# The US citizenship thread



## Nononymous

Right, here's that article about US expats and their secret children: When American Expats Don’t Want Their Kids to Have U.S. Citizenship - Expat - WSJ

Note that these children all have another citizenship - they're not going to be rendered stateless. 

The WSJ expat blog is actually full of useful stuff.

On edit: this doesn't seem to be the piece with the number-crunching that estimated a shortfall. It's just anecdotes. But within the comments I found this:

Research by Isaac Brock Society has found statistical evidence that Americans are not registering births of their children born abroad:

"In 2002 there were an estimated 14.4 registered births for every thousand Americans abroad, and even as recently as 2008 (when State estimated that about four million resided abroad) there were 13 registered births per thousand Americans abroad. However, according to the 2012 figures there were only 10.9 registered births per thousand Americans abroad. And if the May 2013 Bureau of Consular Affairs Fact Sheet is correct in stating that there are 7.6 million Americans abroad, there might be as few as 9 registered births per thousand Americans abroad."

To summarize, while the birth rate in the US has held fairly constant at about 14 per 1,000 over this time period, it has fallen from 14.4 to 9 for Americans abroad.

With no link back and no sources one can take this _cum grano salis_, but interesting all the same.


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## iota2014

I would say the best way to preserve children's freedom of choice about their US citizenship, is to get their childhood passports in their native citizenship, and *not* register them as US citizens, and leave it to them to claim or not claim US citizenship as adults. 

A certificate of registration isn't necessary as long as they can prove their parent was a US citizen at the time, and met the conditions. And it's not necessary to claim at age 18, they can wait until that Lady GaGa opportunity arises.


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## Pacifica

Nononymous said:


> Right, here's that article about US expats and their secret children: When American Expats Don’t Want Their Kids to Have U.S. Citizenship - Expat - WSJ
> 
> . . . On edit: this doesn't seem to be the piece with the number-crunching that estimated a shortfall. It's just anecdotes. But within the comments I found this:
> 
> Research by Isaac Brock Society has found statistical evidence that Americans are not registering births of their children born abroad:
> 
> "In 2002 there were an estimated 14.4 registered births for every thousand Americans abroad, and even as recently as 2008 (when State estimated that about four million resided abroad) there were 13 registered births per thousand Americans abroad. However, according to the 2012 figures there were only 10.9 registered births per thousand Americans abroad. And if the May 2013 Bureau of Consular Affairs Fact Sheet is correct in stating that there are 7.6 million Americans abroad, there might be as few as 9 registered births per thousand Americans abroad."
> 
> To summarize, while the birth rate in the US has held fairly constant at about 14 per 1,000 over this time period, it has fallen from 14.4 to 9 for Americans abroad.
> 
> With no link back and no sources one can take this _cum grano salis_, but interesting all the same.


That paragraph is from an article entitled “Falling Proportion of America Emigrants Requesting Consular Reports of Birth Abroad for Children,” by Eric at the Isaac Brock Society and it includes links to source documents and data.

Note: I don't think the link in my comment here is working. But if you google "Falling Proportion of America Emigrants Requesting Consular Reports of Birth Abroad for Children" the article will come up with no problem -- I was just looking at it.


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## Nononymous

Let's just compromise and say that there are good arguments for and against each course of action, depending on where one lives and which other citizenship one's child has:

1. documenting your child's US citizenship, while giving them the option to renounce later

2. hiding your child's US citizenship, while giving them the option to claim it later

Remember that not everyone qualifies for the free money.


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## iota2014

Nononymous said:


> ...hiding your child's US citizenship...


Surely not hiding. They're not born as US citizens, since their entitlement has to be registered (by their parents) or applied for (by them, as adults). So there's nothing to hide.


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## BBCWatcher

iota2014 said:


> They're not born as US citizens....


Such children are.


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## Nononymous

iota2014 said:


> Surely not hiding. They're not born as US citizens, since their entitlement has to be registered (by their parents) or applied for (by them, as adults). So there's nothing to hide.


Yes they are. If they qualify - one US-citizen parent meets the criteria - then the US considers such children to be citizens from the moment they leave the womb. (Unless Ted Cruz wins the election, in which case they'll be citizens from the moment of conception.) Whether the parents have registered their birth or not, strictly speaking the kids would have all the tax and reporting obligations of any other expat US citizen.

This is largely meaningless for families living abroad - the US won't know about these children and they won't have any US indicia to alert their banks unless they are somehow connected to a known US-citizen parent. However, it could potentially cause problems if such a child travels to the US on a non-US passport with a US-citizen parent.

Keeping quiet is still a reasonable course of action for parents of children with with other citizenships who have no intention of returning to the US, but in so doing you are encouraging a lifetime's delinquency. Which as a practical matter is probably a price worth paying.


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## iota2014

> Quote:
> They're not born as US citizens....
> 
> 
> 
> Such children are.
Click to expand...

I don't agree, but no doubt the USG would, if it happened to suit them at a given time.

It's a funny thing, isn't it. 

If you asserted that your, say, French-born child was a US citizen, the US would say, Prove it.

If you asserted that your French-born child was not a US citizen, the US would say, Prove it.


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## iota2014

Nononymous said:


> Yes they are. If they qualify - one US-citizen parent meets the criteria - then the US considers such children to be citizens from the moment they leave the womb. (Unless Ted Cruz wins the election, in which case they'll be citizens from the moment of conception.) Whether the parents have registered their birth or not, strictly speaking the kids would have all the tax and reporting obligations of any other expat US citizen.
> 
> This is largely meaningless for families living abroad - the US won't know about these children and they won't have any US indicia to alert their banks unless they are somehow connected to a known US-citizen parent. However, it could potentially cause problems if such a child travels to the US on a non-US passport with a US-citizen parent.
> 
> Keeping quiet is still a reasonable course of action for parents of children with with other citizenships who have no intention of returning to the US, but in so doing you are encouraging a lifetime's delinquency. Which as a practical matter is probably a price worth paying.


