Quote from Emini Maestro:
You can trade offshore, but the official answer to renouncing your US citizenship is that you must file 1040s for TEN YEARS after you renounce.
This requirement was dropped with the passage of the exit tax. Now it's just a one-time tax on any unrealized asset gains, provided you're over the set threshold (>$2M in assets or >$139k annual income the previous 5 years).
The 30-day limitation on US annual visitation (w/o suffering tax liability) was also dropped with the exit tax.
For traders, it's arguably better to expatriate
now than it was
before (provided they don't have large unrealized gains in stocks, real estate, etc).
Basically, if you're a trader with mostly liquid assets, you can apply for citizenship in St Kitts or Dominica for ~$250k today, renounce, apply for a US visa, then go back to
living & trading in the US, tax-free. Nice little loophole there.
Though I think most would choose to live off-shore if they're going to expatriate, it's at least nice to know you effectively have the option of coming back to the US now (of course, as long as the person processing your visa application isn't the same person who just processed your renunciation).
http://www.irs.gov/businesses/small/international/article/0,,id=97245,00.html
http://www.wilmerhale.com/publications/whPubsDetail.aspx?publication=8394
I. Summary of Prior Law
Generally, under Code §877, expatriates who met certain conditions were subject to an alternate US income tax regime for a 10-year period after the date of expatriation, during which they were required to file annual information returns and pay US tax on certain items of income not otherwise taxable to nonresident aliens (e.g., capital gains on the sale of US stock). In addition, such expatriates were subject during the 10-year post-expatriation period to US gift and estate tax on the transfer of a broader array of assets than other nonresident aliens.
Also, under prior law, if any such expatriate were physically present in the US for more than 30 days in any given year during the 10-year post-expatriation period, he or she would be treated for tax purposes as a US citizen or resident for that taxable year. As a result, such individual would be subject to (1) US income tax on worldwide income earned that year, (2) US gift tax if he or she transferred any worldwide assets by gift that year, and (3) US estate tax on worldwide assets if he or she died that year.
These rules will continue to apply to individuals who expatriated from the US prior to June 17, 2008.
They will not apply, however, to individuals who expatriate from the US on or after that date.