301.7701(b)-7 for information on related
comply with their initial and annual (and consequently, have an expatriation filing requirements.
information reporting obligations under date) on the earliest of the following
Date of termination of long-term
section 6039G. dates.
residency. If you were an LTR, you
1. The date you renounced your terminated your lawful permanent
Note. Individuals who expatriated for U.S. citizenship before a diplomatic or residency (and consequently, have an
immigration purposes after June 3, consular officer of the United States expatriation date) on the earliest of the
2004, and before June 17, 2008, but (provided that the voluntary following dates.
who have not previously filed a Form
Oct 06, 2021 Cat. No. 24874E1. The date you voluntarily certain minors (defined next) won't be Taxation Under Section 877A
abandoned your lawful permanent treated as covered expatriates (and If you are a covered expatriate in the
resident status by filing Department of therefore won't be subject to the year you expatriate, you are subject to
Homeland Security Form I-407 with a expatriation tax) solely because one or income tax on the net unrealized gain in
U.S. consular or immigration officer. both of the statements in paragraph (1) your property as if the property had
2. The date you became subject to or (2) under Covered expatriate applies. been sold for its fair market value (FMV)
a final administrative order that you However, these individuals will still be on the day before your expatriation date
abandoned your lawful permanent treated as covered expatriates unless (“mark-to-market tax”). This applies to
DRAFT AS OF
resident status (or, if such order has they file Form 8854 and certify that they most types of property interests you
been appealed, the date of a final have complied with all federal tax held on the date of your expatriation.
judicial order issued in connection with obligations for the 5 tax years preceding But see Exceptions, later.
such administrative order). the date of expatriation as required in
paragraph (3) (under Covered Gains from deemed sales are taken
3. The date you became subject to expatriate, earlier).
a final administrative or judicial order for into account without regard to other
October 6, 2021
your removal from the United States Certain dual-citizens. You can rules under the Code. Losses from
under the Immigration and Nationality qualify for the exception described deemed sales are taken into account to
Act. above if you meet both of the following the extent otherwise allowed under the
requirements. Code. However, section 1091 (relating
4. If you were a dual resident of the to the disallowance of losses on wash
United States and a country with which • You became at birth a U.S. citizen
and a citizen of another country and, as sales of stock and securities) doesn't
the United States has an income tax apply. For 2021, the net gain that you
treaty, the date on which you of your expatriation date, you continue
to be a citizen of, and are taxed as a must otherwise include in your income
commenced to be treated as a resident is reduced (but not below zero) by
of that country under the treaty, did not resident of, that other country.
• You were a resident of the United $744,000.
waive the benefits of the treaty, and
gave notice to the Secretary of the States for not more than 10 years during Exceptions. The mark-to-market tax
commencement of such treatment. See the 15-tax-year period ending with the does not apply to the following.
Regulations section 301.7701(b)-7 for tax year during which you expatriated. 1. Eligible deferred compensation
information on related filing For the purpose of determining U.S. items.
requirements. residency, use the substantial presence
test described in chapter 1 of Pub. 519. 2. Ineligible deferred compensation
Covered expatriate. You are a items.
Certain minors. You can qualify for 3. Specified tax deferred accounts.
covered expatriate if you expatriated the exception described above if you
after June 16, 2008, and any of the meet both of the following requirements. 4. Interests in nongrantor trusts.
following statements apply.
• You expatriated before you were Instead, item (1) is subject to
1. Your average annual net income 181/2. withholding provided that you (i)
tax liability for the 5 tax years ending • You were a resident of the United properly make an irrevocable waiver on
before the date of expatriation is more States for not more than 10 tax years your initial filing of this form of any right
than the amount listed next. before you expatriated. For the purpose to claim any reduction in withholding
a. $139,000 for 2008. of determining U.S. residency, use the under an applicable treaty between the
b. $145,000 for 2009. substantial presence test described in United States and your country of
chapter 1 of Pub. 519. residence, see Line 1a of
c. $145,000 for 2010.
