U.S. Individual Income Tax Return

2007 Instructions for Form 8854
Initial and Annual Expatriation Information Statement
Purpose:

This is the first circulated draft of the 2007 Instructions for Form 8854,
Initial and Annual Expatriation Information Statement, for your review and
comments. There are no major changes.

TPCC Meeting:

None, but one may be arranged if requested.

Prior Revision:

The 2006 Instructions for Form 8854 can be viewed by clicking on the
following link: http://www.irs.gov/pub/irs-pdf/i8854.pdf

Form:

The 2007 Form 8854 was circulated earlier at:
http://taxforms.web.irs.gov/Products/Drafts/2007-2/07f8854_d1.pdf

Other Products:

Circulations of draft tax forms and instructions are posted at:
http://taxforms.web.irs.gov/draft_products.html

Comments:

Please email, call, mail, or fax any comments by September 24, 2007.

Phil Parisi
Tax Forms & Publications
SE:W:CAR:MP:T:I:S
Email: www.philip.a.parisi@irs.gov
Phone: 202-622-3297
Fax: 202-622-5022

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Instructions for Form 8854

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2007

Department of the Treasury
Internal Revenue Service

Instructions for Form 8854
Initial and Annual Expatriation Information Statement
Section references are to the Internal Revenue Code unless
otherwise noted.

General Instructions
Purpose of Form
If you expatriated or terminated your long-term resident
status after June 3, 2004, use Form 8854 to provide the
information required by sections 6039G and 7701(n).

country with which the United States has an income tax
treaty, on the date you commenced to be treated as a
resident of that country and you determined that, for
purposes of the treaty, you are a resident of the treaty
country. See Treas. Reg. Section 301.7701(b)-7 for
information on other filing requirements for such individuals.

Definitions

Expatriation or Termination of Residency
For purposes of immigration and nationality law, the date of
your expatriation or termination of residency depends on
when certain acts occurred. The specific acts that must have
occurred depend on whether you are a former U.S. citizen
or a former U.S. long-term resident (LTR). The specific acts
are described below.

Former U.S. Citizens
If you were a U.S. citizen, you expatriated:
• On the date you renounced your U.S. citizenship outside
the United States before a diplomatic or consular officer of
the United States pursuant to paragraph (5) of section 349
of the Immigration and Nationality Act, provided there is a
determination of loss of citizenship by the Secretary of
State, as reflected by your receipt of an approved Certificate
of Loss of Nationality, or
• On the date you voluntarily performed an act of
expatriation with the specific and contemporaneous intention
of giving up your U.S. citizenship, provided there is a
determination of loss by the Secretary of State, as reflected
by your receipt of an approved Certificate of Loss of
Nationality. An act of expatriation is any act defined as a
potentially expatriating act either by paragraph (1), (2), (3),
or (4) of section 349(a) of the Immigration and Nationality
Act or by any other Act of Congress defining expatriating
acts.
While your citizenship may have ended because a
federal court revoked your naturalization under section 340
of the Immigration and Nationality Act, this type of loss of
citizenship is not treated as an expatriating event for
purposes of section 877 and this form, if after the
revocation, you hold the status under the Immigration and
Nationality Act of an alien lawfully admitted for permanent
residence.

Former U.S. Long-Term Residents (LTRs)
If you were a U.S. long-term resident (LTR) (see Definitions
below), you terminated your residency:

• On the date you voluntarily abandoned your lawful

• If you were a dual resident of the United States and a

permanent resident (LPR) status by filing Department of
Homeland Security Form I-407 with a U.S. consular or
immigration officer, and the Department of Homeland
Security determines that you have, in fact, abandoned your
LPR status,
• On the date you became subject to a final administrative
order for your removal from the United States under the
Immigration and Nationality Act and you actually left the
United States as a result of that order, or

Former U.S. LTR. You are a former U.S. LTR if you were a
lawful permanent resident of the United States for at least 8
of the 15 consecutive tax years ending with the date of your
termination of residency.
LPR. You are an LPR of the United States if you have been
given the privilege, according to U.S. immigration laws, of
residing permanently in the United States as an immigrant.
You generally have this status if you have been issued an
alien registration card, also known as a “green card.”

