8854 Instr

2020

Instructions for Form 8854

Department of the Treasury
Internal Revenue Service

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

Future Developments

For the latest information about
developments related to Form 8854 and
its instructions, such as legislation
enacted after they were published, go to
IRS.gov/Form8854.

What's New
Increase in average annual net income tax liability. The average annual
net income tax liability for the 5 taxable
years ending before the expatriation
date, which is used to determine
whether an individual is a covered
expatriate has increased to $171,000.
For more information, see Covered
expatriate, later.
Increase in threshold for net unrealized gain on property. For 2020, if
you are a covered expatriate, the net
gain that you otherwise must include in
your income is reduced by $737,000.
For more information, see Taxation
Under Section 877A, later.

General Instructions
Purpose of Form

Section 877A applies to U.S. citizens
who have relinquished their citizenship
and long-term residents who have
ended their residency (expatriated) on
or after June 17, 2008.
Form 8884 is used by expatriates to
certify compliance with tax obligations in
the five years before expatriation and to
comply with their initial and annual
information reporting obligations under
section 6039G.
Note. Individuals who expatriated for
immigration purposes after June 3,
2004 and before June 17, 2008, but
who have not previously filed a Form
8854, continue to be treated as U.S.
citizens or U.S. lawful permanent
residents for U.S. income tax purposes
until they file a Form 8854. See section
7701(n), as in effect before June 17,
2008.
Individuals in this category are
subject to section 877 once they file the
Form 8854. These individuals should
Nov 13, 2020

use the 2018 Form 8854 and the
Instructions for Form 8854 (but modify
the year on the form by crossing out
2018, and entering the year of actual
filing) for purposes of filing their initial
and/or annual expatriation statements
pursuant to section 877 going forward.
Individuals who expatriated before
June 17, 2008, who have previously
filed a Form 8854, but who still have an
annual reporting requirement in 2020
under section 877 should also use the
2018 Form 8854 but modify the year on
the form by crossing out 2018, and
entering 2020.

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.

Who Must File

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,” and your
green card hasn't been revoked or
judicially or administratively determined
to have been abandoned, and you
haven't 1) commenced to be treated as
a resident of a foreign country under the
provisions of a tax treaty , 2) waived the
benefits of such treaty, and 3) notified
the IRS of such a position on a Form
8833 attached to an income tax return. If
you were already an LTR at the time you
cease to be treated as a lawful
permanent resident, then you will be
treated as having expatriated as of that
date.

You must file your initial Form 8854
(Parts I and II) if you relinquished your
U.S. citizenship in 2020 or you are a
long-term resident (LTR), defined
below, and terminated your residency
status in 2020.
You must file your annual Form 8854
(Parts I and III) if you expatriated before
2020 and you:
1. Deferred the payment of tax,
2. Have an item of eligible deferred
compensation, or
3. Have an interest in a nongrantor
trust.
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 a 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).
Cat. No. 24874E

Long-term resident 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, don't count any year that
you were treated as a resident of a
foreign country under a tax treaty and
didn't waive treaty benefits applicable to
residents of the country.

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.
2. The date you became subject to
a final administrative order that you
abandoned your lawful permanent
resident status (or, if such order has
been appealed, the date of a final

judicial order issued in connection with
such administrative order).
3. The date you became subject to
a final administrative or judicial order for
your removal from the United States
under the Immigration and Nationality
Act.
4. 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 on which you
commenced to be treated as a resident
of that country under the treaty, did not
waive the benefits of the treaty, and
gave notice to the Secretary of such
treatment. See Regulations section
301.7701(b)-7 for information on other
filing requirements.
Covered expatriate. You are a
covered expatriate if you expatriated
after June 16, 2008, and 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.
e. $151,000 for 2012.
f. $155,000 for 2013.
g. $157,000 for 2014.
h. $160,000 for 2015.
i. $161,000 for 2016.
j. $162,000 for 2017.
k. $165,000 for 2018.
l. $168,000 for 2019.
m. $171,000 for 2020.
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.
Exception for dual-citizens and
certain minors. Dual-citizens and
certain minors (defined next) won't be
treated as covered expatriates (and
therefore won't be subject to the
expatriation tax) solely because one or
both of the statements in paragraph (1)
or (2) above (under Covered expatriate)
applies. However, these individuals will
still be treated as covered expatriates
unless they file Form 8854 and certify
that they have complied with all federal
tax obligations for the 5 tax years
preceding the date of expatriation as

