U.S. Individual Income Tax Return

2011

Department of the Treasury
Internal Revenue Service

Instructions for Form 8854
Initial and Annual Expatriation Statement
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
What’s New
The IRS has created a page on
IRS.gov for information about Form
8854 and its instructions, at
www.irs.gov/form8854. Information
about any future developments
affecting Form 8854 (such as legislation
enacted after we release it) will be
posted on that page.

Purpose of Form
Expatriation tax provisions apply to U.S.
citizens who have relinquished their
citizenship and long-term residents who
have ended their residency
(expatriated). Form 8854 is used by
individuals who have expatriated on or
after June 4, 2004.
The date on which you are
considered to have expatriated
determines which Parts of the form you
must complete. You are considered to
have expatriated on the date you
relinquished your citizenship (in the
case of a former citizen) or terminated
your long-term residency status (in the
case of a former U.S. resident). If you
expatriated after June 3, 2004, and
before June 17, 2008, complete Parts I,
II, and V. If you expatriated after June
16, 2008, and before January 1, 2011,
complete Parts I and III. If you
expatriated in 2011, complete Parts I,
IV, and V.
Expatriation. Expatriation includes
the acts of relinquishing U.S. citizenship
and terminating long-term residency.
Date of relinquishment of U.S.
citizenship. You are considered to
have relinquished your U.S. citizenship
on the earliest of the following dates.
1. The date you renounced your
U.S. citizenship before a diplomatic or
consular officer of the United States
(provided that the voluntary
renouncement was later confirmed by
the issuance of a certificate of loss of
nationality).
2. The date you furnished to the
State Department a signed statement of
your voluntary relinquishment of U.S.
nationality confirming the performance
of an expatriating act (provided that the
voluntary relinquishment was later
confirmed by the issuance of a
certificate of loss of nationality).
Nov 28, 2011

3. The date the State Department
issued a certificate of loss of nationality.
4. The date a U.S. court canceled
your certificate of naturalization.
Date of termination of long-term
residency. If you were a U.S.
long-term resident (LTR), you
terminated your lawful permanent
residency on the earliest of the
following dates.
1. The date you voluntarily
abandoned your lawful permanent
resident status by filing Department of
Homeland Security Form I-407 with a
U.S. consular or immigration officer,
and the Department of Homeland
Security determined that you had, in
fact, abandoned your lawful permanent
resident status.
2. The date you became subject to
a final administrative order for your
removal from the United States under
the Immigration and Nationality Act and
you actually left the United States as a
result of that order.
3. If you were a dual resident of the
United States and a country with which
the United States has an income tax
treaty, the date you commenced to be
treated as a resident of that country
and you determined that, for purposes
of the treaty, you are a resident of the
treaty country and gave notice to the
Secretary of such treatment. See
Regulations section 301.7701(b)-7 for
information on other filing requirements
if you are such an individual.
Long-term resident (LTR) defined.
You are an LTR if you were a lawful
permanent resident of the United States
in at least 8 of the last 15 tax years
ending with the year your status as an
LTR ends. In determining if you meet
the 8-year requirement, do not count
any year that you were treated as a
resident of a foreign country under a
tax treaty and did not waive treaty
benefits applicable to residents of the
country.
Lawful permanent resident. You
are a lawful permanent resident of the
United States if you have been given
the privilege, according to U.S.
immigration laws, of residing
permanently in the United States as an
immigrant. You generally have this
status if you have been issued an alien
registration card, also known as a
“green card.”
Cat. No. 24874E

Expatriation
After June 3, 2004,
and Before June 17, 2008
The rules in this section apply to
persons who are considered to have
expatriated after June 3, 2004, and
before June 17, 2008.

Date of Tax Expatriation
For purposes of filling out Part I, the
date of your expatriation is the later of
the date you notified the relevant
agency of your expatriating act or the
date Form 8854 was first filed in
accordance with these instructions.
Apply the rules of section 7502 to
determine the date on which this form
is filed. Generally, the postmark date is
the filing date.
Until you file Form 8854 and
notify the Department of State
CAUTION or the Department of Homeland
Security of your expatriating act, your
expatriation for immigration purposes
does not relieve you of your obligation
to file U.S. tax returns and report your
worldwide income as a citizen or
resident of the United States.

!

Who Must File
You must file Form 8854 to:
• Establish that you have expatriated
for tax purposes; or
• Comply with the annual information
reporting requirements of section
6039G, if you are subject to tax under
section 877.
Note. If you were a naturalized citizen,
but lost your citizenship because a
federal court revoked your
naturalization under section 340 of the
Immigration and Nationality Act, you do
not need to complete this form if, after
the revocation, you hold the status
under the Immigration and Nationality
Act of an alien lawfully admitted for
permanent residence. You must
complete this form, however, if you
were a naturalized citizen and you gave
up your citizenship by expatriation
under section 349 of the Immigration
and Nationality Act.