Everyone is entitled to whatever point of view makes sense to them. To me, the US seems to have a very Humpty-Dumpty position on citizenship. It means what they want it to mean, from one minute to the next.


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## iota2014

> The Department of Homeland Security (“DHS”) bears the burden of proving alienage. United States ex rel. Bilokumsky v. Tod, 263 U.S. 149, 153 (1923) (“It is true that alienage is a jurisdictional fact; and that an order of deportation must be predicated upon a finding of that fact. It is true that the burden of proving alienage rests upon the Government.”), overruled on other grounds by INS v. Lopez-Mendoza, 468 U.S. 1032 (1984); Gordon, Mailman, & Yale-Loehr, Immigration Law and Procedure § 64.03 (rev. ed. 2009) (“INA § 240(a)(1) provides that IJs shall determine whether ‘an alien’ is inadmissible or deportable. It therefore remains the government’s burden to first establish the court’s jurisdiction by proving that the person in court is, in fact, ‘an alien.’”).
> 
> Evidence of alienage must be established by clear and convincing evidence. See Matter of Amaya, 21 I&N Dec. 583, 588 (BIA 1996) (pre-IIRIRA case) (“[T]he respondent’s admission that he was born in Honduras is clear, unequivocal, and convincing evidence that shifts to him the burden of showing the time, place, and manner of his entry under section 291 of the Act.”); Matter of Cervantes, 21 I&N Dec. 351, 354 (BIA 1996) (pre-IIRIRA case) (“The burden of proof in deportation proceedings does not shift to the alien to show time, place, and manner of entry under section 291 of the Act, until after the respondent’s alienage has been established by clear, unequivocal, and convincing evidence.” (citing Woodby v. INS, 385 U.S. 276 (1966), and Murphy v. INS, 54 F.3d 605 (9th Cir. 1995))).
> 
> “In removal proceedings, evidence of foreign birth gives rise to a rebuttable presumption of alienage, shifting the burden to the respondent to come forward with evidence to substantiate his citizenship claim.” Matter of Hines, 24 I&N Dec. 544, 546 (BIA 2008);


http://www.justice.gov/sites/default/files/eoir/legacy/2014/11/05/vol8no8_edit3.pdf
(Pointed out by someone else, not me, but I've lost track of where I saw the link)

This seems to me to say that a person born abroad is presumed not to be a US citizen unless s/he can prove it. If the person can't or doesn't want to prove it, they remain a non-US citizen - not entitled to a US passport. The US can't then turn around and claim they're subject to US tax.

Failed passport application - the cheap way to prove you're not a US citizen.


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## maz57

iota2014 said:


> This seems to me to say that a person born abroad is presumed not to be a US citizen unless s/he can prove it. If the person can't or doesn't want to prove it, they remain a non-US citizen - not entitled to a US passport. The US can't then turn around and claim they're subject to US tax.


The assumption is often exactly opposite in the situation of foreign-born children traveling with their US parents. There are plenty of instances where US border guards insist those kids are US citizens and should be entering on a US passport. ("I'll let them enter with a Canadian passport this time, but next time you show here up they'd better have a US passport.")

Kind of screwy, when one considers how complicated the rules for transmitting US citizenship to foreign born children are. No front line border guard is likely to be knowledgeable enough to assess whether the kids are, in fact, US citizens, and in any case, they couldn't do it there on the spot. I've not heard of kids actually being refused entry but this situation does occur frequently. Geez, what a mess.


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## BBCWatcher

I'm glad some other posters are now starting to figure this stuff out. I figured it out a while ago.

Let's keep it simple, because it is. U.S. citizenship, like most other citizenships, is a particular package of rights, privileges, obligations, and responsibilities. If you could sell that package its global market price would be quite high -- it's a very valuable citizenship. There is at least contingent value in that citizenship for every child. Exactly how much we could quibble about, but zero is the wrong answer. U.S. citizenship status is a legal fact, or in other words the U.S. government is entirely within its rights to hold any of its citizens, _documented or not_, to their obligations and responsibilities. On the other hand, lack of documentation makes it difficult or impossible to exercise the rights and privileges associated with that citizenship, and it becomes increasingly difficult and expensive over time (or even bureaucratically impossible) for a citizen to get documented. (If your kid's other country of citizenship goes pear shaped next Tuesday, do you really want your kid struggling with his/her own identity as the ship sails, literally?)

So what a perfect mess being undocumented is. That's a reasonable word for it.

Sorry, I'm not saddling my kids with entirely avoidable messes because I'm too cheap to get a CRBA for $100 and too cheap/concerned they might ask me for $2350 in the future. I'm not cheap, not when it comes to my kids. I recommend you don't be cheap either, at least not when it comes to your kids.


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## Nononymous

BBCWatcher said:


> (If your kid's other country of citizenship goes pear shaped next Tuesday, do you really want your kid struggling with his/her own identity as the ship sails, literally?)


What do you mean by "pear shaped" exactly? I suppose Canada might one day collapse, rendering my daughter's Canadian citizenship worthless. Ditto the UK or Germany or Australia. This is not a likely scenario - I don't see a high risk of first-world citizens suddenly becoming stateless. 

We're not talking about an expensively purchased Caribbean citizenship-of-convenience here, but rather a second citizenship by virtue of birth and/or parental citizenship (much like US citizenship). I might even go so far as to call this a child's *primary* citizenship if they have no connection to the US.

