I Made My Money and Chose the World. Now My Tax Return Has Four Countries in It.
The restaurant had twelve seats and no sign outside.
Falco had found it the way he found everything: someone he trusted had written it down years ago, and he had carried the name in a notes app until the right city and the right night arrived together. Tokyo in winter. Kree was somewhere on the other side of the city, sleeping in a capsule the size of a generous closet, which cost eleven dollars a night and had a curtain that kept sliding open. His room cost more per night than her hut in Thailand cost per month. Neither of them thought the other had gotten it wrong.
He ordered without looking at the menu, because there was no menu. The chef sent out what the day had given him. Falco sat at the counter alone and watched the knife work and thought about almost nothing, which was the point.
The boba tea was butterfly pea, served cold, the color of a bruise, the color of dusk over water. He ordered it with the same confidence he ordered everything, which was complete.
His phone had nine notifications from four countries. He turned it face down.
The story pauses here. Here is what the law actually says.
His Tax Situation Surprises People Who Assume Wealth Makes Things Simpler
It does not. It makes them different.
Falco has investment accounts in four countries. Some of them hold what the IRS calls passive foreign investment companies: foreign mutual funds, certain ETFs registered outside the United States, instruments that look straightforward from the outside and carry reporting requirements that are anything but. The PFIC rules exist specifically for this situation, and they are among the most technically demanding areas of individual international tax.
He has a foreign pension plan from a period of work he does not often mention. The United States and the country where that pension lives have a tax treaty, and the treaty has something to say about how the pension is taxed, or rather, how it may not be taxed, if the right forms are filed in the right sequence.
He has bought property in two countries at different points in his life. Selling it will have consequences he is already tracking. The gain will be calculated in US dollars, not in the currency he paid, which means exchange rate movements over years of ownership become part of the taxable event.
Bottom Line
US citizens are taxed on worldwide income regardless of where they live or where their income comes from (IRC Section 61). Wealth held internationally (foreign investment accounts, passive foreign investment companies (PFICs), foreign pension plans, property in multiple countries) creates reporting obligations beyond a standard domestic return. PFICs require annual reporting or mark-to-market elections. Foreign pensions may be covered by treaty provisions but only with correct and timely filings. Foreign property sales trigger US capital gains tax calculated in US dollars, with currency fluctuation folded into the gain. Find your plan at taxjet.co.
Filed under
Planning & Strategy
Renee Mizrahi, EA, CFE
Our founder spent twenty years in U.S. tax practice. But something shifted when her daughters began living abroad permanently: Nepal, Cambodia, Thailand, Israel, France, and a long list of places she has genuinely lost track of.
Falco and Kree are fictional characters created to make real tax situations easier to understand. The people are not real. The law is, and it is cited above so you can check it yourself. Nothing here is advice for your specific situation.
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