Taxation Under Section 877
You are subject to taxation under
section 877 if you are a former U.S.
citizen or former LTR and any one of
the following applies to you.
1. Your average annual net income
tax liability for the 5 tax years ending
before the date of your expatriation is
more than the amount listed next.

a. $124,000 if you expatriated in
2004.
b. $127,000 if you expatriated in
2005.
c. $131,000 if you expatriated in
2006.
d. $136,000 if you expatriated in
2007.
e. $139,000 if you expatriated in
2008.
2. Your net worth is $2 million or
more on the date of your expatriation.
3. You fail to certify on Form 8854
that you have complied with all of your
federal tax obligations for the 5 tax
years preceding the date of your
expatriation.
If you are subject to tax under
section 877, you are no longer taxed as
a citizen or resident on your worldwide
income. However, you must compute
your tax as a nonresident according to
the special rules of section 877. These
rules expand the categories of income
and gain on which you owe tax. You
are also subject to special rules for gift
and estate tax purposes that differ from
those applicable to other nonresident
aliens.
Tax consequences of presence in
the United States after expatriation.
If, for any tax year during the 10-year
period in which you are otherwise
subject to section 877, you are present
in the United States for more than 30
days in a calendar year ending in such
tax year, you will be treated as a U.S.
citizen or resident for that tax year. You
will be subject to U.S. tax on your
worldwide income unless the following
exception applies.
Exception. You can be present in
the United States for up to 60 days
without being treated as a U.S. citizen
or resident if you are performing
personal services in the United States
for an employer who is not related
(within the meaning of sections 267 and
707) to you and you meet either of the
following requirements.
• You were a U.S. citizen and, within a
reasonable period following your
expatriation, you became a citizen or
resident fully liable to tax in the country
in which you, your spouse, or either of
your parents was born; or
• For each year in the 10-year period
ending on the date of expatriation, you
were physically present in the United
States for 30 days or less.
See Pub. 519, U.S. Tax Guide for
Aliens, for details about what
constitutes a day of presence in the
United States.

When To File
File your initial Form 8854 as soon as
possible after the date you relinquish
U.S. citizenship or terminate your
long-term residence. You remain
subject to tax as a U.S. citizen or
resident until you both file your initial

Form 8854 and notify the appropriate
authorities of your expatriating act. See
the Caution in Date of Tax Expatriation,
earlier.
In most cases, you must file your
annual Form 8854 by the due date for
filing Form 1040NR, U.S. Nonresident
Alien Income Tax Return, regardless of
whether you are required to file Form
1040NR. If you are required to file Form
1040NR, attach Form 8854 to your
Form 1040NR and file your Form
1040NR at the address in the
Instructions for Form 1040NR. Also
send a copy of Form 8854 to the
address under Where To File below. If
you are not required to file Form
1040NR, send your Form 8854 to the
address under Where To File below.
If you are present in the United
States following your expatriation and
are subject to tax as a U.S. citizen or
resident under the rules described in
Exception, earlier, file Form 8854 with
your Form 1040 by the due date for
filing Form 1040. Also send a copy of
Form 8854 to the address under Where
To File below by the due date for filing
Form 1040.

Where To File
Send your Form 8854 (or a copy of
your Form 8854 if you are required to
attach the original to a Form 1040NR or
a Form 1040) to this address.
Department of the Treasury
Internal Revenue Service
Philadelphia, PA 19255-0549

Expatriation
After June 16, 2008
The rules in this section apply to
persons who are considered to have
expatriated after June 16, 2008.

Who Must File
If you expatriated after June 16, 2008,
the expatriation rules apply to you if any
of the following statements apply.
1. Your average annual net income
tax liability for the 5 tax years ending
before the date of expatriation is more
than the amount listed next.
a. $139,000 for 2008.
b. $145,000 for 2009.
c. $145,000 for 2010.
d. $147,000 for 2011.
2. Your net worth was $2 million or
more on the date of your expatriation.
3. You fail to certify on Form 8854
that you have complied with all federal
tax obligations for the 5 tax years
preceding the date of your expatriation.
4. You expatriated before 2011 and
you:
a. Deferred the payment of tax,
b. Have an item of eligible deferred
compensation, or
c. Have an interest in a nongrantor
trust.

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Covered expatriate. You are a
covered expatriate if you meet (1), (2),
or (3), earlier.
Exception for dual-citizens and
certain minors. Dual-citizens and
certain minors (defined next) are not
subject to the expatriation tax even if
they meet (1) or (2), earlier. However,
they still must provide the certification
required in (3), earlier.
Certain dual-citizens. You may
qualify for the exception described
above if you meet the following
requirements.
• You became at birth a U.S. citizen
and a citizen of another country and
you continue to be a citizen of, and are
taxed as a resident of, that other
country.
• You were a resident of the United
States for not more than 10 years
during the 15-tax-year period ending
with the tax year during which the
expatriation occurred. For the purpose
of determining U.S. residency, use the
substantial presence test described in
chapter 1 of Pub. 519.
Certain minors. You may qualify
for the exception described above if
you meet the following requirements.
• You expatriated before you were
181/2.
• You were a resident of the United
States for not more than 10 tax years
before the expatriation occurs. For the
purpose of determining U.S. residency,
use the substantial presence test
described in chapter 1 of Pub. 519.

Taxation Under Section 877A
If you are a covered expatriate in the
year you expatriate, you are subject to
income tax on the net unrealized gain
in your property as if the property had
been sold for its fair market value on
the day before your expatriation date
(“mark-to-market tax”). This applies to
most types of property interests you
held on the date of your expatriation.
But see Exceptions below.
Gains from deemed sales are taken
into account without regard to other
U.S. internal revenue laws. Losses from
deemed sales are taken into account to
the extent otherwise allowed under U.S.
internal revenue laws. However, section
1091 (relating to the disallowance of
losses on wash sales of stock and
securities) does not apply. The net gain
that you otherwise must include in your
income is reduced (but not below zero)
by $636,000.
Exceptions. The mark-to-market tax
does not apply to the following.
1. Eligible deferred compensation
items.
2. Ineligible deferred compensation
items.
3. Specified tax deferred accounts.
4. Interests in nongrantor trusts.
Instead, items (1) and (4) are subject to
withholding at source. In the case of