If you're worried about documenting US citizenship for the child to claim it on some future day, well, assemble the necessary documents and lock them up in a safe. I suppose that it might be difficult to prove that a deceased parent had lived the required number of years in the US. When I registered her birth, back in the day, I wasn't asked to provide documentation - I just showed them a California birth certificate and wrote down some ballpark dates and signed the thing. But yes, possibly harder to do after my untimely death, I grant you that.


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## BBCWatcher

Nononymous said:


> What do you mean by "pear shaped" exactly? I suppose Canada might one day collapse, rendering my daughter's Canadian citizenship worthless. Ditto the UK or Germany or Australia. This is not a likely scenario....


First of all, not likely is not zero. Second of all, there are all kinds of non-collapse scenarios that might influence some other individual's citizenship-related wants and needs. An audition for a Broadway role with the role to be cast within the next 8 days, to pick a random example. "Pear shaped" simply means not well suited to that other person's independent, future path, _whatever that path may be_. Keeping all options open, on the table, and instantly actionable, as desired.

Bottom line: are you going to provide (up to) $2450 for your kid to document your kid's preexisting identity and allow that kid to enjoy all the rights and privileges associated with that identity, at the drop of a hat, or not? I am, and it's an _easy_, cheap decision.



> But yes, possibly harder to do after my untimely death, I grant you that.


And a lot longer than an 8 day casting call.

Once again, I ask, are you too cheap to spring for the $100 plus $2350 your kid might ask you for someday? Because that's the only question here as I see it. Sorry if I'm being blunt, but I think I have to be.


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## Nononymous

In the end it's a personal decision. Pros and cons each way. There can be costs associated with US citizenship, as many duals are discovering. (For every Zuckerberg there's a Saverin, to extend your metaphor.) 

My daughter was documented rather unthinkingly - what's done is done - but knowing what I know now, I likely wouldn't do so again. She at least will be fairly safe ignoring the obligations if she's not interested in the rights and privileges. 

For the record, when we cross the border together I always use my Canadian passport, and they've not once looked at my place of birth or asked questions. The only grief I've had was on a solo business trip.


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## maz57

The kids of my US expat peers all seem to be quite happy being Canadian, period. The ones I've broached the subject with have said they have no desire to be Americans even though technically (at least in the eyes of the US government), they might be. The kids don't believe they are, and they sure as hell don't file US taxes or FBARs. In fact if I mention the US and its wacky CBT tax system those kids roll their eyes in disbelief and say I must have got it all wrong. That can't possibly be right, it makes no sense, there's no way I would do that, that's totally crazy. I have to agree with them.

If one of their parents unilaterally signed 'em up (none have), those same parents would probably find themselves having to cough up $2350 the following week. We'll never know how many extra Broadway stars we may have missed. (But we have some great, successful young Canadians.) Their parents are very proud of them.


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## BBCWatcher

Nononymous said:


> (For every Zuckerberg there's a Saverin, to extend your metaphor.)


Bad metaphor. Does anybody seriously believe Saverin would have become anywhere near as fabulously wealthy as he became if not for his U.S. citizenship and prior permanent residence? He might still have met Zuckerberg at Harvard -- _might_, but very unlikely since his parents' U.S. residence put him on a much more reliable path to Harvard -- but then he wouldn't have been able to drop out of Harvard and work helping start Facebook in Silicon Valley as a foreigner on a student visa. Zuckerberg would have run off without him in those early days. (And probably Zuckerberg would have been less successful, too.)

He's an adult, and all adults can renounce their U.S. citizenships if/when they wish. But you seem to be arguing that your kid shouldn't even have the chance to run off with the next Zuckerberg at a moment's notice if that's what he/she wants to do. That's exactly what Saverin did, and he could only do so with his documented U.S. citizenship (or U.S. permanent residence, either way). That was a moment in time bit of stunning luck for him.

I have absolutely no objection to Saverin's subsequent renunciation of U.S. citizenship. He's an adult, and that's his right.



> She at least will be fairly safe ignoring the obligations if she's not interested in the rights and privileges.


Correct! Your daughter still has the option to violate U.S. tax and financial reporting laws if that's what she chooses to do. And if she's a resident of Canada it's at least very, very hard for her to violate U.S. tax laws (contrary to some mythologies around here). It's easier for her to violate the 1970 U.S. Bank Secrecy Act if she wishes, but it's also easy not to violate that law if she wishes. (FinCEN Form 114 I'm referring to.)


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## BBCWatcher

Let me see if I can find some common ground here. As background, I know of an individual who only learned of his possession of another citizenship (from birth) well into his adulthood. The lack of knowledge about his possession of that citizenship was inadvertent, not intentional. Nonetheless, had he known he possessed that other citizenship he might have taken advantage of different opportunities, and his life might have taken a different course.

OK, with that background, could we all at least agree on a minimum standard of parental care incorporating these elements:

(1) That parents should always tell their children (including adopted children) what citizenships they possess (all of them), to the best of their ability and knowledge, at least by the time their children can reasonably comprehend such issues (age 16 or earlier, in general), and straightforwardly and purely factually.

(2) That parents allow their children ample time to make citizenship-related decisions if there are any legal deadlines, such as deadlines to document a citizenship, limitations on generational transmission of a citizenship, or a requirement to declare a citizenship choice if a child possesses a citizenship from a country that does not tolerate multiple citizenships; and that parents, to the best of their ability, monitor legal developments that might impact such deadlines.