Section C—Property Owned on Date of
d. $147,000 for 2011. Note. If you have relinquished or intend Expatriation under Part II; and (ii) timely
e. $151,000 for 2012. to relinquish your U.S. citizenship, and notify the payor on Form W-8CE. To
you wish to come into compliance with timely notify the payor on Form W-8CE,
f. $155,000 for 2013. your U.S. income tax and reporting you must file the Form W-8CE with the
g. $157,000 for 2014. requirements in order to avoid being payor on the earlier of:
h. $160,000 for 2015. treated as a covered expatriate under
section 877A, you may qualify for
• The day before the first distribution on
i. $161,000 for 2016. or after your expatriation date, or
certain relief procedures. See IRS.gov/
j. $162,000 for 2017. Individuals/International-Taxpayers/
• 30 days after your expatriation date.
k. $165,000 for 2018. Relief-Procedures-for-Certain-Former- In the case of item (2), you are
Citizens. treated as receiving the present value of
l. $168,000 for 2019. your accrued benefit as of the day
m. $171,000 for 2020. Penalties. If you are subject to section before your expatriation date and you
877A and required to file Form 8854 for should include this amount on your
n. $172,000 for 2021.
any tax year, and you fail to file or do not Form 1040 or 1040-SR for the year that
2. Your net worth was $2 million or include all the information required by includes your expatriation date. In the
more on the date of your expatriation. the form, or the form includes incorrect case of item (3), you are treated as
3. You fail to certify on Form 8854 information, you will owe a penalty of receiving a distribution of your entire
that you have complied with all federal $10,000 for that year, unless it is shown interest in the account on the day before
tax obligations for the 5 tax years that such failure is due to reasonable your expatriation date and you should
preceding the date of your expatriation. cause and not willful neglect. include this amount on your Form 1040
Exception for dual-citizens and or 1040-SR for the year that includes
certain minors. Dual-citizens and your expatriation date. See paragraphs
(d), (e), and (f) of section 877A.
-2- Instructions for Form 8854 (2021)Item (4) is subject to withholding, and Alien in the Instructions for Form Part I—General
you are treated as having waived any 1040-NR.)
right to claim any reduction in
Information
withholding under an applicable treaty File your annual Form 8854 if you This section is to be completed by all
between the United States and your expatriated before 2021 and you: filers.
country of residence, unless you elect to 1. Deferred the payment of tax on
Line 1
be treated as having received the value any property on a Form 8854 filed in a
previous year, If you have a P.O. box, enter your box
of your entire interest in the trust by
number instead of your street address
DRAFT AS OF
obtaining a ruling from the IRS to that 2. Reported an eligible deferred only if your post office does not deliver
effect. See Section C—Property Owned compensation item on a Form 8854 filed
on Date of Expatriation under Part II, mail to the street address.
in a previous year, or
later. 3. Reported an interest in a Line 2
Deferral of the payment of nongrantor trust on a Form 8854 filed in Enter the information in the following
mark-to-market tax. You can make an a previous year. order: street address, city, province or
October 6, 2021
irrevocable election to defer the state, and country. Follow the country's
See Part III—Annual Expatriation practice for entering the postal code.
payment of the mark-to-market tax
Statement for Persons Who Expatriated Don't abbreviate the country name.
imposed on the deemed sale of
After June 16, 2008, and Before
property. If you make this election, the
following rules apply.
January 1, 2021, later. Line 3
For each year that you are required Enter the country of which you are
1. You make the election on a
to file a Form 1040-NR (or Form 1040 or considered a resident for tax purposes if
property-by-property basis.
1040-SR), attach your annual Form it is different from the country in which
2. The deferred tax on a particular your principal foreign residence is
8854 to your Form 1040-NR (or Form
property is due on the return for the tax located.
1040 or 1040-SR) and send a copy,
year in which you dispose of the
marked “Copy,” to the address under Line 4
property.
Where To File, later. For each year that
3. Interest is charged for the period you are not required to file Form Check the appropriate box to indicate
the tax is deferred. 1040-NR (or Form 1040 or 1040-SR), whether you expatriated in 2021 and are
send your Form 8854 to the address filing your initial expatriation statement,
4. The due date for the payment of
under Where To File, later, by the date or if you expatriated before 2021 (but
the deferred tax cannot be extended
your Form 1040-NR (or Form 1040 or after June 16, 2008) and are filing an
beyond the earlier of the following
1040-SR) would have been due annual statement.
dates.
a. The due date of the return (including extensions) if you had been Line 5
required for the year of death. required to file a Form 1040-NR (or Your expatriation date is the date you
Form 1040 or 1040-SR). relinquish citizenship (in the case of a
b. The time that the security
provided for the property fails to be Where To File former citizen) or terminate your
adequate. See item (6) below. long-term residency (in the case of a
1. Send your original initial or annual
former U.S. resident). See Date of
5. You make the election in Part II, Form 8854 to the address listed below.
relinquishment of U.S. citizenship or
Section D—Deferral of Tax. 2. If you are required to attach the Date of termination of long-term
6. You must provide adequate original Form 8854 to a Form 1040-NR, residency, earlier.
security (such as a bond). 1040, or 1040-SR, send a copy of your
7. You must make an irrevocable initial or annual Form 8854, marked Line 6
waiver of any right under any treaty of “Copy,” to the address listed below. List all countries (including the United
the United States that would preclude 3. If you elected to defer the States) of which you are a citizen and
assessment or collection of any tax payment of any tax due, see the the date, including by birth, on which
imposed by section 877A. instructions under Part II, Section D, you became a citizen.