required in paragraph (3) (under
Covered expatriate, earlier).
Certain dual-citizens. You can
qualify for the exception described
above if you meet both of the following
requirements.
• You became at birth a U.S. citizen
and a citizen of another country and, as
of the expatriation date, 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 can qualify for
the exception described above if you
meet both of 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 (FMV)
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, later.
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) doesn't apply. For 2020, the
net gain that you otherwise must include
in your income is reduced (but not
below zero) by $737,000.

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.

-2-

Instead, item (1) is subject to
withholding at source provided that you
properly make an irrevocable waiver on
your initial filing of this form of any right
to claim any reduction in withholding
under an applicable treaty between the
United States and a foreign country and
timely notify the payor on Form W-8CE.
To timely notify the payor on Form
W-8CE, you must file the Form W-8CE
with the payor on the earlier of:
• The day prior to the first distribution
on or after the expatriation date, or
• 30 days after the expatriation date.
Item (4) is also subject to withholding
at source, and you are treated as having
waived any right to claim any reduction
in withholding under an applicable treaty
between the United States and a foreign
country, unless you elect to be treated
as having received the value of your
entire interest in the trust by obtaining a
ruling from the IRS to that effect. See
Section C—Property Owned on Date of
Expatriation under Part II.
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 and you
should include this amount on your
Form 1040 or 1040-SR for the year that
includes your 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 and you should
include this amount on your Form 1040
or 1040-SR for the year that includes
your expatriation date. See paragraphs
(d), (e), and (f) of section 877A.
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.
Instructions for Form 8854 (2020)

5. You make the election in Part II,
Section D—Deferral of Tax.
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

Attach your initial Form 8854 to your
income tax return (Form 1040,
1040-SR, or 1040-NR) 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, marked
“Copy,” to the address under Where To
File, later. If you are not required to file
an income tax return, send your Form
8854 to the address under Where To
File, later, by the date your Form
1040NR (or Form 1040 or 1040-SR)
would have been due (including
extensions) if you had been required to
file. (See Resident Alien or Nonresident
Alien in the Instructions for Form
1040-NR.)
File your annual Form 8854 if you
expatriated before 2020 and you:
1. Deferred the payment of tax on
any property on a Form 8854 filed in a
previous year;
2. Reported an eligible deferred
compensation item on a Form 8854 filed
in a previous year; or
3. Reported an interest in a
nongrantor trust on a Form 8854 filed in
a previous year.
See Part III—Annual Expatriation
Statement for Persons Who Expatriated
After June 16, 2008, and Before
January 1, 2020, later.
For each year that you are required
to file a Form 1040-NR (or Form 1040 or
1040-SR), attach your annual Form
8854 to your Form 1040-NR (or Form
1040 or 1040-SR) and send a copy,
marked “Copy,” to the address under
Where To File, later. For each year that
you are not required to file Form
1040-NR (or Form 1040 or 1040-SR),
send your Form 8854 to the address
under Where To File, later, by the date
your Form 1040-NR (or Form 1040 or
1040-SR) would have been due
(including extensions) if you had been
required to file a Form 1040-NR (or
Form 1040 or 1040-SR).

Where To File
1. Send your original initial or annual
Form 8854 to the address listed below.
Instructions for Form 8854 (2020)

2. If you are required to attach the
original Form 8854 to a Form 1040-NR,
Form 1040, or Form 1040-SR send a
copy of your initial or annual Form 8854,
marked “Copy,” to the address listed
below.
3. If you elected to defer the
payment of any tax due, see the
instructions under Part II, Section D,
Line 5, later, and send your tax deferral
agreement request to the address listed
below.
Department of the Treasury
Internal Revenue Service
Philadelphia, PA 19255-0049

Specific Instructions
Identifying number. Generally, this
number is your U.S. social security
number. An incorrect or missing
identifying number may result in 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.

