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  #961  
Old 04-25-2018, 07:18 PM
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I would think too that wearing a tiara from the vaults on a loaner for a state dinner wouldn't even be questioned by the IRS. Its basically like a woman borrowing her mother's pearls for a formal occasion.

Its also, I believe one of the reasons the BRF mostly give tiaras to the working royals as lifetime loans. Diana had the lifetime loan of the Lover's Knot tiara but it was returned to the Queen's vault. If a tiara is a personal gift like Sarah's was from the Queen, its Sarah's problem to report it as an asset she holds (if I understand it right).

Its also why "gifts" are few and far between and loans are more prominent rather than "inheriting". The holdings go from monarch to monarch and in that way, avoid death duties that can cost an arm and a leg and a few hangnails besides.

Don't quote me on this stuff as I'm not 100% sure how this all works but I really think that the US IRS will run into serious brick walls when it comes to British finances of the BRF.
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  #962  
Old 04-26-2018, 12:18 AM
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I will post about the different tax and report implications that are likely and unlikely to occurred when I have time to sit down and type it all out in an orderly manner, likely tomorrow or Friday night. There are a few different types of things going on here and that's likely what's been confusing.
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  #963  
Old 04-26-2018, 12:19 AM
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Quote:
Originally Posted by Rudolph View Post
If the IRS gets involved in jewellery loans Meghan will have to buy her own things.

I can’t see the BRF opening up it’s books to a foreign government just because Meghan is American. That’s her ‘issue’ to deal with.
Well, it's their events. So no, it's not just her issue. Suggesting the BRF will just leaving Meghan to deal with this matter on her own is just ludicrous.
  #964  
Old 04-26-2018, 02:21 AM
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Surely Tax Treaties between countries plays a part here?

Meghan would become Tax Residence in the UK (which is unrelated to citizenship) and will be taxed from here. Any future revenues she receives such as royalties from Suits etc will be within the US jurisdiction since that is where they emanated from and therefore liable for tax in the US. The loan or even the gifts of jewels etc will be within the UK jurisdiction and so only liable (if applicable) to tax in the UK.
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  #965  
Old 04-26-2018, 02:49 AM
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I don't think the issue is so much that she'd have to pay taxes on these things, but that she might have to declare their value in her annual declarations of her foreign assets.
  #966  
Old 04-26-2018, 04:48 AM
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Originally Posted by jacqui24 View Post
Well, it's their events. So no, it's not just her issue. Suggesting the BRF will just leaving Meghan to deal with this matter on her own is just ludicrous.
Yeah, I don't see anyone trying to even suggest to Meghan, that she deal with something like this, it's her 'issue'.
  #967  
Old 04-26-2018, 05:29 AM
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Quote:
I really think that the US IRS will run into serious brick walls when it comes to British finances of the BRF.
I damned well hope so.. prying into the finances of a foreign HEAD of STATE is none of their business..
The clue is in their moniker.. 'INTERNAL Revenue Service' !
  #968  
Old 04-26-2018, 05:45 AM
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  #969  
Old 04-26-2018, 07:53 AM
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Quote:
Originally Posted by wbenson View Post
I don't think the issue is so much that she'd have to pay taxes on these things, but that she might have to declare their value in her annual declarations of her foreign assets.
Yes, this is the part that is interesting to me, and that seems to me to open the BRF to unwelcome scrutiny.
  #970  
Old 04-26-2018, 07:57 AM
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Originally Posted by jacqui24 View Post
I will post about the different tax and report implications that are likely and unlikely to occurred when I have time to sit down and type it all out in an orderly manner, likely tomorrow or Friday night. There are a few different types of things going on here and that's likely what's been confusing.
That would be great, thanks for taking the time to do that.
  #971  
Old 04-26-2018, 10:16 AM
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Originally Posted by wyevale View Post
I damned well hope so.. prying into the finances of a foreign HEAD of STATE is none of their business..
The clue is in their moniker.. 'INTERNAL Revenue Service' !
They don't really want to pry into another head of state's finances, but it is their job to make sure that someone who owes taxes to them isn't hiding anything taxable, thus the requirements for American citizens to disclose everything. And it's one of those areas where they can't grant exemptions for special situations without inviting intense scrutiny and criticism.

Honestly, this is reason enough for the UK to decide it's in the government's best interest to fast-track her citizenship--not to help her so much as to maintain British autonomy over matters of royal privacy. So while I don't think we'll see her given citizenship with any sort of timing that could make it look like a "wedding present," I do expect it will happen within the year. And some folks won't be happy about that, but I suspect the powers that be will determine that detailing royal financial details to the IRS is a bigger PR risk than speeding up citizenship proceedings for a royal bride would be.
  #972  
Old 04-27-2018, 11:26 PM
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Ok, I thought since there has been so much discussion of the tax and reporting implications related to Meghan's US citizenship, I'd create a post explaining some of the basic concepts so there isn't so much confusion.

