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Socialite Denise Rich Dumps U.S. Passport
By Lynnley Browning | Reuters – Mon, Jul 9, 2012 11:28 AM EDT....
Denise Rich, the wealthy socialite and former wife of pardoned billionaire trader Marc Rich, has given up her U.S. citizenship - and, with it, much of her U.S. tax bill.

Rich, 68, a Grammy-nominated songwriter and glossy figure in Democratic and European royalty circles, renounced her American passport in November, according to her lawyer.

Her maiden name, Denise Eisenberg, appeared in the Federal Register on April 30 in a quarterly list of Americans who renounced their U.S. citizenship and permanent residents who handed in their green cards.

By dumping her U.S. passport, Rich likely will save tens of millions of dollars or more in U.S. taxes over the long haul, tax lawyers say.

Rich, who wrote songs recorded by Aretha Franklin, Mary J. Blige and Jessica Simpson, is the latest bold-faced name to join a wave of wealthy people renouncing their American citizenship. Facebook co-founder Eduardo Saverin gave up his U.S. passport to become a citizen of Singapore, an offshore tax haven, before the company's initial public offering in May.

Nearly 1,800 citizens and permanent residents, a record since data was first compiled in 1998, expatriated last year, according to government figures.

Rich, who was born in Worcester, Massachusetts, has Austrian citizenship through her deceased father, said Michael Heidt, a lawyer in Hollywood, Florida, who represented her in a recent lawsuit.

He said Rich had dumped her U.S. passport "so that she can be closer to her family and to Peter Cervinka, her long-time partner." Rich's two daughters live in London; Cervinka, a wealthy property developer, is an Austrian national. Rich plans to make London her main residence and does not intend to acquire other passports, Heidt said.

MARC RICH's PARDON

Rich's ex-husband, commodities trader Marc Rich, fled the United States in 1983 when indicted on charges of tax evasion, fraud, racketeering and illegal trading of oil with Iran. They divorced in 1996.

Marc Rich received a presidential pardon in 2001 on President Bill Clinton's last day in office. Federal prosecutors and Congress investigated the pardon, and in 2002 a House of Representatives committee concluded Denise Rich had swayed the action through donations to the Clinton library and campaign.

Dubbed "Lady Gatsby" by Yachting magazine, Rich owns multiple properties, including a mansion in Aspen, Colorado. She is a frequent habitue of Cannes, Monte Carlo and St. Tropez with celebrities and singers aboard her 157-foot yacht, Lady Joy.

Rich will escape future U.S. taxes but possibly not all current ones. In 2008, Congress imposed an expatriation tax on persons with a net worth of more than $2 million who dump their U.S. citizenship or permanent residency. Under the law, those people owe an "exit tax" on their worldwide property, computed at a fair market value the day before they leave. But tax lawyers say the tax can be reduced or avoided by structuring asset holdings through foreign annuities.

While Austria, like the United States, generally taxes its citizens on their worldwide income, it has generous tax breaks for citizens who spend half the year abroad.

In January, Rich put her 5th Avenue penthouse in New York on the market for $65 million, according to the listing agent, The Corcoran Group. New York property records show Rich acquired a 100 percent stake in the apartment, described by Corcoran as "the epitome of luxury and grandeur," for $200,000 in 2006. Bonnie Evans, the Corcoran broker for the property, declined to discuss details.

COOK ISLANDS TRUST

The recent lawsuit against Rich was filed on behalf of Lee Goldberg, the former protector of a Cook Islands trust of which Rich is a beneficiary, in February. The case was dismissed in April, court records show.

The Cook Islands, a South Pacific tax haven, offers Swiss-style secrecy for wealthy investors.

The lawsuit accused Rich and Richard Kilstock, a British real estate entrepreneur who is married to Rich's daughter Daniella, of "transferring, moving or secreting trust assets, in violation of the trust's guidelines and without the knowledge or permission of Goldberg."

Rich and Kilstock denied the charges and accused Goldberg of altering trust documents, court filings show.

Both Goldberg and his attorney, Donald Thomas, declined to discuss the case. Rich recently dismissed Goldberg, one of her long-time lawyers, as protector of the trust.

Heidt, who also represents Kilstock in the case, declined to discuss the lawsuit. Kilstock did not return calls requesting comment.

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Facebook Billionaire Gives Up Citizenship to Escape Bad American Tax Policy

It is very sad that America’s tax system is so onerous that some rich people feel they have no choice but to give up U.S. citizenship in order to protect their family finances.

I’ve written about this issue before, particularly in the context of Obama’s class-warfare policies leading to an increase in the number of Americans “voting with their feet” for places with less punitive tax regimes.