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.
Don't 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

Check the appropriate box to indicate
whether you expatriated in 2020 and are
filing your initial expatriation statement,
or if you expatriated before 2020 (but
after June 16, 2008) and are filing an
annual statement.

Line 5

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
-3-

former U.S. resident). See Date of
relinquishment of U.S. citizenship or
Date of termination of long-term
residency, earlier.

Line 6

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

Line 7

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

Line 8

If you are or were a U.S. lawful
permanent resident, indicate the date
on which you became a U.S. lawful
permanent resident.

Part II—Initial Expatriation
Statement for Persons
Who Expatriated
During 2020
Section A—Expatriation
Information

This section must be completed by all
individuals who expatriated in 2020.

Line 2
You can use the Part II, Section B,
balance sheet to arrive at your net
worth.

Line 3
Check the “Yes” box if you became at
birth a U.S. citizen and a citizen of
another country and, as of the
expatriation date, you continue to be a
citizen of, and are taxed as a resident
of, that other country.

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—Balance Sheet

The financial information in this balance
sheet is required under section 6039G.
The balance sheet can be used to arrive
at your net worth.
For purposes of determining your net
worth, you are considered to own any
interest in property that would be
taxable as a gift under Chapter 12 of
Subtitle B of the Code had you
transferred it immediately prior to
expatriation, but without regard to the
sections 2503(b) through (g), 2513,
2522, 2523, and 2524. To determine the
value of your interests in property, use
the valuation principles of section 2512
and the regulations thereunder.
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.

Columns (a) and (b)
List in U.S. dollars the FMV (column (a))
and the U.S. adjusted basis (column
(b)) of your assets and liabilities as of
your expatriation date.
You can use good faith estimates of
FMV and basis. Formal appraisals are
not required.

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.
Don't 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.

included in determining the amounts on
line 5.

Line 9

Line 23

For purposes of determining your net
worth, you are considered to own assets
held in trusts that would be subject to
U.S. gift tax if you had transferred your
interest by gift immediately before your
expatriation date, but without regard to
sections 2503(b) through (g), 2513,
2522, 2523, and 2524. List the total fair
market value and basis of such property
on line 9. Attach a statement to Form
8854 describing each asset. Include the
EIN (if any) for the trust in which the
asset is held.

Attach a statement describing and
listing the total value of any other
liabilities you have that aren't included
on lines 21 and 22.

Complete Section C 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 10

Line 1

List the total value of your beneficial
interest in a trust. 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 of which you have a
beneficial interest.

None of the amounts checked on line 1
are subject to the mark-to-market tax.
Don't include them on line 2. Instead,
you must attach a statement to the form
that separately identifies each amount
checked on line 1 as of the day before
your expatriation date.

Note. To determine the value of your
beneficial interest, use the two-step
process described in Section III of
Notice 97-19.

income tax withholding at
source. You must provide Form W-8CE
to the payor of the relevant items. See
paragraphs (d), (e), and (f) of section
877A for more information.

Lines 11 and 12

Line 1a. 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, whether or not
substantially vested. 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

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 aren't 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

-4-

Section C—Property Owned
on Date of Expatriation

Some of these amounts may be

TIP otherwise taxable or subject to

Instructions for Form 8854 (2020)

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 (whether or not such property
or right to property is substantially
vested) 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.
Note. A deferred compensation item
does not include the portion of an item
that is attributable to services performed
outside the United States while you
were not a citizen or resident of the
United States. For more information,
see section 5 of Notice 2009-85,
2009-45 I.R.B. 598, available at
IRS.gov/irb/
2009-45_IRB#NOT-2009-85.
Eligible deferred compensation item
means any deferred compensation item
with respect to which:
• The payor 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
• The covered expatriate notifies the
payor of his or her status as a covered
expatriate on Form W-8CE, and
• Irrevocably waives any right to claim
any withholding reduction on such item
under any treaty with the United States
on Form 8854.
The Secretary may provide separate
guidance providing a procedure for a
payor who is a non-U.S. person and
wishes to elect to be treated as a U.S.
person for purposes of section 877A(d)
(1).
You must file Form 8854
annually to certify that no
CAUTION distributions have been
received from your eligible deferred
compensation item(s) or to report the
distributions you received.