item (2), you are treated as receiving
the present value of your accrued
benefit as of the day before the
expatriation date. In the case of item
(3), you are treated as receiving a
distribution of your entire interest in the
account on the day before your
expatriation date. See paragraphs (d),
(e), and (f) of section 877A for more
information.
Deferral of the payment of
mark-to-market tax. You can make
an irrevocable election to defer the
payment of the mark-to-market tax
imposed on the deemed sale of
property. If you make this election, the
following rules apply.
1. You make the election on a
property-by-property basis.
2. The deferred tax on a particular
property is due on the return for the tax
year in which you dispose of the
property.
3. Interest is charged for the period
the tax is deferred.
4. The due date for the payment of
the deferred tax cannot be extended
beyond the earlier of the following
dates.
a. The due date of the return
required for the year of death.
b. The time that the security
provided for the property fails to be
adequate. See item (6) below.
5. You make the election in Part IV,
Section C.
6. You must provide adequate
security (such as a bond).
7. You must make an irrevocable
waiver of any right under any treaty of
the United States that would preclude
assessment or collection of any tax
imposed by section 877A.

When To File
If you expatriated after June 16, 2008,
attach Form 8854 to your income tax
return (Form 1040 or Form 1040NR) for
the year that includes your expatriation
date, and file your return by the due
date of your tax return (including
extensions). Also send a copy of your
Form 8854 to the address in Where To
File next. If you are not required to file
Form 1040NR or Form 1040, send your
Form 8854 to the address in Where To
File next by the date your Form
1040NR (or Form 1040) would have
been due (including extensions) if you
had been required to file. (See
Resident Alien or Nonresident Alien in
the Instructions for Form 1040NR.)
Note. If you elected to defer the
payment of any tax due (see Section
C — Deferral of Tax, later), you must file
Form 8854 annually for each year up to
and including the year in which the full
amount of deferred tax and interest is
paid. For each year that you are
required to file a Form 1040NR (or
Form 1040), attach your annual Form
8854 to your Form 1040NR (or Form

1040) and send a copy to the address
under Where To File below. For each
year that you are not required to file
Form 1040NR (or Form 1040), send
your Form 8854 to the address in
Where To File below by the date your
Form 1040NR (or Form 1040) would
have been due (including extensions) if
you had been required to file a Form
1040NR (or Form 1040).

Where To File
Send your Form 8854 (or a copy of
your Form 8854 if you are required to
attach the original to a Form 1040NR or
a Form 1040) to this address.
Department of the Treasury
Internal Revenue Service
Philadelphia, PA 19255-0549
.

Specific Instructions
See Chart A to determine which Parts
of Form 8854 you must complete.
Chart A. Which Parts To Complete
IF your
expatriation date
is:

THEN you must
complete the following
Parts.
I

II

After June 3,
2004, and before
June 17, 2008

u

u

After June 16,
2008, and before
January 1, 2011 *

u

During 2011

u

III

IV

V
u

u

u

u

* Only if you deferred the payment of tax OR
have an item of eligible deferred compensation
OR have an interest in a nongrantor trust.

Identifying number. Generally, this
number is your U.S. social security
number. An incorrect or missing
identifying number may result in a
continued obligation to file U.S. tax
returns as a citizen or resident of the
United States for persons expatriating
after June 3, 2004, and before June 17,
2008, and/or a penalty of $10,000. If
you were never issued a social security
number, please attach a statement
explaining the reason.

Part I — General
Information
This section is to be completed by all
filers.

Line 1
If you have a P.O. box, enter your box
number instead of your street address
only if your post office does not deliver
mail to the street address.

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Line 2
Enter the information in the following
order: street address, city, province or
state, and country. Follow the country’s
practice for entering the postal code.
Do not abbreviate the country name.

Line 3
Enter the country of which you are
considered a resident for tax purposes
if it is different from the country in which
your principal foreign residence is
located.

Line 4
Your expatriation date is the date you
relinquish citizenship (in the case of a
former citizen) or terminate your
long-term residency (in the case of a
former U.S. resident). See Date of
relinquishment of U.S. citizenship or
Date of termination of long-term
residency, earlier.

Line 5
If you are a person who expatriated
after June 3, 2004, and before June 17,
2008, and you have not yet notified the
Secretary of State or Secretary of
Homeland Security in connection with
your expatriating act, you must file an
amended Form 8854 stating the date
on which such notification occurs.
Citizen. Check this box if you are a
former U.S. citizen, and enter the date
on which you gave notice of your
expatriation to the Department of State.
Long-term resident. Check this box if
you are a former LTR, and enter the
date on which you gave notice of
termination of your lawful permanent
resident status to the Department of
Homeland Security.
Long-term resident with dual
residency. Check this box if you are
an LTR with dual residency in a treaty
country, and enter the date you
commenced to be treated for tax
purposes as a resident of the treaty
country (see Date of termination of
long-term residency, earlier).
If you are a person who expatriated
after June 16, 2008, you expatriated as
of the date that you commence to be
treated for tax purposes as a resident
of the treaty country. But you must
notify the IRS by filing a Form 8833,
Treaty-Based Return Position
Disclosure Under Section 6114 or
7701(b), and a Form 8854 to avoid
penalties.

Line 6
Enter the number of days or parts of
days you were physically present in the
United States during the year.
If you expatriated after June 3,
2004, and before June 17,
CAUTION 2008, and were physically
present in the United States for more
than 60 days during the tax year, you
will be taxed as a U.S. citizen or

!

resident for that tax year. For more
information, see Tax consequences of
presence in the United States after
expatriation, earlier.

Line 7
List all countries (other than the United
States) of which you are a citizen and
the date on which you became a
citizen.

Line 8
If you are a former U.S. citizen, indicate
how you became a U.S. citizen.