(3) That parents, as soon as reasonably practical after a child is born or adopted, should either document their child's citizenships (all of them) or, if feasible, gather and protect all necessary documentation (e.g. adequate proof of sufficient U.S. residency in the case of derivative U.S. citizenship) so that their child can easily get any undocumented citizenships properly documented, and that they cover those costs if the child (or young adult) asks.

Is all that a reasonable, agreeable minimum standard of parental care -- can we all agree at least to that set of principles?


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## iota2014

maz57 said:


> The assumption is often exactly opposite in the situation of foreign-born children traveling with their US parents. There are plenty of instances where US border guards insist those kids are US citizens and should be entering on a US passport. ("I'll let them enter with a Canadian passport this time, but next time you show here up they'd better have a US passport.")
> 
> Kind of screwy, when one considers how complicated the rules for transmitting US citizenship to foreign born children are. No front line border guard is likely to be knowledgeable enough to assess whether the kids are, in fact, US citizens, and in any case, they couldn't do it there on the spot.


Especially nowadays: if the children were born via IVF or ICSI, as an increasing number are, the US requires DNA tests before granting citizenship. 


> The Department is aware of cases where foreign fertility clinics have substituted alternate donor sperm and eggs for the U.S. parents’ genetic material, either purposefully when the planned genetic material turned out not to be viable or through accidental laboratory errors. The intended parents learned of these undisclosed switches only when the parents obtained DNA tests after the child’s birth, as part of the process of documenting the child’s citizenship for the purposes of obtaining a U.S. passport. Such situations can have the unfortunate consequence of leaving a child stateless or otherwise unable to leave the country of birth.


https://travel.state.gov/content/tr...olicies/assisted-reproductive-technology.html

Not a comfortable situation for a family trying to visit grandparents, if a border guard suspects they're trying to bring a US citizen into the country on a non-US passport.



> I've not heard of kids actually being refused entry but this situation does occur frequently. Geez, what a mess.


Yes.


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## BBCWatcher

iota2014 said:


> Especially nowadays: if the children were born via IVF or ICSI, as an increasing number are, the US requires DNA tests before granting citizenship.


That's not a firm or even semisolid requirement. It depends on the circumstances, but in many/most cases medical records adequately documenting the Assisted Reproductive Technologies (ART) are acceptable, along with the parents' sworn statement and oath.

That said, I find it very odd indeed that in a forum where the U.S. government comes under heavy criticism for its alleged incompetence there would be such tremendous faith that a U.S. citizen child could get his/her U.S. citizenship properly documented years or even decades after birth without much if any bureaucratic difficulty. I don't know how you can hold the first viewpoint while simultaneously holding the second. That makes no rational sense to me. Indeed, I assume a certain level of bureaucratic difficulty, with increasing difficulty over time (and a big jump in difficulty at age 18). I don't know if a child's U.S. citizenship can actually be documented until it actually is, until the job is done. So, in my view, you get the job done -- then offer $2350 (2016 dollars) to those adult children that want it.


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## iota2014

BBCWatcher said:


> That's not a firm or even semisolid requirement. It depends on the circumstances, but in many/most cases medical records adequately documenting the Assisted Reproductive Technologies (ART) are acceptable, along with the parents' sworn statement and oath.
> 
> That said, I find it very odd indeed that in a forum where the U.S. government comes under heavy criticism for its alleged incompetence there would be such tremendous faith that a U.S. citizen child could get his/her U.S. citizenship properly documented years or even decades after birth without much if any bureaucratic difficulty. I don't know how you can hold the first viewpoint while simultaneously holding the second. That makes no rational sense to me. Indeed, I assume a certain level of bureaucratic difficulty, with increasing difficulty over time (and a big jump in difficulty at age 18). I don't know if a child's U.S. citizenship can actually be documented until it actually is, until the job is done. So, in my view, you get the job done -- then offer $2350 (2016 dollars) to those adult children that want it.


I did "get the job done". At that time, CBT wasn't being enforced, so I knew nothing of the legal consequences I was laying on my children. And couldn't have known or suspected how much I should be putting aside for their renunciations. Today's parents can't know either - by the time the children or grown the situation is likely to have changed in ways we can't predict.

It's the US which needs to rethink its citizenship laws - not the parents.


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## Bevdeforges

iota2014 said:


> It's the US which needs to rethink its citizenship laws - not the parents.


No, the issue is that it was the parents who urged Congress to change the citizenship laws back in the 1970s. In somewhat typical fashion, they lobbied Congress to allow easy/automatic citizenship for children born overseas (including reducing the length of time the US parent had to have lived in the US past the age of 14) - without any consideration to the "unintended consequences" of their requests.

It was in the 1990s when a few of the first overseas born Americans were getting established for themselves and had just found out about their eternal tax filing obligation that the stuff hit the rotary oscillator. (I just happened to be a member at the time of a couple of the US expat groups who had lobbied for the change in the law, and whose kids were now looking to renounce.)
Cheers,
Bev


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## iota2014

Interesting. Mine were born in the early 70s and I had to register them and get a US passport for them to visit Grandma.

Maybe there should be an international agreement on at least a few basic rights. The US isn't the only country whose citizenship laws need modernising.


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## Bevdeforges

If you're interested in the original skirmishes over citizenship and voting for overseas Americans, there is a book called "The Unknown Ambassadors" by Phyllis Michaux. Phyllis was part of the founding members of AARO, AAWE, possibly FAWCO and probably a couple other groups here in the Paris area. I happen to have known her and know how well-motivated she was. But I always thought she was perhaps not aware of some of the mess she created with her insistence about pushing for citizenship the way she did.
Cheers,
Bev


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## iota2014

Thanks for the reference Bev, I'll definitely have a look for that. Actually I was just looking at a Google preview of this book:
https://books.google.co.uk/books?id...or+children+born+abroad&source=gbs_navlinks_s

which also seems interesting insofar as can be determined with a 5-inch screen.