Date of Tax Expatriation
If you expatriated or terminated your long-term resident
status on or before June 3, 2004, see Pub. 519.
If you expatriated or terminated your long-term resident
status after June 3, 2004, until you file Form 8854 and notify
the Department of State or the Department of Homeland
Security of your expatriating act or termination of residency,
your expatriation or termination of residency for immigration
purposes will not relieve you of your obligation to file U.S.
tax returns and report your worldwide income as a citizen or
resident of the United States. For purposes of U.S. tax rules,
the date of your expatriation or termination of residency will
be the later of the date you notify the relevant agency of
your expatriating act or termination of residency, or the date
this form is filed in accordance with these instructions. For
purposes of determining the date on which this form is filed,
apply the rules of section 7502. Generally, this is the
postmark date.

Who Must File
You must file Form 8854 to:
• Establish that you have expatriated or terminated your
LTR status for tax purposes, or
• Comply with the annual information reporting
requirements of section 6039G, if you are subject to tax
under section 877.
Note. If you were a naturalized citizen, but lost your
citizenship because a federal court revoked your
naturalization under section 340 of the Immigration and
Nationality Act, you do not need to complete this form if,
after the revocation, you hold the status under the
Immigration and Nationality Act of an alien lawfully admitted
for permanent residence. You must complete this form,
however, if you were a naturalized citizen and you gave up
your citizenship by expatriation under section 349 of the
Immigration and Nationality Act.

Taxation Under Section 877
You are subject to taxation under section 877 if you are a
former U.S. citizen or former LTR, and any one of the
following applies to you.

Cat. No. 24874E

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Instructions for Form 8854

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1. Your average annual net income tax liability for the 5
years ending before the date of your expatriation or
termination of residency is more than the amount listed
below.
a. $127,000 if you expatriated in 2005.
b. $131,000 if you expatriated in 2006.
c. $136,000 if you expatriated in 2007.
This amount is subject to cost-of-living adjustments. The
IRS will announce the amounts applicable to future years in
annual revenue procedures that will be published in the
Internal Revenue Bulletin. The Internal Revenue Bulletins
can be accessed at www.irs.gov/irb.
2. Your net worth is $2 million or more on the date of
your expatriation or termination of residency.
3. You fail to certify on Form 8854 that you have
complied with all of your U.S. federal tax obligations for the
5 years preceding the date of your expatriation or
termination of residency.

When To File
Initial Information Statement
If you are filing this form because you ceased to be a U.S.
citizen (expatriated) or terminated your U.S. residency
during the tax year, there is no due date for filing this form.
However, until you both file this form with the Internal
Revenue Service and notify either the Department of State
or the Department of Homeland Security of your expatriation
or termination of residency, you will continue to be treated,
for tax purposes, as if you were still a U.S. citizen or
resident. The date of your tax expatriation (the date you are
no longer subject to U.S. taxation on a worldwide basis) is
the date on which you have satisfied both requirements.

Annual Information Statement
If you are a nonresident alien filing this form to comply with
the annual information reporting requirements of section
6039G, this form should be attached to a timely filed Form
1040NR, U.S. Nonresident Alien Income Tax Return, and a
copy should be sent to the address below. If you are not
required to file Form 1040NR, submit this form to the
address below by the due date for filing Form 1040NR.
If you are present in the United States following your
expatriation ande are subject to tax as a U.S. citizen or
resident, file Form 8854 with your Form 1040 and send a
copy to the address below.

If you are subject to tax under section 877, you are no
longer taxed as a citizen or resident on your worldwide
income. However, you must compute your tax as a
nonresident in accordance with the special rules of section
877. These rules expand the categories of income and gain
on which you owe tax. You are also subject to special rules
for gift and estate tax purposes that differ from those
applicable to other nonresident aliens.
Exceptions to section 877. Provided you have certified
that you have met your tax obligations for the 5 tax years
prior to your expatriation or termination of residency, you will
not be subject to tax under section 877(b) if either of the
following exceptions applies.
• You became at birth a U.S. citizen and a citizen of
another country, you continue to be a citizen of the other
country, and you have no substantial contacts with the
United States.
• You became at birth a U.S. citizen, neither of your parents
was a U.S. citizen at the time of your birth, your loss of
citizenship occurred before you attained age 181/2, and you
were not present in the United States for more than 30 days
during any of the 10 calendar years preceding your loss of
citizenship.