Part II—For Persons
Who Expatriated
After June 3, 2004, and
Before June 17, 2008
Line 1
Check the “No” box if you expatriated
after June 3, 2004, and before June 17,
2008, and have not previously filed
Form 8854. You must complete Form
8854 for the year in which you
expatriated for immigration purposes
before you can file Form 8854 for the
current year. You can download Form
8854 for any year at www.irs.gov/form
8854.
Check the “Yes” box if you
completed Form 8854 for any period
after June 3, 2004, and before June 17,
2008. Enter the tax year for which you
first filed Form 8854 and go to line 2.

Line 2
If you were physically present in the
United States more than 30 days but
not more than 60 days during the tax
year, complete lines 2a and 2b. If you
answer “No” to either question, you will
be taxed as a U.S. citizen or resident
and must file Form 1040 for the current
tax year. If you answer “Yes” to both
questions, you remain subject to
section 877 for the tax year.

Part III—For Persons
Who Expatriated
After June 16, 2008, and
Before January 1, 2011
You must file Part III if you:
1. Deferred the payment of tax on
any property on your 2008, 2009, or
2010 Form 8854;
2. Reported an eligible deferred
compensation item on your 2008, 2009,
or 2010 Form 8854; or
3. Reported an interest in a
nongrantor trust on your 2008, 2009, or
2010 Form 8854.

Line 1
If you deferred the payment of tax in an
earlier year, refer to the Form 8854 you

filed for that earlier year to complete
columns (a), (b), and (c). For 2008, use
the information from Part B, line 8; for
2009, use the information from Part IV,
line 9; for 2010, use the information
from Part IV, line 8.
If you disposed of any property in
2011 on which you deferred the
payment of tax on a previous return,
also complete column (d). You must
report the gain or loss from the property
disposed of on the appropriate line (or
schedule) of Form 1040NR.
You must pay the deferred tax,
plus interest, on any property
CAUTION you disposed of, no later than
the due date (without extensions) of
your 2011 Form 1040NR. See
Satisfying your deferred tax liability,
later, for information on arranging
payment.

!

Line 2
Check the “Yes” box if you received
any distributions of eligible deferred
compensation items in 2011. Enter the
part of the distribution that you would
include in gross income if you
continued to be subject to tax as a U.S.
citizen or resident. Also enter the total
amount of tax withheld by the payer(s)
of any eligible deferred compensation
items.
Do not enter the part of any
payment that is attributable to
CAUTION services performed outside the
United States before or after the
expatriation date while you were not a
citizen or resident of the United States.

!

Line 3
Unless the exception below applies,
check the “Yes” box if you received any
direct or indirect distributions of
property (including money) from a
nongrantor trust in 2011. Enter the part
of the distribution that you would
include in gross income if you
continued to be subject to tax as a U.S.
citizen or resident. Also enter the total
amount of tax withheld by the payer(s)
of any distribution.
Do not include any distribution
from a trust if your interest in the
CAUTION trust was treated in an earlier
year as a deferred compensation item
or part of a specified tax deferred
account.

!

Exception. Do not check the “Yes”
box if you elected on your 2008, 2009,
or 2010 Form 8854 to be treated as
having received the value of your entire
interest in the trust as of the day before
your expatriation date.

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Part IV—For Persons
Who Expatriated
During 2011
Section A—Expatriation
Information
This section must be completed by all
individuals who expatriated in 2011.

Line 2
You can use the balance sheet in Part
V (Schedule A) to arrive at your net
worth.

Line 5
Check the “Yes” box if:
• You expatriated before you were
181/2, and
• You have been a resident of the
United States for not more than 10 tax
years before you expatriated. For the
purpose of determining U.S. residency,
use the substantial presence test
described in chapter 1 of Pub. 519.

Line 6
Check the “Yes” box if you have
complied with your tax obligations for
the 5 tax years ending before the date
on which you expatriated, including but
not limited to, your obligations to file
income tax, employment tax, gift tax,
and information returns, if applicable,
and your obligation to pay all relevant
tax liabilities, interest, and penalties.
You will be subject to tax under section
877A if you have not complied with
these obligations, regardless of whether
your average annual income tax liability
or net worth exceeds the applicable
threshold amounts.

Section B—Property Owned
on Date of Expatriation
Complete Section B only if you are a
covered expatriate (see Covered
expatriate, earlier). If you need
additional space for the description of
property, or if you need additional entry
lines, attach a continuation statement.

Line 7
None of the amounts checked on line 7
are subject to the mark-to-market tax.
Do not include them on line 8.
Some of these amounts may be
TIP otherwise taxable or subject to
income tax withholding at
source. You must provide Form W-8CE
to the payer of the relevant items. See
paragraphs (d), (e), and (f) of section
877A for more information.
Line 7a. Generally, a deferred
compensation item is one of the
following.
1. Any interest in a plan or
arrangement described in section
219(g)(5). This includes a qualified
pension, profit-sharing (including
401(k)), annuity, SEP, and SIMPLE
plan.