Visit to university library scheduled.


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## maz57

BBCWatcher said:


> Indeed, I assume a certain level of bureaucratic difficulty, with increasing difficulty over time.....


Are you talking about documenting US citizenship or renouncing US citizenship? In the last 40 years or so, claiming US citizenship has become somewhat easier, but in the last few years getting rid of it has become more difficult (not to mention a lot more expensive). 

No one can predict what Congress or the State Dept. will do next, but the trend re: renouncing has not been to make it easier or cheaper.


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## Nononymous

BBCWatcher said:


> She at least will be fairly safe ignoring the obligations if she's not interested in the rights and privileges.
> 
> 
> 
> Correct! Your daughter still has the option to violate U.S. tax and financial reporting laws if that's what she chooses to do. And if she's a resident of Canada it's at least very, very hard for her to violate U.S. tax laws (contrary to some mythologies around here). It's easier for her to violate the 1970 U.S. Bank Secrecy Act if she wishes, but it's also easy not to violate that law if she wishes. (FinCEN Form 114 I'm referring to.)
Click to expand...

And that's what I'd advise her to do, whether she stays in Canada or settles in Europe. (We currently don't see a compelling economic case for her attending university in the US!)

I agree that in reality it's almost impossible for an ordinary to Canadian to find themselves in trouble with the IRS, but it's actually not that difficult to violate US tax laws. Certainly a basic income under $100k won't do it, but there are all kinds of investment products that have additional reporting requirements. (I remain ignorant of the details because I'm not going to be filing anything.) 

The great big elephant in the room is capital gains on sale of primary residence - the Boris Johnson problem. Given the performance of our housing markets, particularly Vancouver and Toronto, it's very easy to exceed $500k per couple gain on the sale of a house. Money would be owed to the US, though if you plan on staying in Canada you'd be a complete idiot to report that to the IRS and voluntarily write them a cheque. (Boris was a bit of an exception, as he had both political and financial reasons to clean up the mess.) 

I suppose my cynical, unprincipled view of her situation is that the risks of the US finding her and causing problems are very, very small, so small that she doesn't need to spend money renouncing, plus she can keep that old baby passport in a drawer for the highly unlikely event that she finds a use for US citizenship.


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## jbr439

Nononymous said:


> ...
> I agree that in reality it's almost impossible for an ordinary to Canadian to find themselves in trouble with the IRS, but it's actually not that difficult to violate US tax laws. Certainly a basic income under $100k won't do it, but there are all kinds of investment products that have additional reporting requirements. (I remain ignorant of the details because I'm not going to be filing anything.)
> ...


Right! If she has a TFSA (extremely common for folks in Canada), she would be in violation for not filing foreign trust forms (3520 and 3520A) [some tax specialists question whether a TFSA is a foreign trust, but because the IRS likes to keep these things inscrutable, we can't say for sure]. Ditto for having a RESP or RDSP for her (if any) children. If she has non-US domiciled mutual funds or ETFs outside of a RRSP (again, a *very* common occurrence), she would be in violation for not filing PFIC forms (8621) for each mutual find or ETF. Both violations have significant theoretical penalties which are totally independent of any tax owed or not owed.

*There are no myths here* - it is very easy for Canadian residents to be in *significant* violation of US tax laws without even owing tax or without even being above the filing threshold.


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## iota2014

I guess we all have a different view of these things.

As far as I'm concerned my children owe the US exactly zero. They're not hiding, they're not delinquent, and they've never violated any tax laws.

The US can "deem" them US citizens till the cows come home. They're not. End of story.


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## Nononymous

jbr439 said:


> *There are no myths here* - it is very easy for Canadian residents to be in *significant* violation of US tax laws without even owing tax or without even being above the filing threshold.


Indeed. But all those violations (and capital gains on house sales) can be safely ignored if you don't have financial interests in the US. It's even better if you don't have a US birthplace - you can easily avoid FATCA and potential denial of banking services.


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## BBCWatcher

So nobody wants to comment on my "common ground" proposed statement of principles?


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## jbr439

BBCWatcher said:


> So nobody wants to comment on my "common ground" proposed statement of principles?


No major issues from me. AFAICT the gist of it is that the child should either have his/her citizenships documented, or be given the tools (knowledge, necessary supporting documentation, $$, etc) to be able to get their citizenships documented should they decide to do so when they are able to make an informed decision for themselves. I, apparently like most others here, lean to the latter, but I view things from a Canadian perspective, which may differ for someone with citizenships from other countries.


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## Nononymous

jbr439 said:


> No major issues from me. AFAICT the gist of it is that the child should either have his/her citizenships documented, or be given the tools (knowledge, necessary supporting documentation, $$, etc) to be able to get their citizenships documented should they decide to do so when they are able to make an informed decision for themselves. I, apparently like most others here, lean to the latter, but I view things from a Canadian perspective, which may differ for someone with citizenships from other countries.


Despite having done the opposite, I too lean to the latter. Put copies of the relevant documents in a safe place so that children can claim US citizenship if they ever want it. This provides the best protection from FATCA and banking problems for Europeans, spares the expense and hassle of renunciation if somehow filing obligations became onerous, or the admittedly tiny risk of IRS trouble due to perfectly ordinary activities like saving for retirement or making money on the sale of your house.

The situation is more complicated for children with a US birthplace. Depending on the situation they may have enough challenges with banking and travel to the US on a foreign passport that they're probably better off claiming, then renouncing if necessary.