Line 5, later, and send your tax deferral Line 7
When To File agreement request to the address listed
Attach your initial Form 8854 to your below. If you are a former U.S. citizen, indicate
income tax return (Form 1040, how you became a U.S. citizen.
1040-SR, or 1040-NR) for the year that Internal Revenue Service Line 8
includes your expatriation date, and file 3651 S IH35
MS 4301AUSC If you are or were a U.S. lawful
your return by the due date of your tax
Austin, TX 78741 permanent resident, indicate the date
return (including extensions). Also send
on which you became a U.S. lawful
a copy of your Form 8854, marked
permanent resident. This is the date you
“Copy,” to the address under Where To
Specific Instructions were issued your green card.
File, later. If you are not required to file
an income tax return, send your Form
Identifying number. Generally, this
8854 to the address under Where To
number is your U.S. social security
File, later, by the date your Form
number. If you were never issued a
1040-NR (or Form 1040 or 1040-SR)
social security number, attach a
would have been due (including
statement explaining the reason.
extensions) if you had been required to
file. (See Resident Alien or Nonresident
Instructions for Form 8854 (2021) -3-Part II—Initial Expatriation transferred it immediately prior to Line 9
expatriation, but without regard to
Statement for Persons sections 2503(b) through (g), 2513,
For purposes of determining your net
Who Expatriated 2522, 2523, and 2524. To determine the
worth, you are considered to own assets
held in trusts that would be subject to
During 2021 value of your interests in property, use
U.S. gift tax if you had transferred your
the valuation principles of section 2512
Section A—Expatriation interest by gift immediately before your
and the regulations thereunder.
expatriation date, but without regard to
Information sections 2503(b) through (g), 2513,
Note. If there have been significant
DRAFT AS OF
This section must be completed by all 2522, 2523, and 2524. List the total
changes in your assets and liabilities for
individuals who expatriated in 2021. FMV and basis of such property on
the period that began 5 years before
your expatriation and ended on the date line 9. Attach a statement to Form 8854
Line 2 that you first filed Form 8854, you must describing each asset. Include the EIN
You can use the Part II, Section B, attach a statement explaining the (if any) for the trust in which the asset is
balance sheet to determine your net changes. held.
October 6, 2021
worth.
Columns (a) and (b) Line 10
Line 3 List in U.S. dollars the FMV (column (a)) List the total value of your beneficial
Check the “Yes” box if you became at and the U.S. adjusted basis (column interest in a trust. You must attach a
birth a U.S. citizen and a citizen of (b)) of your assets and liabilities as of statement to Form 8854 that lists each
another country and, as of your your expatriation date. trust separately. Include the EIN (if any)
expatriation date, you continue to be a for each trust. Describe the assets and
citizen of, and are taxed as a resident You can use good faith estimates of liabilities (using the categories on this
of, that other country. FMV and basis. Formal appraisals are balance sheet) from your interest in
not required. each trust of which you have a
beneficial interest.
Line 5
Line 5a Note. To determine the value of your
Check the “Yes” box if:
• You expatriated before you were List the appropriate amount in each beneficial interest, use the two-step
181/2, and column for all nonmarketable stock and process described in Section III of
• You have been a resident of the securities issued by foreign Notice 97-19.
United States for not more than 10 tax corporations that would be controlled
years before you expatriated. For the foreign corporations if you were still a Lines 11 and 12
purpose of determining U.S. residency, U.S. citizen or resident. Note that these
amounts are already included on line 5. Intangible property includes any of the
use the substantial presence test following items that have substantial
described in chapter 1 of Pub. 519. Don't include amounts on this line in the
total on line 20. value independent of the services of any
individual.
Line 6 • Patent, invention, formula, process,
Line 6 design, pattern, or know-how.
