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Copyright (c) 1998 Georgetown Immigration Law Journal
Georgetown Immigration Law Journal

NOTE: The Expatriate Exclusion Clause: An Inappropriate Response to Relinquishing Citizenship for Tax Avoidance Purposes

Summer, 1998

12 Geo. Immigr. L.J. 689


Renee S. Liu *



Since the inception of the income tax system in the United States, taxpayers have sought all possible legal means to avoid paying any money to the United States Treasury not required of them. Judge Learned Hand recognized this fact early in this century in his dissent in Commissioner v. Newman. 1 The United States Supreme Court acknowledged this same idea by declaring that: "The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted." 2 Taxpayers exploit every opportunity available to them. Congress, upon recognition of a loophole, generally attempts to eliminate the benefit quickly by passing new legislation. One small gap that Congress has not been successful at closing is tax avoidance by expatriation. 3 In 1966, 4 the enactment of Internal Revenue Code (the "I.R.C.") section 877 (Expatriation to Avoid Tax) was the first legislative attempt to get rid of this problem. 5 This "Expatriation Tax" subjected persons who renounced their American citizenship for tax avoidance purposes to United States source income tax for ten years after the date of expatriation. 6 Despite its passage, section 877 proved largely ineffective. 7

Recently, Congress renewed its efforts to remedy this problem. Because of the publicity given to the issue of expatriation for tax purposes, the 104th Congress passed not only a tax bill, 8 but also immigration legislation 9 a mere month ...
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