Where To File
Internal Revenue Service
11511 Roosevelt Boulevard
Drop Point S607-F8854
Philadelphia, PA 19154

Specific Instructions
Initial or Annual Information
Statement
Check the Initial Information Statement box if you are filing
this form as your initial expatriation information statement to
establish that you have expatriated or terminated your LTR
status for tax purposes. Check the Annual Information
Statement box if you have already expatriated or terminated
your LTR status, are subject to the tax rules of section
877(b), and are filing this form as your annual expatriation
information statement.

See the instructions for lines 9 and 10 on page 3.

Tax Consequences of Presence in the
United States After Expatriation or
Termination of Residency
If, for any tax year during the 10-year period in which you
are otherwise subject to section 877, you are present in the
United States for more than 30 days in a calendar year
ending in such tax year, you will be treated as a U.S. citizen
or resident for that tax year. You will be subject to U.S. tax
on your worldwide income unless the following exception
applies.
Exception. You can be present in the United States for up
to 60 days without being treated as a U.S. citizen or resident
if you are performing personal services in the United States
for an employer who is not related (within the meaning of
sections 267 and 707) to you and you meet either of the
following requirements.
• You were a U.S. citizen and, within a reasonable period
following your expatriation, you became a citizen or resident
fully liable to tax in the country in which either you, your
spouse, or either of your parents were born, or
• For each year in the 10-year period ending on the date of
expatriation or termination of residency, you were physically
present in the United States for 30 days or less.

Part I–General Information
This section is to be completed by all filers.

Line 1
Generally, this number is your U.S. social security number.
An incorrect or missing identifying number may result in
failure to expatriate or terminate residency and/or a penalty
of $10,000. If you were never issued a social security
number, please attach a statement explaining the reason.

Line 2
If you have a P.O. box, enter your box number instead of
your street address only if your post office does not deliver
mail to the street address.

Line 3
Enter the information in the following order: street address,
city, province or state, and country. Follow the country’s
practice for entering the postal code. Do not abbreviate the
country name.

See Pub. 519, U.S. Tax Guide for Aliens, for details
about what constitutes a day of presence in the United
States.

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Instructions for Form 8854

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Line 4

Line 9

Enter the country of which you are considered a resident for
tax purposes if different from the country in which your
principal foreign residence is located.

You have no substantial contacts with the United States if
you (a) were never a resident of the United States (as
defined in section 7701(b)), (b) never held a U.S. passport,
and (c) were not present in the United States for more than
30 days during any of the 10 calendar years preceding your
loss of U.S. citizenship.

Line 5
Date of notification, termination, or claim. In order to
expatriate for tax purposes (to no longer be subject to U.S.
tax as a U.S. citizen or LTR), you must (a) give notice of an
expatriating act or termination of residency (with the
requisite intent to relinquish citizenship or terminate
residency) to the Secretary of State or the Secretary of
Homeland Security, and (b) provide a statement in
accordance with the information reporting requirements of
section 6039G. The date of your expatriation is the date on
which the latter of these two events occurs.

Line 10
Check the “Yes” box if:
• You are a minor who became a U.S. citizen at birth,
• Neither of your parents was a U.S. citizen at the time of
your birth,
• Your loss of citizenship occurred before you attained age
181/2, and
• You were not present in the United States for more than
30 days in any of the 10 calendar years preceding your loss
of U.S. citizenship.

You will be considered to have given notice of an
expatriating act (with the requisite intent to relinquish
citizenship) to the Secretary of State as of the date that you
either:
• Renounced your U.S. citizenship outside the United
States before a diplomatic or consular officer of the United
States pursuant to paragraph (5) of section 349(a) of the
Immigration and Nationality Act, or
• Submitted to a U.S. Embassy or consulate a signed
statement affirming your voluntary and intentional
relinquishment of U.S. citizenship accompanied by
documentation confirming the performance of an act defined
as potentially expatriating by paragraph (1), (2), (3), or (4) of
section 349(a) of the Immigration and Nationality Act
provided that such notification is ultimately confirmed by the
issuance of a Certificate of Loss of Nationality from the
Department of State.