Check the “Yes” box if you have
complied with your tax obligations for List in U.S. dollars the present value of • Copyright, literary, musical, or artistic
the 5 tax years ending before the date your U.S. and foreign pensions or composition.
on which you expatriated, including but similar retirement arrangements as of • Trademark, trade name, or brand
not limited to, your obligations to file your expatriation date. name.
income tax, employment tax, gift tax, • Franchise, license, or contract.
and information returns, if applicable, Line 7 • Method, program, system,
and your obligation to pay all relevant procedure, campaign, survey, study,
List in U.S. dollars the present value of forecast, estimate, customer list, or
tax liabilities, interest, and penalties. your deferred compensation, including
You will be subject to tax under section technical data.
any stock options, as of your
877A if you have not certified your • Any similar item.
expatriation date. The present value
compliance with these obligations, should include all deferred
regardless of whether your average compensation, regardless of where you Line 19
annual income tax liability or net worth performed services. Attach a statement describing and
exceeds the applicable threshold listing the total value of any other assets
amounts. you have that aren't included on lines 1
Line 8
Section B—Balance Sheet List the total value of all your partnership
through 18.
The financial information in this balance interests. If you hold an interest in one
sheet is required under section 6039G. or more partnerships, you must attach a Line 20
The balance sheet can be used to arrive statement to Form 8854 that lists each Combine lines 1 through 5 and 6
at your net worth. partnership separately. Include the through 19, not including any amounts
For purposes of determining your net employer identification number (EIN), if on line 5a. The amounts on line 5a are
worth, you are considered to own any any, for each partnership. Describe the included in determining the amounts on
interest in property that would be assets and liabilities (using the line 5.
taxable as a gift under chapter 12 of categories on this balance sheet) from
subtitle B of the Code had you your interest in each partnership.
-4- Instructions for Form 8854 (2021)Line 23 unsecured promise to pay money or this eligible deferred compensation item
other compensation in the future (other under any treaty with the United States.”
Attach a statement describing and
than such a promise to transfer property
listing the total value of any other Line 1b. Ineligible deferred
in the future), and an interest in a trust
liabilities you have that aren't included compensation item means any deferred
described in section 402(b)(1) or (4)
on lines 21 and 22. compensation item that is not an eligible
(commonly referred to as a secular
deferred compensation item. The
Section C—Property Owned trust).
amount of this deferred compensation
on Date of Expatriation 4. Any property, or right to property, item (the present value of the accrued
DRAFT AS OF
Complete Section C only if you are a that you are entitled to receive in benefit) must be included on your Form
covered expatriate (see Covered connection with the performance of 1040 or 1040-SR, or other schedule, for
expatriate, earlier). If you need services (whether or not such property the portion of your tax year that includes
additional space for the description of or right to property is substantially your expatriation date. For more
property, or if you need additional entry vested) to the extent not previously information, see section 5D of Notice
lines, attach a statement. taken into account under section 83 or 2009-85, 2009-45 I.R.B. 598, available
October 6, 2021
in accordance with section 83. at IRS.gov/irb/
Examples of these items include, but 2009-45_IRB#NOT-2009-85.
Line 1
are not limited to, restricted stock,
None of the amounts checked on line 1 stock-settled stock appreciation rights, Note. If you have one or more ineligible
are subject to the mark-to-market tax. and stock-settled restricted stock units. deferred compensation item(s), you
Don't include them on line 2. Instead, must attach a statement to the form that
you must attach a statement to the form Note. A deferred compensation item separately identifies each ineligible
that separately identifies each amount does not include the portion of an item deferred compensation item and
checked on line 1 as of the day before that is attributable to services performed provides the present value of such
your expatriation date. outside the United States while you ineligible deferred compensation item
were not a citizen or resident of the as of the day before your expatriation
Some of these amounts may be
United States. For more information, date.
TIP otherwise taxable or subject to see section 5 of Notice 2009-85,
income tax withholding at Line 1c. A specified tax deferred
2009-45 I.R.B. 598, available at
source. You must provide Form W-8CE account includes:
IRS.gov/irb/
to the payor of the relevant items. See 1. An individual retirement plan
2009-45_IRB#NOT-2009-85.