We now have a very high-profile tax expatriate. One of the founders of Facebook is escaping for Singapore. Here are some relevant passages in a Bloomberg article.

Eduardo Saverin, the billionaire co- founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill. …Saverin’s stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. …Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stand to reap billions of dollars after the world’s largest social network holds its IPO. “Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” said Tom Goodman, a spokesman for Saverin, in an e-mailed statement. …Singapore doesn’t have a capital gains tax. It does tax income earned in that nation, as well as “certain foreign- sourced income,” according to a government website on tax policies there. …Renouncing your citizenship well in advance of an IPO is “a very smart idea,” from a tax standpoint, said Avi-Yonah. “Once it’s public you can’t fool around with the value.” …Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records. …“It’s a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice,” said Richard Weisman, an attorney at Baker & McKenzie in Hong Kong. “The tax cost, complexity and the traps for the unwary are among the considerations.”

What makes this story amusing, from a personal perspective, is that Saverin’s expatriation takes place just a couple of days after my wayward friend Bruce Bartlett wrote a piece for the New York Times, in which he said that people like me are exaggerating the impact of taxes on migration.

Here are some key excerpts from Bruce’s column.

“In recent years, the number of Americans renouncing their citizenship has increased. …the number of Americans renouncing their citizenship rose to 1,781 in 2011 from 231 in 2008. This led William McGurn of The Wall Street Journal to warn that the tax code is turning American citizens living abroad into “economic lepers.” The sharply rising numbers of Americans renouncing their citizenship “are canaries in the coal mine,” he wrote. The economist Dan Mitchell of the libertarian Cato Institute was more explicit in a 2010 column in Forbes, “Rich Americans Voting With Their Feet to Escape Obama Tax Oppression.” …the sharp rise in Americans renouncing their citizenship since 2008 is less pronounced than it appears if one looks at the full range of data available since 1997, when it first was collected. As one can see in the chart, the highest number of Americans renouncing their citizenship came in 1997. …The reality is that taxes are just one factor among many that determine where people choose to live. Factors including climate, proximity to those in similar businesses and the availability of amenities like the arts and cuisine play a much larger role. That’s why places like New York and California are still magnets for the wealthy despite high taxes. And although a few Americans may renounce their citizenship to avoid American taxes, it is obvious that many, many more people continually seek American residency and citizenship.

I actually agree with Bruce. Taxes are just one factor when people make decisions on where to live, work, save, and invest.

But I also think Bruce is drinking too much of the Kool-Aid being served by his new friends on the left. There is a wealth of data on successful people leaving jurisdictions such as California and New York that have confiscatory tax systems.

And there’s also lots of evidence of taxpayers escaping countries controlled by politicians who get too greedy. Mr. Saverin is just the latest example. And I suspect, based on the overseas Americans I meet, that there are several people who quietly go “off the grid” for every person who officially expatriates.

The statists say these people are “tax traitors” and “economic Benedict Arnolds,” but those views are based on a quasi-totalitarian ideology that assumes government has some sort of permanent claim on people’s economic output.

If people are leaving America because our tax law is onerous, that’s a signal we should reform the tax code. Attacking those who expatriate is the fiscal version of blaming the victim.

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Billionaire Facebook Co-Founder Flees to Repressive Country to Avoid Taxes: What an Insult to Hard-Working American Families

May 16th, 2012

Saverin’s move is an insult to immigrant families like mine who worked hard to build something in this country.

by: Samuel Kang

The recent announcement that Facebook co-founder Eduardo Saverin had renounced his U.S. citizenship to avoid future capital gains taxes on the fortune he’ll make from Facebook’s initial public offering upset quite a few people. More than anything, it’s an insult to millions of immigrants who built this nation and are continuing to build it.

When my family immigrated to the United States almost 30 years ago, my parents barely spoke English and had no relatives here. So they did what millions of immigrants have done for 200 years: they started a business of their own. My parents ran a motel, and it really was a family operation. After school, I watched the cash register while my dad showed guests to their rooms. On weekends I helped rake the leaves while my mom cleaned the rooms.

Life was tough — harder on my parents than on me because they felt so guilty for having to put me to work at age 10. In Korea, my dad would have been guaranteed cushy jobs through my grandfather’s businesses, so my parents constantly contemplated moving back.
One particularly bad time 20 years ago, the family business was failing badly, so they sent my sister and me to Korea for two months to test the waters on whether we would all move back. But it became obvious that we were now more American than Korean, so my parents brought us back and they buckled down, toiling and struggling. By the time I reached college, we had all become naturalized citizens.