Line 11
Check the “Yes” box if you have complied with your tax
obligations for the 5 tax years ending before the date on
which you expatriated or terminated your residency,
including but not limited to, your obligations to file income
tax, employment tax, gift tax, and information returns, if
applicable, and your obligation to pay all relevant tax
liabilities, interest, and penalties. You will be subject to tax
under section 877 if you have not complied with these
obligations, regardless of whether your average annual
income tax liability or net worth exceeds the applicable
threshold amounts.

Part III–Annual Information Reporting
Under Section 6039G

You will be considered to have given notice of a
termination of residency (with the requisite intent to
terminate residency) to the Secretary of Homeland Security
as of the date that you complete Form I-407, Abandonment
of Lawful Permanent Resident Status, before a diplomatic or
consular officer of the United States or at a Port of Entry of
the United States before a U.S. immigration official.

If section 877 applies to you, you must complete Part III and
Schedules A (Balance Sheet) and B (Income Statement) for
the 10 tax years beginning with the year that includes the
date of your expatriation or termination of residency,
whether or not you owe tax under section 877 for the tax
year. This means that if you perform an expatriating act or
terminate residency, you must complete both Parts II and III
of this form for the year in which that event occurs.

You should retain written evidence of your notification.
Box a. Check this box if you are a former U.S. citizen, and
enter the date on which you gave notice of your expatriation
to the Department of State.
Box b. Check this box if you are a former LTR, and enter
the date on which you gave notice of termination of your
LPR status to the Department of Homeland Security.
Box c. Check this box if you are an LTR with dual
residency in a treaty country, and enter the date you
commenced to be treated for tax purposes as a resident of
the treaty country (see Former U.S. Long-Term Residents
(LTRs) on page 1).

Exceptions to Filing Part III
Section 877 does not apply to you if your net worth is less
than $2 million as of the date of your tax expatriation, your
average annual net income tax liability for the 5 tax years
prior to the date of your tax expatriation was not more than
the amount listed under Taxation under section 877 on page
2, and you certify that you have met your tax obligations for
the 5 years prior to expatriation.

If you have not yet notified the Secretary of State or
Secretary of Homeland Security in connection with your
expatriating act or termination of residency, you must file an
amended Form 8854 stating the date on which such
notification occurs.

If you exceed these dollar thresholds and you certify that
you have met your tax obligations, section 877 may still not
apply to you if you meet one of the exceptions for dual
citizens at birth with no substantial presence or for certain
minors. See Exceptions to Section 877 on page 2.

Part II–Initial Expatriation or
Termination Information Statement

• Your average annual net income tax liability for the 5 tax

You do not need to complete Part III of this form if:

years ending before the date of expatriation (see line 6 on
the form) was not more than the amount listed under
Taxation under section 877 on page 2, your net worth on
line 7 was less than $2 million, and you checked the “Yes”
box on line 11.
• You checked the “Yes” box on line 8, and the “No” box on
line 9, and you checked the “Yes” box on line 11, or
• You checked the “Yes” box on lines 10 and 11.

This section and Schedules A (Balance Sheet) and B
(Income Statement) must be completed by all individuals
who expatriate or terminate residency during the tax year.

Line 7
Use the balance sheet in Schedule A to arrive at your net
worth.

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Instructions for Form 8854

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became a U.S. LPR. For details on U.S. residency (including
the substantial presence test), see Pub. 519.

Line 12a
List all foreign countries of which you are a citizen.

Line 12b

Line 5a

Indicate how you became a U.S. citizen. For example, if you
acquired citizenship at birth, write “At Birth.” If you acquired
citizenship through naturalization, write “Naturalized
Citizen.”

List the appropriate amount in each column for all
nonmarketable stock and securities issued by foreign
corporations that would be controlled foreign corporations if
you were still a U.S. citizen or resident. Note that these
amounts are already included on line 5. Do not include
amounts on this line in the total on line 20.

Line 12c
Provide the date on which you became a citizen of each
country listed on line 12a.