paragraphs (d), (e), and (f) of section (except those described in section
877A for more information. Eligible deferred compensation item
means any deferred compensation item 408(k) or 408(p)),
Line 1a. Generally, a deferred with respect to which: 2. A Coverdell education savings
compensation item is one of the • The payor is either a U.S. person or a account, or
following. non-U.S. person who elects to be 3. A health savings account or an
1. Any interest in a plan or treated as a U.S. person for purposes of Archer medical savings account.
arrangement described in section section 877A(d)(1),
• The covered expatriate notifies the The amount of your entire interest in
219(g)(5). This includes a qualified your specified tax deferred account on
pension, profit-sharing (including payor of his or her status as a covered
expatriate on Form W-8CE, and the day before your expatriation date
401(k)), annuity, SEP, and SIMPLE must be included on your Form 1040 or
plan. • Irrevocably waives any right to claim
any withholding reduction on such item 1040-SR, or other schedule, for the
2. Any interest in a foreign pension under any treaty with the United States portion of your tax year that includes
plan or similar retirement arrangement on Form 8854. your expatriation date. For more
or program. information, see section 6 of Notice
The Secretary may provide separate
3. Any item of deferred 2009-85, 2009-45 I.R.B. 598, available
guidance providing a procedure for a
compensation, whether or not at IRS.gov/irb/
payor who is a non-U.S. person and
substantially vested. This is any amount 2009-45_IRB#NOT-2009-85.
wishes to elect to be treated as a U.S.
of compensation if, under the terms of person for purposes of section 877A(d)
the plan, contract, or other arrangement Note. If you have one or more specified
(1). tax deferred account(s), you must
providing for such compensation, the
following conditions were met. You must file Form 8854 attach a statement to the form that
! annually to certify that no separately identifies each specified tax
a. You had a legally binding right on CAUTION distributions have been deferred account and provides the
your expatriation date to such entire account balance of each
received from your eligible deferred
compensation. specified tax deferred account on the
compensation item(s) or to report the
b. The compensation has not been distributions you received. day before your expatriation date.
actually or constructively received on or
Line 1d. A nongrantor trust is the part
before your expatriation date.
Note. If you have one or more eligible of any trust, whether domestic or
c. The compensation is payable on deferred compensation items, you must foreign, of which you were not
or after your expatriation date. attach a statement to the form that considered the owner under sections
Examples of items of deferred separately identifies each eligible 671 through 679 on the day before your
compensation include a cash-settled deferred compensation item and expatriation date. You are considered a
stock appreciation right, a phantom includes the following language for each beneficiary of such trust if:
stock arrangement, a cash-settled item: “I irrevocably waive any right to 1. You are entitled or permitted,
restricted stock unit, an unfunded and claim any reduction in withholding for under the terms of the trust instrument
Instructions for Form 8854 (2021) -5-or applicable local law, to receive a expatriation date. I attach a copy of my allocate the exclusion amount,
direct or indirect distribution of trust valuation letter ruling issued by the IRS.” determine the gain of each gain
income or corpus (including, for property listed in column (a) and enter
example, a distribution in discharge of Line 2 that gain in column (d). If the total gain
an obligation); of all the gain properties exceeds the
2. You have the power to apply trust Column (a). An interest in property exclusion amount ($744,000 for 2021),
income or corpus for your own benefit; includes money or other property, then allocate the entire exclusion
or regardless of whether it produces any amount to the gain properties by
DRAFT AS OF
income or gain. In addition, an interest multiplying the exclusion amount by the
3. You could be paid from the trust in the right to use property will be ratio of the gain determined for each
income or corpus if the trust or the treated as an interest in such property. gain property in column (d) over the
current interests in the trust were However, do not list the following. total gain of all gain properties listed in
terminated. column (d). After you have allocated the
1. Deferred compensation items.
Unless you elect to be treated as exclusion amount to the gain properties,
2. Specified tax deferred accounts.
subtract the exclusion amount allocated
October 6, 2021
having received the value of your
interest in the trust, as determined for 3. Interests in nongrantor trusts. to each gain property from the gain
purposes of section 877A, as of the day You are considered to own any reported for that property in column (d),
before your expatriation date, you interest in property that would be and enter the resulting amount of gain in
cannot claim a reduction in withholding included in your gross estate for federal column (e). If the total gain of the gain
on any distribution from the trust under estate tax purposes under chapter 11 of properties in column (d) is less than the
any treaty with the United States. Before subtitle B of the Code if you died on the exclusion amount (but greater than -0-),
you can make the election, you must get day before your expatriation date as a then you must use the total gain amount
a letter ruling from the IRS as to the citizen or resident of the United States. as the exclusion amount, and you must
value, if ascertainable, of your interest in Whether property would be included in allocate the exclusion amount, as
the trust as of the day before your your gross estate will be determined adjusted, to the gain properties under
expatriation date by following the without regard to sections 2010 through the method described above. The
procedures set forth in Rev. Proc. 2016. For this purpose, you are exclusion amount allocated to each gain
2020-1, 2020-1 I.R.B. 1, available at considered to own your beneficial property cannot exceed the amount of
IRS.gov/irb/2020-01_IRB#RP-2020-01. interest(s) in each trust (or part of a that gain property's built-in gain.