!

Note. If you have one or more eligible
deferred compensation items, you must
attach a statement to the form that
separately identifies each eligible
deferred compensation item and
Instructions for Form 8854 (2020)

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 1b. Ineligible deferred
compensation item means any deferred
compensation item that is not an eligible
deferred compensation item. The
amount of this deferred compensation
item (the present value of the accrued
benefit) must be included on your Form
1040 or 1040-SR, or other schedule, for
the portion of your taxable year that
includes your expatriation date. For
more information, see section 5D of
Notice 2009-85, 2009-45 I.R.B. 598,
available at IRS.gov/irb/
2009-45_IRB#NOT-2009-85.
Note. If you have one or more ineligible
deferred compensation item(s), 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 1c. 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.
The amount of your entire interest in
your specified tax deferred account on
the day before your expatriation date
must be included on your Form 1040 or
1040-SR, or other schedule, for the
portion of your taxable year that
includes your expatriation date. For
more information, see section 6 of
Notice 2009-85, 2009-45 I.R.B. 598,
available at IRS.gov/irb/
2009-45_IRB#NOT-2009-85.
Note. If you have one or more specified
tax deferred account(s), 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 1d. A nongrantor trust is the part
of any trust, whether domestic or
foreign, of which you were not
considered the owner under sections
671 through 679 on the day before your
-5-

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
cannot 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.
2020-1, 2020-1 I.R.B. 1, available at
IRS.gov/irb/2020-01_IRB#RP-2020-01.
You must make this election by
checking the box under line 1d of this
form and attaching a copy of the letter
ruling both to this form and to your
timely filed tax return (including
extensions) for the 2020 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.
If you have an interest in a
nongrantor trust, you must file
CAUTION Form 8854 annually to certify
that no distributions have been received
or to report the distributions you
received.

!

Note. If you have an interest in one or
more nongrantor trust(s), 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 2
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
IRS.gov/pub/irs-irbs/irb97-10.pdf.
Column (b). Use the 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 the FMV.
Column (c). Generally, the cost or
other basis in this column cannot be
less than the FMV of the property on the
date you first became a U.S. resident.
However, if you are a naturalized citizen
or LTR at the time you expatriated, you
can make an irrevocable election under
section 877A(h)(2) 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 ($737,000 for 2020),
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 cannot 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 an FMV of
$2,000,000 and a basis of $200,000;
Asset B had an FMV of $1,000,000 and
a basis of $800,000; Asset C had an
FMV 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
Asset A
Asset B
Asset C

200,000
800,000
800,000

FMV
2,000,000
1,000,000
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
-6-

($737,000) 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
2,000,000

× 737,000 = 663,300

Asset B
200,000
2,000,000

× 737,000 = 73,700

Step 3: Figure the final amount of
deemed gain on each asset by
subtracting the exclusion amount
allocated to each asset.
Asset A:
Asset B:

1,800,000 − 663,300 = 1,136,700
200,000 − 73,700 = 126,700

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 D to line 4. On a
separate attachment, allocate the
amount of tax eligible for deferral among
all gain properties listed on line 2. The
tax attributable to a particular property is
determined by multiplying the amount
on Section D, line 4, by the ratio of the
gain for that property entered on line 2,
column (e), over the total amount of gain
of all gain properties on line 4, column
(e). On line 2, 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 4, column (g), on
Section D, line 5.
Example. Line 2 lists four assets,
each resulting in a deemed gain in
column (d). The amount of tax eligible
for deferral on Section D, line 4, is
$575,000. You must go back to line 2,
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 Section D—Deferral of Tax and
Notice 2009-85, section 3E, for more
information on deferring the payment of
tax.
Instructions for Form 8854 (2020)