Questions of identity will also be a factor. I expect there's an immense difference between (i) children born outside the US to US citizens with no other citizenship - your classic expats; (ii) children born in bi-cultural marriages with one US parent who grow up in their "home" country with another language and citizenship; (iii) our situation, a child living in Canada born to Canadian parents, one of whom just happened to be dual, thus conferring a second citizenship with which there is zero emotional connection.


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## Bevdeforges

Ooh, and I have yet a 4th category: kids born in the US to foreigners in the US who packed up and went back "home" (wherever that is) when the children were still young. The kids have been raised outside the US and many of them barely speak English any more. Their early years in the US may not even be a vague memory.

Somehow, I think it may have been better back in the "good old days" where a kid born a dual national got to pick which nationality they wanted at age 18. (Though there are several other models to choose from if you look at how other countries handle this sort of thing.) 
Cheers,
Bev


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## Nononymous

Bevdeforges said:


> Ooh, and I have yet a 4th category: kids born in the US to foreigners in the US who packed up and went back "home" (wherever that is) when the children were still young. The kids have been raised outside the US and many of them barely speak English any more. Their early years in the US may not even be a vague memory.


That would be me, born in the US and returned to Canada as a toddler, though I do speak English, lived close to the border so made frequent visits, then ultimately moved down for grad school. It added up to enough years that I passed on citizenship to the daughter.


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## BBCWatcher

The ~$17,000 in free money (for your kid!) really ought to be collected if you qualify, I would note.


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## maz57

Believe it or not, some people really don't have any desire to be Americans. They are perfectly content being who and whatever they already are. Not a single offspring of my US expat peers has pursued a claim of US citizenship.

That $17K is anything but free. It comes with a hefty price, not the least of which is a lifetime of filing obligations which in recent years has gotten more invasive and financially controlling. Those dollars would soon be eaten up by the cross-border tax people even if no US tax is actually owed. What kid needs that?

Arrange things so the kids can make their own decision once they are old enough to do the math themselves. Keep options open but for God's sake don't shackle that extra US ball and chain to them before they even know what a tax return is.


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## BBCWatcher

maz57 said:


> That $17K is anything but free. It comes with a hefty price, not the least of which is a lifetime of filing obligations which in recent years has gotten more invasive and financially controlling.


No, that's just not factually correct.

Whatever those filing obligations are, and however you wish to characterize them, they either exist or they don't. If the ball is already shackled (birth), it's already shackled. We've been through that point in this very thread, and it's not complicated. If U.S. citizenship exists it's a legal fact, whether documented or not.

As I think Bev mentioned, up until several decades ago, when U.S. citizenship law changed, there might have been a colorable argument that derivative U.S. citizenship was not a legal fact unless and until documented (whereupon it was retroactive to birth). But that's no longer true. Derivative U.S. citizenship is birthright, by law, whether documented or not.

There is one and only one way a U.S. citizen parent (meeting the U.S. residence minimum) can avoid that legal fact: the parent can pay $2350 and get a U.S. Certificate of Loss of Nationality (CLN) prior to the birth of his/her child overseas. In other words, if you don't want your child to have U.S. legal obligations then you need to end your own U.S. legal obligations before your child is born. (During pregnancy works, if you wish.) Nothing else works.


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## Nononymous

So what are the qualifications for that free $17k, and how far back can I go to claim it? The exchange rate's gotten worse lately!

Assume for sake of argument both US citizen and non-citizen spouse earning $75k US per year.


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## maz57

This whole discussion reminds me of a quote from an old, highly successful, auto racer: "The rules are meant to be.......interpreted".


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## BBCWatcher

Nononymous said:


> So what are the qualifications for that free $17k, and how far back can I go to claim it?


It's the Additional Child Tax Credit. Refer to IRS Publication 972 for the official information, but here's how it would work for a typical situation in Canada or in some other comparatively high income tax jurisdiction:

1. You need at least one documented U.S. citizen child living with you (because you need the child's SSN).

2. You file a U.S. tax return per normal, but importantly you skip the Foreign Earned Income Exclusion (IRS Form 2555 or 2555-EZ) and only take the Foreign Tax Credit (IRS Form 1116). It's at least best to file as Head of Household if you're eligible rather than Married Filing Separately. Married Filing Jointly works too. (The better filing statuses lower your hypothetical U.S. tax rate and increase the income limits for this refundable child tax credit, so they make it more likely you qualify for the maximum in free money.)

3. Use IRS Schedule 8812 to take the Additional Child Tax Credit.

Under "reasonable" assumptions that particular recipe is worth US$1,000 per year per child in free money from the IRS for a total of up to about $17,000 over that child's childhood. Run your own numbers, but that wouldn't be a surprising outcome.

Plus you get excess Foreign Tax Credits with this approach, and having a documented child means your excess FTCs are higher (because a reported child with SSN drives down your effective U.S. tax rate). And Head of Household filing status is only available if you have a documented dependent, and same thing. So it's a bit more than the free money itself that's nice, financially speaking.

Just like any other refund, this free money must be claimed within three years of the normal filing deadline. So right now the oldest free money claim still available (as I write this) is for tax year 2012. You have until April 15, 2016,(*) to claim the Additional Child Tax Credit (or any other refundable tax credit or tax refund) for 2012. In other words, you can't leave your U.S. citizen child undocumented for 12 years (or whatever) then go back and claim all this free money -- I'm afraid that doesn't work. Free money that was available from tax years 2011 and prior is now gone. That's too bad because there was some other free money available to lots of people in tax years 2009 and 2010 called the "Making Work Pay" tax credit, and some overseas Americans missed out on that one, too.

Yes, the United States is so awful, so terrible -- such a ball and chain -- that the IRS literally pays parents of low and middle income (living in tyrannically high income tax regimes like Canada) if they have at least one documented U.S. citizen child. The brutality! 