2. Any interest in a foreign pension
plan or similar retirement arrangement
or program.
3. Any item of deferred
compensation. This is any amount of
compensation if, under the terms of the
plan, contract, or other arrangement
providing for such compensation, the
following conditions were met.
a. You had a legally binding right on
your expatriation date to such
compensation,
b. The compensation has not been
actually or constructively received on or
before the expatriation date, and
c. The compensation is payable on
or after the expatriation date.
Examples of items of deferred
compensation include: a cash-settled
stock appreciation right, a phantom
stock arrangement, a cash-settled
restricted stock unit, an unfunded and
unsecured promise to pay money or
other compensation in the future (other
than such a promise to transfer
property in the future), and an interest
in a trust described in section 402(b)(1)
or (4) (commonly referred to as a
secular trust).
4. Any property, or right to property,
that you are entitled to receive in
connection with the performance of
services to the extent not previously
taken into account under section 83 or
in accordance with section 83.
Examples of these items include, but
are not limited to, restricted stock,
stock-settled stock appreciation rights,
and stock-settled restricted stock units.
For more information, see section 5B of
Notice 2009-85, 2009-45 I.R.B. 598,
available at www.irs.gov/irb/
2009-45_IRB/ar10.html.
Eligible deferred compensation item
means any deferred compensation item
with respect to which: (i) the payer is
either a U.S. person or a non-U.S.
person who elects to be treated as a
U.S. person for purposes of section
877A(d)(1) and (ii) the covered
expatriate notifies the payer of his or
her status as a covered expatriate and
irrevocably waives any right to claim
any withholding reduction on such item
under any treaty with the United States.
Special guidance will be issued
providing a procedure for a payer who
is a non-U.S. person and wishes to be
treated as a U.S. person for purposes
of section 877A(d)(1).
Note. If you have more than one
eligible deferred compensation item,
you must attach a statement to the form
that separately identifies each eligible
deferred compensation item and
includes the following language for
each item. “I irrevocably waive any right
to claim any reduction in withholding for
this eligible deferred compensation item
under any treaty with the United
States.”

Line 7b. Ineligible deferred
compensation item means any deferred
compensation item that is not an
eligible deferred compensation item.
Note. If you have more than one
ineligible deferred compensation item,
you must attach a statement to the form
that separately identifies each ineligible
deferred compensation item and
provides the present value of such
ineligible deferred compensation item
as of the day before your expatriation
date.
Line 7c. A specified tax deferred
account includes:
1. An individual retirement plan
(except those described in section
408(k) or 408(p)),
2. A Coverdell education savings
account, or
3. A health savings account or an
Archer medical savings account.
Note. If you have more than one
specified tax deferred account, you
must attach a statement to the form
that separately identifies each specified
tax deferred account and provides the
entire account balance of each
specified tax deferred account on the
day before your expatriation date.
Line 7d. A nongrantor trust is the part
of any trust, whether domestic or
foreign, of which you were not
considered the owner on the day before
your expatriation date. You are
considered a beneficiary of such trust if:
1. You are entitled or permitted,
under the terms of the trust instrument
or applicable local law, to receive a
direct or indirect distribution of trust
income or corpus (including, for
example, a distribution in discharge of
an obligation);
2. You have the power to apply trust
income or corpus for your own benefit;
or
3. You could be paid from the trust
income or corpus if the trust or the
current interests in the trust were
terminated.
Unless you elect to be treated as
having received the value of your
interest in the trust, as determined for
purposes of section 877A, as of the day
before your expatriation date, you may
not claim a reduction in withholding on
any distribution from the trust under any
treaty with the United States. Before
you can make the election, you must
get a letter ruling from the IRS as to the
value, if ascertainable, of your interest
in the trust as of the day before the
expatriation date by following the
procedures set forth in Rev. Proc.
2011-4, 2011-1 I.R.B. 123, available at
www.irs.gov/irb/2011-01_IRB/ar09.html.
You must make this election by
checking the box under line 7d of this
form and attaching a copy of the letter
ruling both to this form and to your

-5-

timely filed tax return (including
extensions) for the 2011 tax year. Until
you obtain the valuation letter ruling
and provide a copy of such letter ruling
to the trustee of the nongrantor trust
together with certification, under
penalties of perjury, that you have paid
all tax due as a result of your election,
any taxable distributions that you
receive from the trust will be subject to
30% withholding.
Note. If you have an interest in more
than one nongrantor trust, you must
attach a statement to the form that
separately identifies each nongrantor
trust and includes one of the following
statements for each interest.
1. “I waive any right to claim any
reduction in withholding on any
distribution from such trust under any
treaty with the United States.”, or
2. “I elect under section
877A(f)(4)(B) to be treated as having
received the value of my entire interest
in the trust (as determined for purposes
of section 877A) as of the day before
my expatriation date. I attach a copy of
my valuation letter ruling issued by the
IRS. ”

Line 8
Column (a). An interest in property
includes money or other property,
regardless of whether it produces any
income or gain. In addition, an interest
in the right to use property will be
treated as an interest in such property.
However, do not list the following.
1. Deferred compensation items.
2. Specified tax deferred accounts.
3. Interests in nongrantor trusts.
You are considered to own any
interest in property that would be
included in your gross estate for federal
estate tax purposes under Chapter 11
of Subtitle B of the Code if you died on
the day before the expatriation date as
a citizen or resident of the United
States. Whether property would be
included in your gross estate will be
determined without regard to sections
2010 through 2016. For this purpose,
you are considered to own your
beneficial interest(s) in each trust (or
part of a trust), other than a nongrantor
trust subject to section 877A(f), that
would not be included in your gross
estate as described in the preceding
sentences. Your beneficial interest(s) in
such a trust shall be determined under
the special rules set forth in section III
of Notice 97-19, which is on page 40 of
Internal Revenue Bulletin 1997-10 at
www.irs.gov/pub/irs-irbs/irb97-10.pdf.
Column (b). Use the fair market value
(FMV) on the day before your
expatriation date. FMV is the price at
which the property would change hands
between a buyer and a seller when
both have reasonable knowledge of all
the necessary facts and neither has to