You must make this election by trust), other than a nongrantor trust See Notice 2009-85, section 3B, for
checking the box under line 1d of this subject to section 877A(f), that would more information.
form and attaching a copy of the letter not be included in your gross estate as Example. X, a covered expatriate,
ruling both to this form and to your described in the preceding sentences. renounced his citizenship on Date 2. On
timely filed tax return (including Your beneficial interest(s) in such a trust Date 1, the day before X's renunciation
extensions) for the 2021 tax year. Until shall be determined under the special of his citizenship, X owned three assets,
you obtain the valuation letter ruling and rules set forth in Section III of Notice which he had owned for more than 1
provide a copy of such letter ruling to 97-19, which is on page 40 of Internal year. Asset A is business property and
the trustee of the nongrantor trust Revenue Bulletin 1997-10 at assets B and C are personal property.
together with certification, under IRS.gov/pub/irs-irbs/irb97-10.pdf. As of Date 1, Asset A had an FMV of
penalties of perjury, that you have paid
Column (b). Use the FMV on the day $2,000,000 and a basis of $200,000;
all tax due as a result of your election,
before your expatriation date. FMV is Asset B had an FMV of $1,000,000 and
any taxable distributions that you
the price at which the property would a basis of $800,000; and Asset C had
receive from the trust will be subject to
change hands between a buyer and a an FMV of $500,000 and a basis of
30% withholding.
seller when both have reasonable $800,000. X must allocate the exclusion
If you are a beneficiary of a knowledge of all the necessary facts amount as follows:
! nongrantor trust, you must file and neither has to buy or sell. If parties Step 1: Determine the built-in gain or
CAUTION Form 8854 annually to certify
with adverse interests place a value on loss of each asset by subtracting the
that no distributions have been received property in an arm's-length transaction, basis from the FMV of the asset on Date
or to report the distributions you that is strong evidence of the FMV. 1.
received.
Column (c). Generally, the cost or
other basis in this column cannot be Basis FMV Built-in Gain/
Note. If you are a beneficiary of one or less than the FMV of the property on the Loss
more nongrantor trusts, you must attach date you first became a U.S. resident. Asset A 200,000 2,000,000 1,800,000
a statement to the form that separately However, if you are a naturalized citizen Asset B 800,000 1,000,000 200,000
identifies each trust and includes one of or LTR at the time you expatriated, you Asset C 800,000 500,000 (300,000)
the following statements for each trust. can make an irrevocable election under
1. “I waive any right to claim any section 877A(h)(2) to determine basis
reduction in withholding on any without regard to this restriction. Print Step 2: Allocate the exclusion
distribution from such trust under any “(h)(2)” after any entry for which you amount to each of the gain properties by
treaty with the United States.” make this election. multiplying the exclusion amount
2. “I elect under section 877A(f)(4) Column (e). Before you complete ($744,000) by a ratio of the deemed
(B) to be treated as having received the column (e), you must allocate the gain attributable to each gain property
value of my entire interest in the trust exclusion amount to the gain properties over the total gain of all the gain
(as determined for purposes of section on a separate schedule. Attach a copy properties deemed sold.
877A) as of the day before my of the separate schedule to this form. To
-6- Instructions for Form 8854 (2021)Asset A of the payment of tax, later, for the all income, including the section
correct address. 877A(a) gain and loss.
1,800,000
× 744,000 = 669,600
Reporting gain or loss. You must
2,000,000 report and recognize the gain (or loss) Line 3
of each property reported in Section C, Enter on line 3 the amount of tax on
Asset B line 2, column (a), on the relevant form line 24 of the second return, which
or schedule of your Form 1040 or includes all income except the section
200,000 1040-SR for the part of the year that 877A(a) gain and loss.