(*) If you are particularly careful and add the overseas residence statement to your tax return as described in IRS Publication 54, you might be able to stretch this to June 15, 2016. I do not recommend testing that stretch if you can avoid it since I'm not 100% sure it would work. I recommend getting any/all such free money/refund requests into the IRS -- *received* at the IRS -- by April 15.


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## BBCWatcher

Did I mention that US$1000 per year per child is most probably Canadian (and other foreign country) tax free? Not bad!

OK, so with all that Additional Child Tax Credit described, let's suppose our young Johnny Galt, documented U.S. citizen, now celebrates his 18th birthday. He makes an appointment at his nearest U.S. embassy or consulate to renounce his U.S. citizenship, right?

Not so fast! Financially that too would be a dumb move, at least for most 18 year olds, even for an 18 year old.  Let's suppose Johnny is accepted at McGill University, to pick an example. Of course he has tuition, fees, and course materials to pay for, in all likelihood. So one thing he'll do is work at least during his summers and term breaks, and let's suppose he earns C$10,000 per year. And let's further suppose his Canadian income tax rate is zero (or even negative, if it ever is) -- let's just assume that. Ah ha! That evil, awful U.S. government and its tyrannical Internal Revenue Service will swoop in and grab some of Mr. Galt's too few (and too weak) Canadian dollars, right?

Wrong. WAY wrong. You see, under present U.S. tax law, the free money party doesn't stop for Mr. Galt. In all likelihood he would qualify for another US$1000 per year in free money from the IRS for his first four years of post-secondary education: the American Opportunity Tax Credit. The AOTC is compatible with the Foreign Earned Income Exclusion, so even if Canada doesn't want to tax his earned income the U.S. won't either. He doesn't even need any earned income if he prefers to take his free money and not work. All he needs to do is file a "1040" and claim it.

So we're up to US$21,000 in free money available over the course of this documented U.S. citizen child's childhood and young adulthood, and in common circumstances, assuming current tax law and 2016 dollars. THEN he should pay his $2350 and renounce U.S. citizenship, right?

Well, maybe not just yet. Let's suppose Johnny takes out a U.S. federal student loan, a direct one preferably. Yes, he can do that, even if he never stepped foot in the United States. Yes, McGill University is perfectly fine -- lots and lots of non-U.S. universities are fine. (Not all, but many.) Unless his parents are particularly wealthy, he should qualify. While he's attending university, and for 6 months after he leaves university, interest does not accrue on the loan. When it comes time for repayment, he chooses the income-based repayment scheme.

Now, why would he do this? Well, under present tax laws and federal student loan regulations, his loan repayment amount is calculated on his income after he takes the Foreign Earned Income Exclusion. Most people -- about 91% of U.S. citizens living overseas, and especially those starting their careers -- don't owe any U.S. taxes thanks to the FEIE. (Another 3% are covered by the FTC if not the FEIE -- and a greater percentage in Canada, approaching 100% total.) That also means that all those people would owe zero on their U.S. federal student loan repayments under income-based repayment terms. Johnny takes that deal and runs with it, of course -- it's one heck of a terrific deal, assuming he's part of the 91%. At the end of the income-based repayment period he'll have a U.S. tax bill, at ordinary income tax rates, based on the value of the debt forgiveness. But that's still a small fraction of the total, so he got a lot of free money again -- even, incredibly, if he actually used that money to buy beer instead of books.

Your mileage may vary, of course. But there's a lot of free money available to many if not most young, documented U.S. citizens living overseas. The U.S. tax code is rather generous in that way. In fact, the President has proposed increasing that refundable child tax credit to US$1500/year, so it may get even more generous. Every citizenship is a unique package of rights, privileges, obligations, and responsibilities. Well, here you go -- here are some of the wonderful privileges that are yours for the taking. And, as a reminder, I'm not counting the benefits a U.S. citizen parent gets in terms of improved filing status (Head of Household notably) and such that a documented U.S. citizen child provides. This is ~US$21K typically tax free, free and clear, commonly available.

So my advice would be to take the free money you and your child are entitled to. Then let him/her decide whether to fork over $2350 (2016 dollars) to renounce. What other investment is paying that kind of return? For $100 now and a possible $2350 later, you get back $21,000 or more, quite realistically. Great deal!


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## Bevdeforges

OK - now there's the other side of that coin. Factor in your time and trouble to fill out 17 years worth of US tax returns (particularly if your connection to the Old Country is tenuous and you aren't inherently in touch with all the annual changes to tax law and reporting requirements). Plus, filing just to obtain a refund like this does earn you "points" in the IRS system, making you somewhat more vulnerable to audit or other inquiry. (Raising your profile on the IRS radar, as we so often refer to it here.)

There is also the ethical issue (which weighs more heavily for some folks than for others): is it "right" to claim this type of "free money" if you don't need it, and particularly if you're receiving equally or more generous family allowance benefits in the country in which you reside? That's another personal issue, not worth debating here.

Citizenship is an accident of birth - in more ways than one. The US seems to be a bit more aggressive than some countries in claiming citizenship of people born with only a passing "connection" to the US. Though, think of those countries where you are legally considered to be born to a particular religion and where conversion is not possible - on penalty of death. 

We get that you find it unacceptable to "leave money on the table" regarding tax matters. But many other here have other considerations. Can we give this one a rest? Yes, raise it as an option when we have an inquiry about US taxes filed from abroad. But then drop it. Some folks aren't interested in taking this sort of benefit from an accident of birth.
Cheers,
Bev


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## BBCWatcher

Remember, the legal obligations already exist. The obligations and responsibilities part of this citizenship equation is fixed and permanent unless and until this Johnny or Jenny Galt pays $2350 and gets a CLN in hand.

