Section 877A imposes a mark-to-market deemed sale of all property on the day before expatriation for covered expatriates. Plus a 40% transfer tax on US recipients of subsequent gifts and bequests. Run your numbers; see the exit-tax exposure before the calendar closes the planning window.
Section 877A applies to "covered expatriates" — US citizens or long-term lawful permanent residents who, on the day of expatriation, satisfy any of three tests: net worth ≥ $2,000,000 (not indexed); 5-year average annual net income tax ≥ $206,000 (2025 IRS-published; projected ~$213,000 for 2026); or failure to certify 5 years of tax compliance on Form 8854. Once covered, the deemed-sale mark-to-market applies to all property on the day before expatriation.
The exit tax is large, concentrated in a single event, and almost entirely shapeable in the 24 months before the trigger. Pre-expatriation gifting (annual exclusion gifts plus lifetime-exclusion gifts before covered-status attaches), charitable structuring, EDCI election on US-employer deferred comp, and pre-departure Roth conversions can collapse the exit-tax base substantially. The planning window is the highest-ROI work in any expatriation engagement.
Once a covered expatriate, gifts and bequests to US recipients trigger a 40% transfer tax on the US recipient — not the donor. Form 708 quarterly. No statute-of-limitations sunset. Plan distributions to flow to non-US beneficiaries where possible.
Puerto Rico Act 60 + bona-fide PR residence under §937 offers similar tax outcomes without renouncing citizenship. No mark-to-market exit tax. Reversible. Subject to §933 PR-source exemption and US tax on non-PR-source income.
The expatriation chapter — the three covered-expatriate tests, mark-to-market mechanics, EDCI election framework, §2801 recipient-tax back-half, and a 24-36 month pre-expatriation planning calendar. Plus a worked-example workbook. Get the chapter and the launch notice.