There are some things I need to point out first:
1. My comments are for casual discussion only, and does not constitute professional advice.
2. I don't know, nor do I claim to know, how the BRF organizes their finances. There are some basic assumptions that I'm using based on what I've read over time on royal expenses. If there is any assumptions that contradicts what any of the royal experts here know, let me know and I'll adjust my comments as necessary.
3. I am not familiar with UK tax law. My comments aren't intended to take into account of UK laws, but rather what Meghan's obligation to IRS is as a US citizen living abroad.
4. Tax laws are filled with loopholes, especially in international tax laws as they can cross several jurisdictions. Creating tax structures to avoid tax is as much of an art as it is science. As the tax liability increases, more complicated tax structure becomes more attractive. Tax avoidance is neither illegal or immoral.
5. Meghan's situation is obviously unprecedented. There is not going to be a case to look at as an exact replica of what she would be facing. However, there are ways to determine certain aspect of her situation and how IRS would view it.
6. Given her unique situation and high public scrutiny, it's unlikely that we would ever see her in court with IRS to fight a decision. Her attorneys and accountants are likely to take the more conservative route. If there is ever a situation that they can't be highly certain of a position they take, they'd like reach out to IRS to obtain a private letter ruling prior to the filing deadline to avoid any sort of public scandal. While IRS audits are private and will not be disclosed, if they ever went to court, it'd be public records.

Ok, now onto the fun stuff. There two things we have to differentiate first. The first is the difference between gifts and income. Gifts are given without receiving some kind of consideration in exchange. For example, wedding gifts are gifts. Income is when something (monetary or in kind) is given for providing a service or goods. The second thing is the difference between income tax return and reporting return. Income tax return is used to report income and offsetting expenses and may incur a tax liability. Reporting returns do not incur tax liability, it is for reporting of foreign assets US citizens either hold or have authority over. This type of return does not incur income tax liability, but they carry steep penalties if proper disclosures are not made. For failure to report a foreign account, the penalty is 10% of highest value in the account during the year. For example, if the account has $100k, reporting it on the FinCen 114 form incurs no liability. However, if the filer fails to report it, the penalty would be $10k.

Let's talk about gifts first. There will NOT be tax liability on Meghan for any gifts given. Period. Full stop. The reason is tax liability is incurred on the part of the person giving the gift, not the person receiving gift. For example, if my mom gives me $50k, anything over $15k may be subject to tax for her, not me, after a calculation of various things that we won't get into here. However, if the person gives the gift is a foreigner, that changes everything. IRS can't tax someone that's not in their jurisdiction. However, if Meghan receives gift over a certain value set forth by IRS, she will have to file a reporting return disclosing the assets and its monetary values. Some of you might remember incidents like Oprah giving away a car and those recipients incurring tax liabilities and think how am I right on this. It's all in how it's structured. For tax purposes, Oprah's giveaways are considered to be winnings and thus income.

Now onto income. In my opinion, any money Meghan gets for her wardrobe and such as part of royal duties will incur any tax liability based on my understanding that wardrobe for royal duties are intended for their use on the job and not personally. It's even possible that all the wardrobe expenses are passed through the office and thus not even go through their personal accounts. Even if you were to report it as income, the same amount would be expenses and it's a wash. It zeros out. Just like how Prince Charles takes the expenses he pays for the Cambridges and Harry's office and takes that as deduction on his taxes. Or at least, I read that he takes them as expenses. Now one concern is the rent free apartment Meghan and Harry receives at KP. There is a way to figure out the fair value of the rent as KP rents out apartments to other residents like the Prince and Princess Michael of Kent. Once it combined with any other income she has in UK (excluding investment income) exceeds the limits allowed by IRS, she would be required to file income tax return and report her foreign income and take tax credit for any foreign income taxes paid.

In terms of reporting, she will be required to disclose any foreign account that she has her name on, has a financial interest in, and has signature authority over. I know this is a concern for many and it feels like IRS just wants to get into people's personal business, but this is originally designed to prevent and discourage hiding assets in foreign accounts for tax evasion or money laundering or any other illegal purposes. This is the form that would incur tax penalty for failure to report. The previous mention gift disclosure return would also incur tax penalties if not properly reported.