DRAFT AS OF
2,000,000
× 744,000 = 74,400 includes the day before your
expatriation date. The return to which Line 5
you attach your form or schedule will
depend on your status at the end of the This is the amount of tax you elect to
Step 3: Figure the final amount of defer. If you are deferring tax on all
deemed gain on each asset by year. See chapter 1 of Pub. 519 to
determine which form you should file. properties, enter the amount from line 4.
subtracting the exclusion amount
October 6, 2021
The gain from column (e) or loss from If you are electing deferral on only
allocated to each asset. certain properties, go to Section C,
column (d) attributable to each property
is reported in the same manner as if the line 2, column (g), to show how much
Asset A: 1,800,000 − 669,600 = 1,130,400 deferred tax is allocated to each
property had actually been sold. For
Asset B: 200,000 − 74,400 = 125,600 property. Attach a computation.
example, gain recognized from the
deemed sale of a rental property that Procedure for requesting a deferral
has been depreciated is reported on of the payment of tax. In order to
Column (f). Complete this column in Form 4797 as if it had been sold. Gain defer any part of the mark-to-market tax,
order to list the schedule or form on recognized from the deemed sale of you must enter into a tax deferral
which you reported the deemed sale of personal property (such as stock or a agreement with the IRS and provide
each property listed in column (a) (for personal residence) is reported on Form adequate security. Notice 2009-85
example, Form 4797 or Form 8949). 8949 as if it had been sold. Capital gain contains a sample agreement
Column (g). Complete this column retains its character as capital gain; (Appendix A). Adequate security can be
only for those properties for which you ordinary gain retains its character as either:
are electing to defer the payment of tax. ordinary income.
1. A bond that is furnished to, and
First, complete Section D to line 4. On a Section D—Deferral of Tax accepted by, the IRS, that is
separate attachment, allocate the conditioned on the payment of tax (and
amount of tax eligible for deferral among If you expatriated in 2021, and you
chose to enter into a tax deferral interest thereon), and that meets the
all gain properties listed on line 2. The requirements of section 6325; or
tax attributable to a particular property is agreement with the IRS with respect to
determined by multiplying the amount assets subject to the mark-to-market 2. Another form of security
on Section D, line 4, by the ratio of the rules of section 877A, use lines 2 (including letters of credit) that is
gain for that property entered on line 2, through 5 of Section D to figure the acceptable to the IRS.
column (e), over the total amount of gain amount of tax you can defer. Before
You must contact the following office
of all gain properties on line 4, column completing lines 2 through 5 of
in order to make the appropriate
(e). On line 2, column (g), enter the tax Section D, you must fill out two
arrangements for providing security.
attributable to each property for which hypothetical individual income tax
you are electing to defer tax. Then, returns using Form 1040 or 1040-SR. Internal Revenue Service
enter the total deferred tax for those The first return includes all income, SBSE Advisory Office
properties from line 4, column (g), on including the section 877A(a) gain and 7850 SW 6th Court
Section D, line 5. loss. The second return includes all Mail Stop 5780
income except the section 877A(a) gain Plantation, FL 33324-3202
Example. Line 2 lists four assets, and loss. Attach both hypothetical
each resulting in a deemed gain in Telephone: 954-991-4455
returns to this Form 8854.
column (d). The amount of tax eligible
for deferral on Section D, line 4, is You must send your original tax
Line 1 deferral agreement request, marked
$575,000. You must go back to line 2,
column (g), to allocate the deferred tax If you aren't electing to defer the “Original,” with your Form 8854 for the
among the individual properties. payment of tax on the gain reported in year that includes your expatriation date
Section C, line 2, column (e), report on to:
You must attach a computation the appropriate income tax return
! to show how you figured the tax schedule or form the gain amount Internal Revenue Service
CAUTION attributable to each property. attributable to each particular property 3651 S IH35
as listed in Section C, line 2, column (e), MS 4301AUSC
See Section D—Deferral of Tax, Austin, TX 78741
later, and Notice 2009-85, section 3E, and report the loss amount attributable
for more information on deferring the to each particular property as listed in
Section C, line 2, column (d). If you are If you are required to file a Form
payment of tax.
electing to defer tax, go to line 2. 1040, 1040-SR, or 1040-NR for the year
Note. The address listed in section 3E that includes your expatriation date,
of Notice 2009-85 for mailing your tax Line 2 also attach a copy of the tax deferral
deferral agreement is no longer valid. agreement request, marked “Copy,” to
Enter on line 2 the amount of tax on the Form 8854 that you include with
See Procedure for requesting a deferral
line 24 of the first return, which includes your tax return.
Instructions for Form 8854 (2021) -7-Note. The address listed in section 3E information from Part III, line 1, of the amount of tax withheld by the payor(s)
of Notice 2009-85 is no longer valid. earlier year's Form 8854. of any distribution.
