SEC. 5. REVISION OF TAX RULES ON EXPATRIATION. 
(a) IN GENERAL.—Subpart A of part II of subchapter 
N of chapter 1 is amended by inserting after section 877 
the following new section: 
‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION. 
‘‘(a) GENERAL RULES.—For purposes of this sub-
title— 
‘‘(1) MARK TO MARKET.—All property of a cov-
ered expatriate shall be treated as sold on the day be-
fore the expatriation date for its fair market value. 
‘‘(2) RECOGNITION OF GAIN OR LOSS.—In the 
case of any sale under paragraph (1)— 
‘‘(A) notwithstanding any other provision of 
this title, any gain arising from such sale shall 
be taken into account for the taxable year of the 
sale, and 
‘‘(B) any loss arising from such sale shall 
be taken into account for the taxable year of the 
sale to the extent otherwise provided by this title, 
except that section 1091 shall not apply to any 
such loss. 
Proper adjustment shall be made in the amount of 
any gain or loss subsequently realized for gain or loss 
taken into account under the preceding sentence, de-
termined without regard to paragraph (3). 
‘‘(3) EXCLUSION FOR CERTAIN GAIN.— 
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‘‘(A) IN
GENERAL.—The amount which 
would (but for this paragraph) be includible in 
the gross income of any individual by reason of 
paragraph (1) shall be reduced (but not below 
zero) by $600,000. 
‘‘(B) ADJUSTMENT FOR INFLATION.— 
‘‘(i) IN GENERAL.—In the case of any 
taxable year beginning in a calendar year 
after 2008, the dollar amount in subpara-
graph (A) shall be increased by an amount 
equal to— 
‘‘(I) such dollar amount, multi-
plied by 
‘‘(II) the cost-of-living adjustment 
determined under section 1(f)(3) for 
the calendar year in which the taxable 
year begins, by substituting ‘calendar 
year 2007’ for ‘calendar year 1992’ in 
subparagraph (B) thereof. 
‘‘(ii) ROUNDING.—If any amount as 
adjusted under clause (i) is not a multiple 
of $1,000, such amount shall be rounded to 
the nearest multiple of $1,000. 
‘‘(b) ELECTION TO DEFER TAX.— 
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‘‘(1) IN GENERAL.—If the taxpayer elects the ap-
plication of this subsection with respect to any prop-
erty treated as sold by reason of subsection (a), the 
time for payment of the additional tax attributable to 
such property shall be extended until the due date of 
the return for the taxable year in which such property 
is disposed of (or, in the case of property disposed of 
in a transaction in which gain is not recognized in 
whole or in part, until such other date as the Sec-
retary may prescribe). 
‘‘(2) DETERMINATION OF TAX WITH RESPECT TO 
PROPERTY.—For purposes of paragraph (1), the addi-
tional tax attributable to any property is an amount 
which bears the same ratio to the additional tax im-
posed by this chapter for the taxable year solely by 
reason of subsection (a) as the gain taken into ac-
count under subsection (a) with respect to such prop-
erty bears to the total gain taken into account under 
subsection (a) with respect to all property to which 
subsection (a) applies. 
‘‘(3) TERMINATION
OF
EXTENSION.—The due 
date for payment of tax may not be extended under 
this subsection later than the due date for the return 
of tax imposed by this chapter for the taxable year 
which includes the date of death of the expatriate (or, 
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if earlier, the time that the security provided with re-
spect to the property fails to meet the requirements of 
paragraph (4), unless the taxpayer corrects such fail-
ure within the time specified by the Secretary). 
‘‘(4) SECURITY.— 
‘‘(A) IN
GENERAL.—No election may be 
made under paragraph (1) with respect to any 
property unless adequate security is provided 
with respect to such property. 
‘‘(B) ADEQUATE SECURITY.—For purposes 
of subparagraph (A), security with respect to 
any property shall be treated as adequate secu-
rity if— 
‘‘(i) it is a bond which is furnished to, 
and accepted by, the Secretary, which is 
conditioned on the payment of tax (and in-
terest thereon), and which meets the require-
ments of section 6325, or 
‘‘(ii) it is another form of security for 
such payment (including letters of credit) 
that meets such requirements as the Sec-
retary may prescribe. 
‘‘(5) WAIVER OF CERTAIN RIGHTS.—No election 
may be made under paragraph (1) unless the tax-
payer makes an irrevocable waiver of any right under 
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any treaty of the United States which would preclude 
assessment or collection of any tax imposed by reason 
of this section. 
‘‘(6) ELECTIONS.—An election under paragraph 
(1) shall only apply to property described in the elec-
tion and, once made, is irrevocable. 
‘‘(7) INTEREST.—For purposes of section 6601, 
the last date for the payment of tax shall be deter-
mined without regard to the election under this sub-
section. 
‘‘(c) EXCEPTION
FOR
CERTAIN
PROPERTY.—Sub-
section (a) shall not apply to— 
‘‘(1) any deferred compensation item (as defined 
in subsection (d)(4)), 
‘‘(2) any specified tax deferred account (as de-
fined in subsection (e)(2)), and 
‘‘(3) any interest in a nongrantor trust (as de-
fined in subsection (f)(3)). 
‘‘(d) TREATMENT
OF
DEFERRED
COMPENSATION 
ITEMS.— 
‘‘(1) WITHHOLDING
ON
ELIGIBLE
DEFERRED 
COMPENSATION ITEMS.— 
‘‘(A) IN GENERAL.—In the case of any eligi-
ble deferred compensation item, the payor shall 
deduct and withhold from any taxable payment 
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to a covered expatriate with respect to such item 
a tax equal to 30 percent thereof. 
‘‘(B) TAXABLE PAYMENT.—For purposes of 
subparagraph (A), the term ‘taxable payment’ 
means with respect to a covered expatriate any 
payment to the extent it would be includible in 
the gross income of the covered expatriate if such 
expatriate continued to be subject to tax as a cit-
izen or resident of the United States. A deferred 
compensation item shall be taken into account as 
a payment under the preceding sentence when 
such item would be so includible. 
‘‘(2) 
OTHER
DEFERRED
COMPENSATION 
ITEMS.—In the case of any deferred compensation 
item which is not an eligible deferred compensation 
item— 
‘‘(A)(i) with respect to any deferred com-
pensation item to which clause (ii) does not 
apply, an amount equal to the present value of 
the covered expatriate’s accrued benefit shall be 
treated as having been received by such indi-
vidual on the day before the expatriation date as 
a distribution under the plan, and 
‘‘(ii) with respect to any deferred compensa-
tion item referred to in paragraph (4)(D), the 
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