In my experience, even if the tax liabilities don't turn out to be significant after it's all said and done, preparation cost for these returns are hefty. I'm not sure what the income tax rate is in UK, but in some countries like Singapore or Dubai, where there is no or very little (1%) income tax, expats tend to turn in their US passport for income tax purposes. However, expats living in other countries with high tax rate also would turn in their passports to avoid the filing requirements. Given Meghan's role, I do expect that she'll renounce her US citizenship. Avoiding the tax filings is definitely an added bonus. But of course, they could always surprise us.

That's all I have for now. If I think of anything else that I think is relevant to this situation, I'll add. Hopefully, having all of this consolidated and in the context of Meghan's situation helps clear up some confusion. I've seen some article from reputable sources that doesn't exactly tell the whole story because it's not concise. Like I said earlier, tax structure and international tax can be as much art as science, and because of this, being concise about which specific issue we are address with which tax return is important. While it doesn't seem like there is a lot of maneuvering going on based on what I just posted, it can get a lot more complicated and thus like an art.
  #973  
Old 04-27-2018, 11:53 PM
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Thank you, jacqui. I thought things might shake out like that. I think I read somewhere on the forums that the royal ladies don't actually own their clothing worn for appearances. Could she keep her investments stateside, to simplify things? It doesn't seem that she would have any income in Britain.

I wonder what happens to her social security account? She'll stop making contributions through her income, but she should already have money available when she reaches retirement age.
  #974  
Old 04-28-2018, 12:04 AM
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Originally Posted by Curbside View Post
Thank you, jacqui. I thought things might shake out like that. I think I read somewhere on the forums that the royal ladies don't actually own their clothing worn for appearances. Could she keep her investments stateside, to simplify things? It doesn't seem that she would have any income in Britain.

I wonder what happens to her social security account? She'll stop making contributions through her income, but she should already have money available when she reaches retirement age.
She could definitely keep her investment stateside. In fact, that's what I'd do. It's less reporting for FBAR and doesn't subject her investment income (interest, dividend, and any capital gains) to UK tax. I'm not sure what the investment tax in UK, but they are relatively low in US. The main concern in income remain their residence. Other than that, the biggest concern is over the reporting returns and what it might reveal to IRS in terms of structuring. Whether a gift came from a trust or if there is other bank accounts that are not located in UK.

And I don't believe she'll be a US citizen by the time she reaches 65 or however old it'll be to receive social security by that point. I know noncitizens living in US with legal status can receive social security, but I don't know how it would work for a former US citizen who lives abroad. Nevertheless, it's a small amount and wouldn't matter. Her IRA account will be subject to tax liability when she renounces if she has assets over $2 million.
  #975  
Old 04-28-2018, 03:22 PM
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jacqui24, thank you so much for taking the time to write that! I'm going to need to take some time to read over it again to make sure I understand it, and might have some questions after that, but your willingness to explain a very complex subject is much appreciated.
  #976  
Old 04-28-2018, 03:38 PM
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Does anyone know how the tax situation was handled for Princess Grace, I don't think she ever gave up her citizenship and her children had to renounce upon reaching maturity.


Although tax laws are constantly changing in the US, knowing how Princess Grace handled it would give us some additional information of what Meghan will face.
  #977  
Old 04-28-2018, 03:41 PM
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Originally Posted by Delsia View Post
Does anyone know how the tax situation was handled for Princess Grace, I don't think she ever gave up her citizenship and her children had to renounce upon reaching maturity.


Although tax laws are constantly changing in the US, knowing how Princess Grace handled it would give us some additional information of what Meghan will face.
Her situation is completely different as the tax code was reformed in the 80s and again effective 2018. Most of the international reporting requirements didn’t become an issue until after her death.
  #978  
Old 04-21-2019, 12:08 PM
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To Meghan: Even when you finally get the British Citizenship, do not give up your birth right American Citizen. Just became a dual American/British citizen.
.
  #979  
Old 04-21-2019, 12:24 PM
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Originally Posted by Fijiro View Post
To Meghan: Even when you finally get the British Citizenship, do not give up your birth right American Citizen. Just became a dual American/British citizen.
.
I think it would be very wise for her to maintain her US citizenship as well. I used to think otherwise but that has changed. That said, I doubt she does but again the visa issue is a major one.
  #980  
Old 04-21-2019, 12:37 PM
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Originally Posted by Fijiro View Post
To Meghan: Even when you finally get the British Citizenship, do not give up your birth right American Citizen. Just became a dual American/British citizen.
.
I felt that way from the beginning, just for something as simple as going to visit her mother when she wants. But the more that's coming out about the BRF I feel even stronger that she should keep it.
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