If the IRS deems your collateral If you disposed of any property in Don't include any distribution
sufficient, and agrees to enter into a tax 2021 on which you deferred the from a trust if your interest in the
deferral agreement, you can pay any tax payment of tax on a previous return,
!
CAUTION trust was treated in an earlier
deferred, together with interest, at any also complete column (d). You must year as a deferred compensation item
time. However, the time for the payment report the gain or loss from the property or part of a specified tax deferred
of tax attributable to a particular deferral disposed of on the appropriate line (or account.
DRAFT AS OF
asset can be extended only until (a) the schedule) of your income tax return.
year the asset is ultimately disposed of, Exception. Don't check the “Yes” box if
or (b) the year of death. You must pay the deferred tax, you elected on a previously filed Form
! plus interest, on any property 8854 to be treated as having received
You must file Form 8854 CAUTION you disposed of, no later than
annually for years up to and the value of your entire interest in the
!
CAUTION including the year in which the
the due date (without extensions) of trust as of the day before your
October 6, 2021
your 2021 income tax return. See expatriation date.
full amount of deferred tax and interest Satisfying your deferred tax liability,
is paid. earlier, for information on arranging
payment.
Signature
Waiver of treaty benefits. As a Form 8854 is not considered valid
further condition to making the election See Section D—Deferral of Tax unless you sign it. If you have someone
to defer the payment of tax on a under Part II—Initial Expatriation else prepare Form 8854, you are still
particular asset, you must waive any Statement for Persons Who Expatriated responsible for its correctness.
right under any U.S. tax treaty that During 2021, earlier, and section 3E of Paid preparers. Generally, anyone
would preclude the assessment or Notice 2009-85 for more information on you pay to prepare Form 8854 must
collection of the tax. deferring the tax. sign it and include a preparer tax
Satisfying your deferred tax liability. identification number (PTIN) in the
If you entered into an agreement for the Note. The address listed in section 3E space provided. The preparer must give
deferral of tax with the IRS Advisory of Notice 2009-85 for mailing your tax you a copy for your records. Someone
Office and dispose of one or more deferral agreement is no longer valid. who prepares Form 8854 but does not
assets for which you elected to defer See Procedure for requesting a deferral charge you a fee should not sign it.
tax, you must contact that office to make of the payment of tax under
arrangements to satisfy your tax liability. Section D—Deferral of Tax, earlier, for Paperwork Reduction Act Notice.
The address for the Advisory Office is the correct address. We ask for the information on this form
shown above. to carry out the Internal Revenue laws of
Line 2
the United States. You are required to
Check the “Yes” box if you received any
Part III—Annual distributions of eligible deferred
give us the information. We need it to
ensure that you are complying with
Expatriation Statement for compensation items in 2021. Enter the these laws and to allow us to figure and
Persons Who Expatriated part of the distribution that you would collect the right amount of tax.
include in gross income if you continued
After June 16, 2008, and to be subject to tax as a U.S. citizen or You are not required to provide the
Before January 1, 2021 resident. Also enter the total amount of information requested on a form that is
You must file Part III if you: tax withheld by the payor(s) of any subject to the Paperwork Reduction Act
1. Deferred the payment of tax on eligible deferred compensation items. unless the form displays a valid OMB
any property on a Form 8854 filed in a control number. Books or records
Don't enter the part of any relating to a form or its instructions must
previous year, payment that is attributable to
2. Reported an eligible deferred
!
CAUTION services performed outside the
be retained as long as their contents
may become material in the
compensation item on a Form 8854 filed United States before or after your administration of any Internal Revenue
in a previous year, or expatriation date while you weren't a law. Generally, tax returns and return
3. Reported an interest in a citizen or resident of the United States. information are confidential, as required
nongrantor trust on a Form 8854 filed in by section 6103.
a previous year. Line 3
Unless the exception at the end of this The average time and expenses
Line 1 section applies, check the “Yes” box if required to complete and file this form
If you deferred the payment of tax in an you received any direct or indirect will vary depending on individual
earlier year, refer to the Form 8854 you distributions of property (including circumstances. For the estimated
filed for that earlier year to complete money) from a nongrantor trust in 2021. averages, see the instructions for your
columns (a), (b), and (c). If you Enter the part of the distribution that you income tax return.
expatriated in 2019, use the information would include in gross income if you
from Part II, Section C, line 2. If you continued to be subject to tax as a U.S.
expatriated in 2018, or earlier, use the citizen or resident. Also enter the total
-8- Instructions for Form 8854 (2021)You can also read