Line 8
List the total value of all your partnership interests. If you
hold an interest in one or more partnerships, you must
attach a statement to Form 8854 that lists each partnership
separately. Include the employer identification number
(EIN), if any, for each partnership. Describe the assets and
liabilities of each partnership (using the categories on the
balance sheet on page 3 of Form 8854) attributable to your
interest in the partnership.

Line 13
If you were physically present in the United States for more
than 60 days during the tax year, you will be taxed as a U.S.
citizen or resident and must file Form 1040 for the current
tax year. If in a subsequent year within the 10-year period
you are not physically present more than 30 days during the
year, you will again be subject to section 877 and file Form
1040NR. If you were present more than 60 days during the
year, skip line 14.

Line 9
List the total value of all assets held by trusts that you are
considered to own for tax purposes. You must attach a
statement to Form 8854 that lists each trust separately.
Include the EIN (if any) for each trust. Describe the assets
and liabilities of each trust (using the categories on the
balance sheet on page 3 of Form 8854) attributable to your
interest in the trust.

Line 14
If you were physically present in the United States more
than 30 days but not more than 60 days during the tax year,
complete lines 14a and b. If you answer “No” to either
question, you will be taxed as a U.S. citizen or resident and
must file Form 1040 for the current tax year. If you answer
“Yes” to both questions, you remain subject to section 877
for the tax year.

Note. To determine if you are an owner of a trust, see
sections 671 through 679.

Signature
Form 8854 is not considered valid unless you sign it. If you
have someone else prepare Form 8854, you are still
responsible for its correctness.
Paid preparers. Generally, anyone you pay to prepare
Form 8854 must sign it in the space provided. The preparer
must give you a copy for your records. Someone who
prepares Form 8854 but does not charge you a fee should
not sign it.

Line 10
List the total value of all assets held by nongrantor trusts in
which you are considered to have a beneficial interest. You
must attach a statement to Form 8854 that lists each trust
separately. Include the EIN (if any) for each trust. Describe
the assets and liabilities of each trust (using the categories
on the balance sheet on page 3 of Form 8854) attributable
to your interest in the trust.
Note. To determine if you are a beneficiary of a nongrantor
trust, you must allocate the property interests of the trust
based on all relevant facts and circumstances. To determine
the value of your beneficial interest, use the valuation
principles under section 2512. See Section III of Notice
97-19 for examples of how the property interests of a
nongrantor trust should be allocated to the beneficiaries of
the trust. You can find Notice 97-19 on page 40 of Internal
Revenue Bulletin 1997-10 at www.irs.gov/pub/irs-irbs/
irb97-10.pdf.

Schedule A–Balance Sheet
Note. If there have been significant changes in your assets
and liabilities for the period that began 5 years prior to your
expatriation and ended on the date that you file Form 8854,
you must attach a statement explaining the changes. Also,
attach a similar statement if you expect significant changes
in the 10-year period after expatriation or termination of
residency.

Columns (a) and (b)

Lines 11 and 12

List the fair market value (in U.S. dollars) of each class of
assets and your U.S. adjusted basis (in U.S. dollars) in the
class of assets. You can use good faith estimates of fair
market value and basis. Formal appraisals are not required.

Intangible property includes any of the following items that
have substantial value independent of the services of any
individual.
• Patent, invention, formula, process, design, pattern, or
know-how.
• Copyright, literary, musical, or artistic composition.
• Trademark, trade name, or brand name.
• Franchise, license, or contract.
• Method, program, system, procedure, campaign, survey,
study, forecast, estimate, customer list, or technical data.
• Any similar item.

Column (c)
Subtract the amounts in column (b) from the amounts in
column (a) and show the gain or (loss) in column (c). Enter
negative amounts in parentheses.

Column (d)
If you are a former U.S. LTR, it may benefit you to complete
column (d). For more details, see section 877(e)(3)(B). Only
former U.S. LTRs should complete column (d).
Enter in column (d) the fair market value of each asset on
the date you first became a U.S. resident for tax purposes.
Note. The date you first became a U.S. resident for tax
purposes is not always the same as the date you first

Line 19
Attach a statement describing and listing the total value of
any other assets you have that are not included on lines 1
through 18.

