Good morning. This is John Richardson speaking with you from Toronto. Canada today is Friday, December the 6th, 2024. It is the morning in Toronto. And I guess late afternoon or early evening in Dubai where my guess, my return guess, Virginia Latora Jieker is today. And today is kind of a last minute. Boy, we've got to do a podcast on this because there is some very interesting news there, Virginia. Oh, hey, John. How are you? Oh, I'm okay. How are you? I'm good. I'm pretty excited about this issue we're going to discuss today. Well, I think of this podcast. Well, I generally very, very wide inference because we've got a lot of people are interested in the exit tax. And a lot of people are interested in Bitcoin and Roger Ver is kind of a household name in the world of Bitcoin, I think, right? Oh, he is Bitcoin Jesus, well known for his evangelism of cryptocurrency. Many years now, since at least 2011. Yeah. And more recently, he is, I think the US government is trying to extradite him from Spain, aren't they, to have a more geographically convenient chat with them about his US tax activities, right? Yes, he was arrested in April in Spain and criminal charges are against him being laid against him for tax evasion being won and filing false tax returns. So yeah, they want to have a nice chat with Mr. Ver. So it's interesting, though, although there may be more than what we're going to talk about today, certainly the extradition and the charges were based on the issue of the expatriation tax, right? The exit tax. That's correct. Essentially what they're alleging, the government is alleging that he did not reveal the true amount of Bitcoin worth that he had. So, you know, they're trying to get him on tax evasion and fraud, tax fraud. Well, supposedly the estimate of tax avoided was about $48 million exit tax. So, right. It's just me. Oh, some of our listeners at this moment may not understand exactly what the issue is with the exit tax and what it is. So could you take us through it in the most simple, possible way possible when somebody were doing what happened. So when someone gives up their citizenship or if they're a long-term resident giving up a green card, they can have the expatriation tax also known as the exit tax apply to them if they're something called a covered expatriate. So a covered expatriate status can be met if the person has a net worth of $2 million or more on the expatriation date or if they have a very significant average income tax liability that's been paid over the past five years. So they're looking at income tax liability, the average over five years, if it exceeds a certain threshold, he can meet this covered expat status or if he doesn't certify under penalties of purge, I agree that he's been fully tax compliant for the five-year period before giving up the citizenship or the green card. So we all know that Roger was a covered expatriate. He was keeping this very simple, right? It's the fact that he had a net worth of over $2 million that makes him a covered expatriate, correct? That's right. That's right. He was investing in the early days in Bitcoin and he had done extremely well. So he had a net worth well over the $2 million. He gave up his citizenship and he paid the exit tax. But the argument is that he didn't pay enough because he didn't reveal he concealed certain amounts of supposedly concealed certain amounts. Undervalued assets, in other words, he undervalued his assets, right? That's what the claim is. That it's a core, right? I think it's worse than that. I think it's worse than you undervalued it. It's worse. It's like you can seal significant assets that's different from undervaluing to me. Well, okay, let's say all of the above. But so he's over the $2 million. And the way it's designed to work is that on the day before renouncing US citizenship, why the day before, because it means you're still a US citizen for tax purposes, okay? You're deemed to have sold your assets, right? So he was deemed it's like a pretend sale of his Bitcoin, right? Yes. And then the gain is calculated. Now there's more complexity, but I think let's leave it at that just so that we can keep it as simple as possible. So basically what's happening here is that for whatever reason, the claim of the US government is that he did not report enough capital gain, correct? Yes. Okay. All right. So it's interesting that that they're so upset about this number one. I think would you think that that should be a warning to people generally to tell the truth? Yes, but I think we can't take this totally out of context. I mean, first of all, this is a criminal indictment. It's not a civil case anymore. Okay. So it's, it's really escalated and Roger Ver is a very well known individual. So I think he was anticipating being challenged by the IRS. Clearly, we know the government is looking more closely at expatriations. They are auditing some in who have expatriated. There is a campaign looking at these people out over at the IRS. So yeah, yes. I think people do have to be very diligent when they're expatriating and making sure everything is done properly. But I don't think we can just disregard the fact that this person is so well known. And I think his tax case has been brewing for years. Okay. So let's let's discuss his tax case. Now, everything I read about this, which by the way is restricted to the the actual extradition. I request early and the, you know, the really quite brilliant fact or brief file file by his law firm that explains this. Would you agree that he clearly was seeking outside counsel and trying to organize itself for this expatriation? Would you, would you agree with that? Absolutely. And he was getting the best counsel possible. It seemed to me. Yeah, I would agree with that. I would agree with it. So we have this guy who, you know, wants to renounce his US citizenship. He is concerned about actioning the system lawfully, very, very clearly. Now, if we go back to 2014, was the IRS publishing very much about the tax aspects of Bitcoin in 2014? That's 10 years ago, isn't it? No, no, I don't think so. I can't remember the first, the first thing they had put out, it was after 