buy or sell. If parties with adverse
interests place a value on property in
an arm’s-length transaction, that is
strong evidence of FMV.
Column (c). Generally, the cost or
other basis in this column cannot be
less than the fair market value of the
property on the date you first became a
U.S. resident. However, you can make
an irrevocable election to determine
basis without regard to this restriction.
Print “(h)(2)” after any entry for which
you make this election.
Column (e). Before you complete
column (e), you must allocate the
exclusion amount to the gain properties
on a separate schedule. Attach a copy
of the separate schedule to this form.
To allocate the exclusion amount,
determine the gain of each gain
property listed in column (a) and enter
that gain in column (d). If the total gain
of all the gain properties exceeds the
exclusion amount ($636,000), then
allocate the entire exclusion amount to
the gain properties by multiplying the
exclusion amount by the ratio of the
gain determined for each gain property
in column (d) over the total gain of all
gain properties listed in column (d).
After you have allocated the exclusion
amount to the gain properties, subtract
the exclusion amount allocated to each
gain property from the gain reported for
that property in column (d), and enter
the resulting amount of gain in column
(e). If the total gain of the gain
properties in column (d) is less than the
exclusion amount (but greater than -0-),
then you must use the total gain
amount as the exclusion amount, and
you must allocate the exclusion
amount, as adjusted, to the gain
properties under the method described
above. The exclusion amount allocated
to each gain property may not exceed
the amount of that gain property’s
built-in gain.
See Notice 2009-85, section 3B, for
more information.
Example. X, a covered expatriate,
renounced his citizenship on Date 2.
On Date 1, the day before X’s
renunciation of his citizenship, X owned
three assets, which he had owned for
more than one year. Asset A is
business property and assets B and C
are personal property. As of Date 1,
Asset A had a fair market value of
$2,000,000 and a basis of $200,000,
Asset B had a fair market value of
$1,000,000 and a basis of $800,000,
and Asset C had a fair market value of
$500,000 and a basis of $800,000. X
must allocate the exclusion amount as
follows:
Step 1: Determine the built-in gain or
loss of each asset by subtracting the
basis from the FMV of the asset on
Date 1.

Basis

FMV

Asset A 200,000 2,000,000
Asset B 800,000 1,000,000
Asset C 800,000 500,000

Built-in
Gain/Loss
1,800,000
200,000
(300,000)

Step 2: Allocate the exclusion
amount to each of the gain properties
by multiplying the exclusion amount
($636,000) by a ratio of the deemed
gain attributable to each gain property
over the total gain of all the gain
properties deemed sold.
Asset A
1,800,000
× 636,000 = 572,400
2,000,000
Asset B
200,000
× 636,000 = 63,600
2,000,000

Step 3: Figure the final amount of
deemed gain on each asset by
subtracting the exclusion amount
allocated to each asset.
Asset A: 1,800,000 − 572,400 = 1,227,600
Asset B: 200,000 − 63,600 = 136,400

Column (f). Complete this column in
order to list the schedule or form on
which you reported the deemed sale of
each property listed in column (a) (for
example, Form 4797 or Form 8949).
Column (g). Complete this column
only for those properties for which you
are electing to defer the payment of tax.
First, complete Section C to line 14. On
a separate attachment, allocate the
amount of tax eligible for deferral
among all gain properties listed on line
8. The tax attributable to a particular
property is determined by multiplying
the amount on Section C, line 14, by
the ratio of the gain for that property
entered on line 8, column (e), over the
total amount of gain of all gain
properties on line 8, column (e). On line
8, column (g), enter the tax attributable
to each property for which you are
electing to defer tax. Then enter the
total deferred tax for those properties
from line 10, column (g), on Section C,
line 15.
Example. Line 8 lists four assets,
each resulting in a deemed gain in
column (d). The amount of tax eligible
for deferral on Section C, line 14, is
$575,000. You must go back to Section
B, line 8, column (g), to allocate the
deferred tax among the individual
properties.

!

CAUTION

You must attach a computation
to show how you figured the tax
attributable to each property.

See the instructions for Section C
and Notice 2009-85, section 3E, for
more information on deferring the
payment of tax.

-6-

Reporting gain or loss. You must
report and recognize the gain (or loss)
of each property reported in line 8,
column (a), on the relevant form or
schedule of your Form 1040 for the part
of the year that includes the day before
your expatriation date. The return to
which you attach your form or schedule
will depend on your status at the end of
the year. See chapter 1 of Pub. 519 to
determine which form you should file.
The gain from column (e) or loss from
column (d) attributable to each property
is reported in the same manner as if the
property had actually been sold. For
example, gain recognized from the
deemed sale of a rental property that
has been depreciated is reported on
Form 4797 as if it had been sold. Gain
recognized from the deemed sale of
personal property (such as stock or a
personal residence) is reported on
Form 8949 as if it had been sold.
Capital gain retains its character as
capital gain; ordinary gain retains its
character as ordinary income.

Section C—Deferral of Tax
Use lines 12 through 15 to figure the
amount of tax you can defer. Before
completing lines 12 through 15, you
must fill out two hypothetical individual
income tax returns using Form 1040.
The first return includes all income,
including the section 877A(a) gain and
loss. The second return includes all
income except the section 877A(a) gain
and loss. Attach both returns to this
Form 8854.

Line 11
If you are not electing to defer the
payment of tax on the gain reported on
line 8, column (e), report on the
appropriate income tax return schedule
or form the gain amount attributable to
each particular property as listed in line
8, column (e), and report the loss
amount attributable to each particular
property as listed in line 8, column (d).
If you are electing to defer tax, go to
line 12.

Line 12
Enter on line 12 the amount of tax on
line 61 of the first return.

Line 13
Enter on line 13 the amount of tax on
line 61 of the second return.