Becoming an American citizen was the result of incredible sacrifice and struggle, for which my parents are still paying the price, both financially and personally. But to them it was worth it to have their children become citizens of the country they love and that has given them a brighter future.

Saverin, a billionaire no longer connected to Facebook but who still owns a share that could add $4 billion to his net worth, has become a citizen of Singapore, which has no capital gains tax. While it’s hard to say how much tax he will save, it won’t be trivial. Conservatives were quick to gloat, with Mike Brownfield posting on the Heritage Foundation’s blog, “A billionaire like Saverin can afford to flee for greener pastures, but the rest of America isn’t so lucky.” America, Brownfield wrote, is “less economically free” than Singapore.

Ah yes, the green pastures of freedom – in a country that ranks 135 on the 179-nation World Press Freedom Index; a country so oppressive it banned chewing gum. Michael Levin, co-founder of the Activist Investor, called Singapore “Cuba with money.”
It must be nice to be so rich you don’t care about such things. What Saverin is expected to make from Facebook’s IPO would be enough to cover all of the budget cuts to education and medical care for the poor Gov. Brown is proposing to address California’s state budget crisis – with enough left over to buy himself a new Ferrari for every day of the year through 2014.

South Korea was a dictatorship when my parents left, so they know something about freedom. They made huge sacrifices to become Americans and give their children the lives of American citizens. Millions of immigrants, some undocumented, gladly pay taxes as they seek their small piece of the American dream. Many risk their very lives for that dream.

I hope you like Singapore, Mr. Saverin. As for me, I’m proud to be an American citizen and grateful for my parents’ sacrifices that made my citizenship possible. Patriots don’t cut and run. We exercise our responsibility to form a more perfect union.

But I hear you can chew gum in Singapore now — as long as you get it from a pharmacy and put yourself on a government list. Enjoy.

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Senators to Unveil the ‘Ex-Patriot Act’ to Respond to Facebook’s Saverin’s Tax ‘Scheme’
May 17, 2012

Sen. Chuck Schumer, D-N.Y., has a status update for Facebook co-founder Eduardo Saverin: Stop attempting to dodge your taxes by renouncing your U.S. citizenship or never come to back to the U.S. again.

In September 2011, Saverin relinquished his U.S. citizenship before the company announced its planned initial public offering of stock, which will debut this week. The move was likely a financial one, as he owns an estimated 4 percent of Facebook and stands to make $4 billion when the company goes public. Saverin would reap the benefit of tax savings by becoming a permanent resident of Singapore, which levies no capital gains taxes.

At a news conference this morning, Sens. Schumer and Bob Casey, D-Pa., will unveil the “Ex-PATRIOT” – “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” – Act to respond directly to Saverin’s move, which they dub a “scheme” that would “help him duck up to $67 million in taxes.”

The senators will call Saverin’s move an “outrage” and will outline their plan to re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country. Their proposal would also impose a mandatory 30 percent tax on the capital gains of anybody who renounces their U.S. citizenship.

The plan would bar individuals like Saverin from ever reentering the United States again.

“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” Tom Goodman, Saverin’s spokesman, told Bloomberg News in an email.

Last year 1,700 people renounced their U.S. citizenship.

Swidden

Jul 11 2012, 04:29 PM

^^^
Yeah, real estate in certain cities in the US is completely out of whack. Even with the correction a few years back.

Swidden

Jul 10 2012, 06:01 PM

From my reading, at least Rich has reasons other than just financial one's to relocate. However, it is pretty clear that not all of Democrats wealthy supporters are inclined to go along with the "Buffet Rule".

Now, that is not me taking a cheap shot at wealthy liberals. One could easily say it would almost be expected of wealthy conservatives to want to hand in the passports to avoid taxes. What it does mean is that there are those on the left and the right that don't think it is remotely fair to essentially be given a surcharge for having been successful in their chosen field of endeavor.

Admiralbill_gomec

Jul 13 2012, 02:14 PM

Every time I see this thread I think "rich people are leaving the US," not some hack songwriter who is buddies with Slick Willie.

Could we amend the headline to read, "Denise Rich" instead.

Admiralbill_gomec

Jul 13 2012, 02:17 PM

Swidden

Jul 11 2012, 04:29 PM

^^^
Yeah, real estate in certain cities in the US is completely out of whack. Even with the correction a few years back.

New York prices are ridiculous, but always have been, no matter if you rent or own.

My aunt owns a brownstone in the Flatbush area of Brooklyn (one of the five boroughs of NYC). It was built sometime in the late 1920s, hasn't been renovated in 30 years, but is worth over a million bucks.

While prices "fell" in the New York area, there was nothing as drastic as Miami or Las Vegas.