2014, John. Yeah, I mean, there was very little, there was very little if any guidance on the taxation of cryptocurrency generally at that time. But also, in 2014, I mean, there was far less experience, I think, with the expatriation regime in general, right? Would you agree? Oh, yes, that's correct. So we have this guy who, you know, what's he supposed to do, I mean, he reaches out and, you know, clearly is seeking competent, good counsel on this. And you know, and still gets himself into travel. Now, before we get into, you know, he said, she said sort of stuff, does that strike you as something that, you know, really criminal charges can be grounded on, you know, somebody is making all these efforts to comply with the law? Well, I think all of that came later about his efforts. I think that what the op was seeing was maybe, you know, what they wanted to see, that there were two companies that had Bitcoin, and they felt he was not revealing everything about those, what those companies were holding, and maybe that they belonged to him, that the bitcoins belonged to him. Okay. So, so we have various categories of issues then, right? We would have the valuation, I think, of whatever was owned was one issue, correct? And the second issue was because of his being immersed with, I think, two corporate entities, right? Yes. The issue, they were sort of the issue of, well, who owned what? And my understanding of this, and I think I'm interested to see if you would confirm that is that, to the extent that the Bitcoin was owned by the company, then his asset for the purpose of its pay creation would be the shares in the company, wouldn't it? That's correct. And the value of those shares, of course, would be reflecting, to a certain extent, the assets held by the company. Yeah, absolutely. Which would be the bit. So, so we've got a range of, you know, we've got a range of difficulties here. And then I think further down the road, we have an issue of distributions from the company not being reported or something, but that's not mainly, that's not the big issue here, I think, right? Okay. No, it's not the biggest issue we want to tell people about. He's apparently in Spain. The extradition thing is still going on. So he's hired this law firm to get the, you know, I think it's a motion to get the charges dismissed, isn't that? That's right. He wants these criminal, this criminal case to be absolutely washed out. So, so his lawyers have filed, you know, this really, you know, quite brilliant brief. I would recommend to everybody that seems to have two broad categories of argument, right? The first is that whatever is going on here, it's not criminal because of the efforts he made to comply, right? That's right. But the second category, I think more of interest to Americans abroad and, you know, your readership and my readership, they raised the issue of the constitutionality of the ex-attacks itself, right? I mean, so we've got this law, you know, it has this deemed sale and Mr. Ver's lawyers are saying, Hey, ah, you know, this is unconstitutional. Congress can't do that, right? Now, this is the first, this is the first case that has raised this argument challenging the exit tax. I mean, we've not, we've not had a case challenging the exit tax to my knowledge. I think I would know. Well, I think that's right. And after the more decision came down within days, you know, at least one legal academic was looking around for what the next case should be to determine whether realization was constitutionally required. And he actually identified the 877A exit tax as being that. Well, there you go. I think this is going to be incredibly interesting. It's also interesting how, notice how laws is never shaped by average middle class people. It's always shaped by, you know, defendants in criminal trials and things like that. Yes, interesting. Well, we couldn't have asked for a more high profile individual than Roger ever. I think that's right. The, you know, the legal arguments for why this is unconstitutional are, I think, enormously complex. You know, they run a wide range of issues. But at its core, isn't the claim that, Hey, you can't be taxed on income you never received? I think that is the core argument that there is no realization of income by anyone, of recognition of income by anyone in this scenario. I mean, when we had the more case, as I recall, the court was saying, well, someone has income here. And it might occur somewhere in the world has income before and it could be it's the foreign corporation. So that is enough to make it, you know, constitutionally valid. The fact that this individual is being taxed on it. And he is not the one that actually earned the income is immaterial. We did have income being earned. Whereas with the exit tax, no, no income whatsoever is being earned. It's 100% fictional, pretend sale and pretend gain that has resulted as a, as a consequence of this pretend sale. So there has been no income realization event. Well, that's right. And interestingly, you know, the more decision came down, he would say, Oh my God, you know, a seven to two loss for the Moors and all this. And I kind of thought of it as well, you know, maybe a loss for the Moors on the narrow issue, but perhaps a larger victory, because four of the nine justices appear to have said, well, we don't have to decide this today. But realization is a requirement. Justice is gorgeous Thomas wrote one decision. And Justin Garrett and Alito wrote another one. So we've got, you know, on based on my reading of that, we've actually got four out of nine judges on the Supreme Court saying, Hey, you got to have realization. You know, that would be it's kind of good news, I think, for Roger various lawyers. I would think so. Let's see. Yes, I think this is the main point, John, that we want to bring home to people is that this argument of Roger Ver's attorneys is essentially hinging in a bit on more and taking it a step further and saying, look, this is not in contradiction of more at all. And, you know, that's my mark. Yes. Absolutely. Actually support it. You know, it's so interesting. When you look at sort of how laws change