Line 15
This is the amount of tax you elect to
defer. If you are deferring tax on all
properties, enter the amount from line
14. If you are electing deferral on only
certain properties, go to Section B, line
8, column (g), to show how much
deferred tax is allocated to each
property. Attach a computation.
Procedure for deferral of the
payment of tax. In order to defer any
part of the mark-to-market tax, you
must enter into a tax deferral

agreement with the IRS and provide
adequate security. Notice 2009-85
contains a sample agreement
(Appendix A). Adequate security can be
either:
1. A bond that is furnished to, and
accepted by, the IRS, that is
conditioned on the payment of tax (and
interest thereon), and that meets the
requirements of section 6325; or
2. Another form of security
(including letters of credit) that is
acceptable to the IRS.
You must contact the following office
in order to make the appropriate
arrangements for providing security.
Internal Revenue Service
SBSE Advisory Office
7850 SW 6th Court
Mail Stop 5780
Plantation, FL 33324-3202
Telephone: (954) 423-7344
You can pay any tax deferred,
together with interest, at any time.
However, the time for the payment of
tax attributable to a particular deferral
asset can be extended only until a) the
year the asset is ultimately disposed of
or b) the year of death.
You must file Form 8854
annually for years up to and
CAUTION including the year in which the
full amount of deferred tax and interest
is paid.
Waiver of treaty benefits. As a
further condition to making the election
to defer the payment of tax on a
particular asset, you must waive any
right under any U.S. tax treaty that
would preclude the assessment or
collection of the tax.
Satisfying your deferred tax liability.
If you entered into an agreement for the
deferral of tax with the IRS Advisory
Office and dispose of one or more
assets for which you elected to defer
tax, you must contact that office to
make arrangements to satisfy your tax
liability. The address for the Advisory
Office is shown above.

!

Part V—Balance Sheet
and Income Statement
The financial information in Part V is
required under section 6039G.

Who Must Complete
Section 877. If you checked the “Yes”
box in Part II, line 1, you must complete
Part V.
Section 877A. If you expatriated in
2011, you must complete Part V.

Schedule A—Balance Sheet
Note. If there have been significant
changes in your assets and liabilities for
the period that began 5 years before
your expatriation and ended on the
date that you first filed Form 8854, you

must attach a statement explaining the
changes. Also, if you expatriated after
June 3, 2004, and before June 17,
2008, attach a similar statement if you
expect significant changes in the
10-year period after expatriation or
termination of residency.

for tax purposes. You must attach a
statement to Form 8854 that lists each
trust separately. Include the EIN (if any)
for each trust. Describe the assets and
liabilities (using the categories on this
balance sheet) from your interest in
each trust.

Columns (a) and (b)

Note. To determine if you are an
owner of a trust, see sections 671
through 679.

List in U.S. dollars the fair market value
(column (a)) and the U.S. adjusted
basis (column (b)) of your assets and
liabilities as of:
• The end of the tax year for which you
are filing this form if your expatriation
date is before June 17, 2008, or
• Your expatriation date if you
expatriated on or after June 17, 2008.
You can use good faith estimates of
fair market value and basis. Formal
appraisals are not required.

Column (c)
Subtract the amounts in column (b)
from the amounts in column (a) and
show the gain or (loss) in column (c).
Enter negative amounts in parentheses.

Column (d)
If you are a former U.S. LTR, it may
benefit you to complete column (d). For
more details, see section 877(e)(3)(B)
or section 877A(h)(2). Only former U.S.
LTRs should complete column (d).
Enter in column (d) the fair market
value of each asset on the date you
first became a U.S. resident for tax
purposes.
Note. The date you first became a
U.S. resident for tax purposes is not
always the same as the date you first
became a U.S. lawful permanent
resident. For details on U.S. residency
(including the substantial presence
test), see Pub. 519.

Line 5a
List the appropriate amount in each
column for all nonmarketable stock and
securities issued by foreign
corporations that would be controlled
foreign corporations if you were still a
U.S. citizen or resident. Note that these
amounts are already included on line 5.
Do not include amounts on this line in
the total on line 20.

Line 8
List the total value of all your
partnership interests. If you hold an
interest in one or more partnerships,
you must attach a statement to Form
8854 that lists each partnership
separately. Include the employer
identification number (EIN), if any, for
each partnership. Describe the assets
and liabilities (using the categories on
this balance sheet) from your interest in
each partnership.

Line 9
List the total value of all assets held by
trusts that you are considered to own

-7-

Line 10
List the total value of all assets held by
nongrantor trusts in which you are
considered to have a beneficial interest.
You must attach a statement to Form
8854 that lists each trust separately.
Include the EIN (if any) for each trust.
Describe the assets and liabilities
(using the categories on this balance
sheet) from your interest in each trust.
Note. To determine if you are a
beneficiary of a nongrantor trust, you
must allocate the property interests of
the trust based on all relevant facts and
circumstances. To determine the value
of your beneficial interest, use the
valuation principles under section 2512.
See Section III of Notice 97-19 for
examples of how the property interests
of a nongrantor trust should be
allocated to the beneficiaries of the
trust.

Lines 11 and 12
Intangible property includes any of the
following items that have substantial
value independent of the services of
any individual.
• Patent, invention, formula, process,
design, pattern, or know-how.
• Copyright, literary, musical, or artistic
composition.
• Trademark, trade name, or brand
name.
• Franchise, license, or contract.
• Method, program, system,
procedure, campaign, survey, study,
forecast, estimate, customer list, or
technical data.
• Any similar item.

Line 19
Attach a statement describing and
listing the total value of any other
assets you have that are not included
on lines 1 through 18.

