On May 16, 2008 Representative Charles Rangel, a New York Democrat, introduced H.R. 6081, the Heroes Earnings Assistance and Relief Tax Act of 2008. The purpose of the bill was to provide $1.2 billion of tax relief to veterans and military families.

The bill was passed by the House of Representatives on May 20, 2008 and by the Senate on May 22, 2008 and is now awaiting President Bush's signature.

This bill has drawn criticism as funding for the bill will come from imposing an immediate income tax on US citizens who relinquish their US citizenship.

New Code Section 877A entitled "Tax Responsibilities of Expatriation" will state that as a general rule "all property of a covered expatriate shall be treated as sold on the day before the expatriation date for its fair market value." Gains of up to $600,000 will be excluded from gross income.

Certain property such as deferred compensation, specified tax deferred accounts and any interest in a nongrantor trust will not be subject to tax. The term expatriate is defined as any US citizen who relinquishes his citizenship and any long-term resident of the United States who ceases to be a lawful permanent resident of the United States.

Further details will be reported when the President acts on this bill.

The tax advice given by this column is, by necessity, general in nature. You should, of course, check with your own US tax consultant as to how specific transactions affect you since tax advice varies with individual circumstances.