in legal history, how, you know, looking at this, somehow I'm reminded of was a Hillary Clinton who wrote a book, It Takes a Village or so how you have one person who, you know, does one thing and that, you know, and then somebody else grabs onto that moves it forward. And I actually see the more litigation is providing, I think, the predicate for this here. It certainly helps. I mean, who knows? Maybe Roger Ver will go down, not only as a hero in the Bitcoin community, but a hero in the expatriation community as well. What do you think? Well, it's a possibility. The other issue that was raised, and I thought this one was quite interesting, is that the exit text was an unconstitutional infringement on the right to expatriate. And essentially that argument focuses on the right to give up the right to leave the US as a fundamental right. So every American has this constitutional right to expatriate. And by having this exit tax, it is kind of singling out a group of people that are, let's say, more well to do. They're the ones that would have the possibility of, you know, these deemed sales happening and resulting in significant taxes. So what they're saying is, we don't know maybe people can't do it. It's like a chilling effect on their constitutional right to be faced with this exit tax. Even if someone might be well to do, they might not have enough liquid assets to pay this tax, which is a pretend sale. They don't have any real income. So I thought this was a good point to raise as well. I think it is absolutely a good point to raise as well. I mean, I think that Americans would be shocked to know that they can't even leave the United States without a valid US passport under the law at number one. And number two, I believe to date that these restrictions, these passport restrictions, you know, based on, you know, not paying child support, this sort of stuff, I think so far, they've actually been upheld. Yes. So it's just to be, you know, another thing that Mr. Ver's legal team will attack, but the way that was described in their brief, you know, just kind of add to what you're saying was, they were saying that, you know, the right to expatriate is a fundamental right, part of ordered liberty. And therefore, the standard of review would be one of strict scrutiny, right? And what that would mean is that it's the job of the government to prove this is necessary, you know, not the other way around. So, you know, this is this is a very interesting case. I think with implications that go far beyond just a tax issue, would you say? Yes, it's, it's going to be fascinating to see how it develops. I mean, what do you think is going to be the next step now that this motion to dismiss has been filed? I don't think it's going to be granted. I don't think that his criminal charges are going to disappear magically because of this motion to dismiss. And I think we are going to have some, maybe some case law coming out of this. What are your thoughts? I agree. I think that this is the beginning of a journey back to the Supreme Court, where they're going to have to deal with what they were asked to deal with in the more case, namely whether realization is required or not. You know, I think that I think it's, in a sense, the perfect case because it is deemed income. There was no income anywhere. I think that he's, I mean, he's clearly got, you know, incredibly good lawyers. And I suspect that he's one of the few people in the world who has the money. Okay, you know, to, you know, I mean, you get as much justice as you can afford in this world as you know, Virginia. But especially if he's dealing with extradition, right? So I, I am inclined to think that this is the right case or a right case to get this to the Supreme Court. Well, let's say it's a fascinating development. And I know that you'll be writing about it soon. And, and I will as well. I'm probably going to publish my first piece on this with Forbes, because I think it has, you know, it'll generate a lot of interest with Forbes readership. And let's see. Absolutely. It'll generate a lot of readership. But I mean, this, this case is interesting to a very, very, to much larger sector of humanity than I think the more case was, right? I mean, the more. Absolutely. Yes. Yes. Oh, you know, technically weird, right? You know, that I mean, most people couldn't even understand it. That's right. This one, the transition tax in the more case was, was very complicated. And it was, it was something for tax nerds. Whereas this people understand, gee, you know, they're reading about people giving up their citizenship. They're reading about people taking on second citizenships, living abroad, retiring abroad, thinking about giving up American citizenship. This is part and parcel of every reading now for many, many people. And so they will get that point. They will get the cryptocurrency, the point. I mean, everyone knows about Bitcoin. They know how it's escalated in value. And they also know a lot about, gee, you have to pay tax on something that they pretend you sold. That sounds really odd to me. So this is, I think, an area that people will be interested in and will understand, even if they're not tax nerds. I think that's right. And you know, Virginia, I suspect that we may be having more podcasts about Mr. Burr's as Mr. Burr's as this goes on. Well, I look forward to it. All right. Well, this is great. Thanks very much. And you know, you mentioned your, you know, contributor forms here. But you know, you've got this great blog and where would people find your blog as well? Okay, the blog is www dot us hyphen. That's just a little dash tax dot org o r g. So and if they can't figure that out, if they just Google my name, they will find they will find the blog. Excellent. Highly recommend your blog. I think it's a great contribution to humanity as well as people who are interested in tax. And you know, we'll certainly be continuing this discussion. So thanks very much. And once again, I'm speaking with Virginia Latora Jieker, US tax lawyer, the world's favorite tax lawyer, I would say on the retail level. So thanks very much, Virginia. Thank you, John. Take care.