Line 20
Combine lines 1 through 5 and 6
through 19, not including any amounts
on line 5a. The amounts on line 5a are
included in determining the amounts on
line 5.

Line 23
Attach a statement describing and
listing the total value of any other
liabilities you have that are not included
on lines 21 and 22.

Schedule B–Income
Statement
Schedule B is required to satisfy the
requirements of section 6039G(b)(5).
You must complete Schedule B without
regard to whether you have income
subject to tax under section 877 or
section 877A for the tax year.
• If your expatriation date is before
June 17, 2008, provide income
information for the tax year for which
you are filing Form 8854.
• If your expatriation date is after June
16, 2008, provide income information
for the part of the tax year that ends
with the day before your expatriation
date, but enter zero on lines 5, 6, and
7.
Note. If you are subject to section 877
for all or a part of the tax year, and you
have income subject to tax under
section 877 for the tax year, you are
liable for tax on that income as
provided in section 1 or section 55, if
the tax figured under such sections
exceeds the tax that would be imposed
on you under section 871. In most
cases, this means that you must report
all income subject to tax under section
877 on Form 1040NR, whether or not it
is effectively connected with the
conduct of a trade or business in the
United States, and you are not
permitted to exclude certain types of
income, such as portfolio interest or
capital gains, which normally would be
exempt from tax in the hands of a
nonresident alien.
Treaty residents. Most U.S. tax
treaties do not prevent the United
States from continuing to tax former
citizens and former LTRs under
domestic law. Unless the treaty
prevents it, you will be subject to the
rules of section 877.
If you deferred the payment of tax
under section 877A(b), you waived any
right under a treaty that would prevent
assessment or collection of any tax
imposed because of section 877A. If
you are a covered expatriate (see
Covered expatriate, earlier) and had
eligible deferred compensation items or
an interest in a nongrantor trust as of
the day before your expatriation date,
you waived any right under a treaty that
would reduce the rate of withholding tax
on the payment of such income item or
trust distribution, unless you elected to
be treated as receiving the value of
your entire interest in a nongrantor trust
as of the day before your expatriation
date.

Line 1
Include all U.S. source gross income
that is not effectively connected with
the conduct of a U.S. trade or business
on lines 1a through 1e.

Lines 3 Through 6
Lines 3 through 6 require reporting
income that, but for the application of
section 877(d), would be income from
sources outside the United States. If
you report income on these lines, you
also must report this income as taxable
income on Form 1040NR.

Line 5

U.S. citizen or LTR, any income or gain
on that property received or accrued by
the foreign corporation during the tax
year is treated as received or accrued
by you. See Section VI of Notice 97-19
for additional information.

Line 8
Add lines 1f through 7 to report your
total income from U.S. sources.

If you owned (within the meaning of
section 958(a) or (b)) at any time during
the 2-year period ending on the date of
your expatriation, more than 50% of the
vote or value of a foreign corporation,
income or gain you receive from the
foreign corporation during the tax year
will be treated as from sources within
the United States, to the extent such
income or gain is not more than the
earnings and profits from such stock
that were earned or accumulated
before the date of your expatriation
while such ownership requirements
were met.

Line 9

Line 6

Signature

If, during the current tax year, you
exchanged any property and (a) the
gain would not (but for this paragraph)
be recognized on such exchange in
whole or in part, (b) income derived
from such property was from sources
within the United States (or, if no
income was so derived, would have
been from such sources), and (c)
income derived from the property
acquired in the exchange would be
from sources outside the United States,
then the property will be treated as sold
for its fair market value on the date of
the exchange, in accordance with
Section V of Notice 97-19. The removal
of appreciated property with an
aggregate fair market value in excess
of $250,000 from the United States is
an exchange of property covered by
this provision.
Enter on line 6 the total amount of
gain resulting from any such exchanges
during the tax year and, if you have
elected to enter into a gain recognition
agreement with the IRS deferring the
gain, attach a copy of the agreement to
your Form 1040NR. If you dispose of
any property covered by a gain
recognition agreement during the tax
year, also list the gain realized on this
line. See Section V of Notice 97-19 for
additional information on exchanges
and gain recognition agreements.

Line 7
If, during the 10-year period beginning
on the date of your expatriation, or
during the 5-year period before your
expatriation, you contributed
U.S.-source property to a foreign
corporation that would be a controlled
foreign corporation had you remained a

-8-

List the total amount of all other income
or gain for the tax year.

Penalties
If you are subject to section 877 or
section 877A and required to file Form
8854 for any tax year, and you fail to
file or do not include all the information
required by the form or the form
includes incorrect information, you will
owe a penalty of $10,000 for that year,
unless it is shown that such failure is
due to reasonable cause and not willful
neglect.
Form 8854 is not considered valid
unless you sign it. If you have someone
else prepare Form 8854, you are still
responsible for its correctness.
Paid preparers. Generally, anyone
you pay to prepare Form 8854 must
sign it and include their preparer tax
identification number (PTIN) in the
space provided. The preparer must give
you a copy for your records. Someone
who prepares Form 8854 but does not
charge you a fee should not sign it.
Paperwork Reduction Act Notice.
We ask for the information on this form
to carry out the Internal Revenue laws
of the United States. You are required
to give us the information. We need it to
ensure that you are complying with
these laws and to allow us to figure and
collect the right amount of tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records
relating to a form or its instructions
must be retained as long as their
contents may become material in the
administration of any Internal Revenue
law. Generally, tax returns and return
information are confidential, as required
by section 6103.
The average time and expenses
required to complete and file this form
will vary depending on individual
circumstances. For the estimated
averages, see the instructions for your
income tax return.