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SEC. 5. REVISION OF TAX RULES ON EXPATRIATION.
(a) IN GENERAL.—Subpart A of part II of subchapter
N of chapter 1 of the Internal Revenue Code of 1986 is
amended by inserting after section 877 the following new
section:
‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
‘‘(a) GENERAL RULE.—For purposes of this subtitle,
if any United States citizen relinquishes his citizenship
during a taxable year—
‘‘(1) except as provided in subsection (f)(2), all
property held by such citizen at the time immediately
before such relinquishment shall be treated as sold at
such time for its fair market value, and
‘‘(2) notwithstanding any other provision of this
title, any gain or loss shall be taken into account for
such taxable year.
Paragraph (2) shall not apply to amounts excluded from
gross income under part III of subchapter B.
‘‘(b) EXCLUSION FOR CERTAIN GAIN.—The amount
which would (but for this subsection) be includible in the
gross income of any individual by reason of subsection (a)
shall be reduced (but not below zero) by $600,000.
‘‘(c) PROPERTY TREATED AS HELD.—For purposes of
this section, except as otherwise provided by the Secretary,
an individual shall be treated as holding—
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‘‘(1) all property which would be includible in
his gross estate under chapter 11 were such individual
to die at the time the property is treated as sold,
‘‘(2) any other interest in a trust which the indi-
vidual is treated as holding under the rules of sub-
section (f)(1), and
‘‘(3) any other interest in property specified by
the Secretary as necessary or appropriate to carry
out the purposes of this section.
‘‘(d) EXCEPTIONS.—The following property shall not
be treated as sold for purposes of this section:
‘‘(1) UNITED
STATES
REAL
PROPERTY
INTER-
ESTS.—Any United States real property interest (as
defined in section 897(c)(1)), other than stock of a
United States real property holding corporation
which does not, on the date the individual relin-
quishes his citizenship, meet the requirements of sec-
tion 897(c)(2).
‘‘(2) 
INTEREST
IN
CERTAIN
RETIREMENT
PLANS.—
‘‘(A) IN
GENERAL.—Any interest in a
qualified retirement plan (as defined in section
4974(c)), other than any interest attributable to
contributions which are in excess of any limita-
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tion or which violate any condition for tax-
favored treatment.
‘‘(B) FOREIGN PENSION PLANS.—
‘‘(i) IN GENERAL.—Under regulations
prescribed by the Secretary, interests in for-
eign pension plans or similar retirement
arrangements or programs.
‘‘(ii) LIMITATION.—The value of prop-
erty which is treated as not sold by reason
of this subparagraph shall not exceed
$500,000.
‘‘(e) RELINQUISHMENT OF CITIZENSHIP.—For pur-
poses of this section, a citizen shall be treated as relinquish-
ing his United States citizenship on the earliest of—
‘‘(1) the date the individual renounces his
United States nationality before a diplomatic or con-
sular officer of the United States pursuant to para-
graph (5) of section 349(a) of the Immigration and
Nationality Act (8 U.S.C. 1481(a)(5)),
‘‘(2) the date the individual furnishes to the
United States Department of State a signed statement
of voluntary relinquishment of United States nation-
ality confirming the performance of an act of expa-
triation specified in paragraph (1), (2), (3), or (4) of
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section 349(a) of the Immigration and Nationality
Act (8 U.S.C. 1481(a)(1)–(4)),
‘‘(3) the date the United States Department of
State issues to the individual a certificate of loss of
nationality, or
‘‘(4) the date a court of the United States cancels
a naturalized citizen’s certificate of naturalization.
Paragraph (1) or (2) shall not apply to any individual un-
less the renunciation or voluntary relinquishment is subse-
quently approved by the issuance to the individual of a cer-
tificate of loss of nationality by the United States Depart-
ment of State.
‘‘(f) SPECIAL RULES APPLICABLE TO BENEFICIARIES’
INTERESTS IN TRUST.—
‘‘(1) DETERMINATION OF BENEFICIARIES’ INTER-
EST IN TRUST.—For purposes of this section—
‘‘(A) GENERAL RULE.—A beneficiary’s in-
terest in a trust shall be based upon all relevant
facts and circumstances, including the terms of
the trust instrument and any letter of wishes or
similar document, historical patterns of trust
distributions, and the existence of and functions
performed by a trust protector or any similar
advisor.