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in accordance with Section V of Notice 97-19, 1997-1 C.B.
394. The removal of appreciated property with an aggregate
fair market value in excess of $250,000, from the United
States is an exchange of property covered by this provision.
Enter on line 6 the total amount of gain resulting from any
such exchanges during the tax year, and if you have elected
to enter into a gain recognition agreement with the IRS
deferring the gain, attach a copy of the agreement to your
Form 1040NR. If you dispose of any property covered by a
gain recognition agreement during the tax year, also list the
gain realized on this line. See Section V of Notice 97-19, for
additional information on exchanges and gain recognition
agreements.

Line 20
Add lines 1 through 5 and 6 through 19, not including any
amounts on line 5a. The amounts on line 5a are included in
determining the amounts on line 5.

Line 23
Attach a statement describing and listing the total value of
any other liabilities you have that are not included on lines
21 and 22.

Schedule B–Income Statement
Schedule B is required to satisfy the requirements of section
6039G(b)(5), and must be completed without regard to
whether you have income subject to tax under section 877
for the tax year.
Note. If you are subject to section 877 for all or a portion of
the tax year, and you derive income subject to tax under
section 877 for the taxable year, you are liable for tax on
that income as provided in section 1 or section 55, if the tax
computed under such sections exceeds the tax that would
be imposed on you under section 871. This generally means
that you must report all income subject to tax under section
877 on Form 1040NR, whether or not it is effectively
connected with the conduct of a trade or business in the
United States, and you are not permitted to exclude certain
types of income, such as portfolio interest or capital gains,
which normally would be exempt from tax in the hands of a
nonresident alien.

Line 7
If, during the 10-year period beginning on the date of your
expatriation or termination of residency, or during the 5-year
period prior to your expatriation or termination of residency,
you contributed U.S. source property to a foreign
corporation that would be a controlled foreign corporation
had you remained a U.S. citizen or LTR, any income or gain
on that property received or accrued by the foreign
corporation during the tax year is treated as received or
accrued by you. See Section VI of Notice 97-19 for
additional information.

Line 8
Add lines 1f through 7 to report your total income from U.S.
sources.

Treaty Residents

Line 9

Most U.S. tax treaties do not prevent the United States from
continuing to tax former citizens and former LTRs under
domestic law. Unless the treaty prevents it, you will be
subject to the rules of section 877.

List the total amount of all other income or gain for the tax
year.

Penalties
If you are subject to section 877 and required to file Form
8854 for any tax year, and you fail to file or do not include all
the information required by the form or the form includes
incorrect information, you will owe a penalty of $10,000 for
that year, unless it is shown that such failure is due to
reasonable cause and not willful neglect.

Specific Line Instructions
Lines 3 through 6 require reporting of income which, but for
the application of section 877(d), would be income from
sources outside the United States. If you report income on
these lines, you must also report this income as taxable
income on Form 1040NR.

Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue
laws of the United States. You are required to give us the
information. We need it to ensure that you are complying
with these laws and to allow us to figure and collect the right
amount of tax.
You are not required to provide the information requested
on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books
or records relating to a form or its instructions must be
retained as long as their contents may become material in
the administration of any Internal Revenue law. Generally,
tax returns and return information are confidential, as
required by section 6103.
The average time and expenses required to complete
and file this form will vary depending on individual
circumstances. For the estimated averages, see the
instructions for your income tax return.
If you have suggestions for making this form simpler, we
would be happy to hear from you. See the instructions for
your income tax return.

Line 5
If you owned (within the meaning of section 958(a) or (b)) at
any time during the 2-year period ending on the date of your
expatriation or termination of residency, more than 50% of
the vote or value of a foreign corporation, income or gain
you receive from the foreign corporation during the tax year
will be treated as from sources within the United States, to
the extent such income or gain is not more than the
earnings and profits from such stock which were earned or
accumulated before the date of your expatriation or
termination of residency while such ownership requirements
were met.

Line 6
If, during the current tax year, you exchanged any property,
and (a) the gain would not (but for this paragraph) be
recognized on such exchange in whole or in part, (b) income
derived from such property was from sources within the
United States (or, if no income was so derived, would have
been from such sources), and (c) income derived from the
property acquired in the exchange would be from sources
outside the United States, then the property will be treated
as sold for its fair market value on the date of the exchange,

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