Note. The address listed in Section 3E
of Notice 2009-85 for mailing your tax
deferral agreement is no longer valid.
See Procedure for requesting a deferral
of the payment of tax, later, for the
correct address.
Reporting gain or loss. You must
report and recognize the gain (or loss)
of each property reported in Section C,
line 2, column (a), on the relevant form
or schedule of your Form 1040 or
1040-SR 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 D—Deferral of Tax

If you expatriated in 2020, and you
chose to enter into a tax deferral
agreement with the IRS with respect to
assets subject to the mark-to-market
rules of section 877A, use lines 2
through 5 of Section D to figure the
amount of tax you can defer. Before
completing lines 2 through 5 of
Section D, you must fill out two
hypothetical individual income tax
returns using Form 1040 or 1040-SR.
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 hypothetical
returns to this Form 8854.

Line 1
If you aren't electing to defer the
payment of tax on the gain reported in
Section C, line 2, column (e), report on
the appropriate income tax return
schedule or form the gain amount
attributable to each particular property
as listed in Section C, line 2, column (e),
and report the loss amount attributable
to each particular property as listed in
Section C, line 2, column (d). If you are
electing to defer tax, go to line 2.
Instructions for Form 8854 (2020)

Line 2
Enter on line 2 the amount of tax on
line 5 of the first return.

Line 3
Enter on line 3 the amount of tax on
line 5 of the second return.

Line 5
This is the amount of tax you elect to
defer. If you are deferring tax on all
properties, enter the amount from line 4.
If you are electing deferral on only
certain properties, go to Section C,
line 2, column (g), to show how much
deferred tax is allocated to each
property. Attach a computation.
Procedure for requesting a 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) 991-4455
You must send your original tax
deferral agreement request, marked
“Original,” with your Form 8854 for the
year that includes your expatriation date
to:
Department of the Treasury
Internal Revenue Service
Philadelphia, PA 19255-0049
If you are required to file a Form
1040, Form 1040-SR or Form 1040-NR
for the year that includes your
expatriation date, please also attach a
copy of the tax deferral agreement
request, marked “Copy,” to the Form
8854 that you include with your tax
return.
-7-

Note. The address listed in Section 3E
of Notice 2009-85 is no longer valid.
If the IRS deems your collateral
sufficient, and agrees to enter into a tax
deferral agreement, 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 III—Annual
Expatriation Statement for
Persons
Who Expatriated
After June 16, 2008, and
Before January 1, 2020

You must file Part III if you:
1. Deferred the payment of tax on
any property on a Form 8854 filed in a
previous year,
2. Reported an eligible deferred
compensation item on a Form 8854 filed
in a previous year, or
3. Reported an interest in a
nongrantor trust on a Form 8854 filed in
a previous year.

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). If you
expatriated in 2019, use the information
from Part II, Section C, line 2. If you
expatriated in 2018, or earlier, use the
information from Part III, line 1, of the
earlier year's Form 8854.

If you disposed of any property in
2020 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 your income tax return.
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 2020 income tax return. See
Satisfying your deferred tax liability,
earlier, for information on arranging
payment.

!

See Section D—Deferral of Tax
under Part II—For Persons Who
Expatriated During 2020, earlier, and
Section 3E of Notice 2009-85 for more
information on deferring the tax.
Note. The address listed in Section 3E
of Notice 2009-85 for mailing your tax
deferral agreement is no longer valid.
See Procedure for requesting a deferral
of the payment of tax under
Section D—Deferral of Tax, earlier, for
the correct address.

Line 2

Check the “Yes” box if you received any
distributions of eligible deferred
compensation items in 2020. 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 payor(s) of any
eligible deferred compensation items.
Don't 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 weren't a
citizen or resident of the United States.

!

Line 3

Unless the exception at the end of this
section applies, check the “Yes” box if
you received any direct or indirect
distributions of property (including
money) from a nongrantor trust in 2020.
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 payor(s)
of any distribution.
Don't 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. Don't check the “Yes” box if
you elected on a previously filed 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.

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.

sign it and include a 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.

Signature

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

-8-

Instructions for Form 8854 (2020)