Sure, people can and do weigh risks in different ways. Some people don't vaccinate their kids against common enough and very serious diseases, to pick an example. I posit that most rational people would consider the risks and costs you describe...and then rush to collect all the free money they're entitled to. US$18550+ net is a heck of a lot of tax free money to most people, and it's undoubtedly a big help for most kids -- no, for all kids in the qualifying income ranges. It's a much higher paid free money pursuit than clipping supermarket coupons, collecting bottle deposits, and filling out product rebate forms, and plenty of people do those things (and should).

I don't really have much argument with adults who want to make decisions for themselves, even if I disagree with their decisions. But denying their kids substantial free money, to their benefit -- more educational experiences, more books, better nutrition, music lessons, or any of the myriad advantages US$18550+ can buy? Well, that bothers me, a lot. That's not in their best interest in any reasonable, rational assessment of the facts. And unfortunately kids aren't able to claim the Additional Child Tax Credit. It's up to the (responsible) parent to do that on behalf of his/her child, and to spend or save that money for their child.


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## Nononymous

I'll leave aside the tax credits - too late at this point to make it worthwhile, given my feelings about compliance - but the student loan scam is a beauty. You'd think they'll eventually close the loophole, but if not, it's an amusing idea to borrow, say, $50k from another government with the expectation that it never has to be paid pack, thanks to an accident of parental birth. Basically that's the US giving her a free car.


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## jbr439

AFAICT the "free money" is the unintended consequence of a loophole (don't normally like that phrase, but it really seems to apply here). There is no way that the intent was to give away that kind of money to people who are not in need, especially people who would be considered unAmerican by some. At some point Congress (or whatever branch/department is responsible) will clue in and shut it down. So, proceed at your own risk.


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## Nononymous

jbr439 said:


> AFAICT the "free money" is the unintended consequence of a loophole (don't normally like that phrase, but it really seems to apply here). There is no way that the intent was to give away that kind of money to people who are not in need, especially people who would be considered unAmerican by some. At some point Congress (or whatever branch/department is responsible) will clue in and shut it down. So, proceed at your own risk.


Yes, I agree. I did a bit of research when I first learned of this loophole, and I vaguely recall seeing language in the regulations somewhere that suggested that they could look at your "real-world" income if the adjusted amount was curiously zero for long periods of time. So I'm not sure I'd trust this little scheme enough to have Uncle Sam buy me a nice new BMW as a graduation present. 

(Incidentally, what happens if you borrow money then become a stay-at-home parent with no income - the loan goes away after 25 years even if you marry someone making heaps of money?)

The prudent thing would be to take the money and invest it and hope that you outperform the usurious interest rates the government charges, so that you can pay it all back if the poop ever hits the fan. If it doesn't, then you've got a nice little bonus after 25 years. 

In our case, there are two additional reasons why it might not work:

1. If present trends continue, we'd not probably qualify for any sort of federal aid or loans; Canadian universities are comparatively cheap, and we have education savings set aside.

2. I just mentioned this to my wife and she threatened to kill me if I suggested to the daughter that she expose herself to the IRS in order to scam the US government.


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## BBCWatcher

As far as I know U.S. federal student loans are available as long as you meet the enrollment and attendance requirements. If the particular university is tuition free, and if your uncle is giving you money for room, board, and books, none of that is an impediment to taking out a U.S. student loan if you wish, as I understand it.

There are a few students and families that take out student loans "just because," even without the MAGI/FEIE loophole. Interest does not start to accrue until six months after graduation (for the federal guaranteed loans), so you can take the loan (if you qualify), earn some interest on the principle, then pay off the loan. It's not common, but it does happen, especially in the "rich uncle/aunt" sort of scenarios. And it's entirely legal.

It also doesn't cost the U.S. federal government anything to do this, so don't worry about that. The government still gets income taxes from the university's faculty and staff. (Well, at U.S. institutions anyway.) And both the annual and total loan amounts are capped -- the government won't float you all that much money for these purposes even if you're lucky enough to be able to pull it off.


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## Nononymous

BBCWatcher said:


> As far as I know U.S. federal student loans are available as long as you meet the enrollment and attendance requirements. If the particular university is tuition free, and if your uncle is giving you money for room, board, and books, none of that is an impediment to taking out a U.S. student loan if you wish, as I understand it.


Tuition free - I don't think that's entirely the case. US federal student loans are only available if you are attending a foreign institution on a (fairly long) list. Most Canadian and UK universities - all of which charge tuition - are on the list, but literally all German universities - which don't charge tuition - are not. 

But yes, it appears that the "direct unsubsidized" loan can be taken out without demonstration of need, to a maximum of $31k for an undergraduate degree, quite a bit higher for graduate or professional school. It's a tempting offer but I have a hard time believing that loophole will stay open for 25 years.

On edit: with the "direct unsubsized" loan, interest accrues during the deferral period and is added to the principal. The government is not paying the interest during this time. But that's all moot if you have it discharged after a quarter-century.


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## BBCWatcher

Nononymous said:


> But yes, it appears that the "direct unsubsidized" loan can be taken out without demonstration of need....


Yes, exactly.



> ....to a maximum of $31k for an undergraduate degree, quite a bit higher for graduate or professional school. It's a tempting offer but I have a hard time believing that loophole will stay open for 25 years.


There are two "loopholes" here, and they are different ones. One is the MAGI/FEIE/income-based repayment loophole. Yes, I think that'll probably get closed at some point in the future. Income-based repayment options are fairly new, and consequently so is that loophole. But IBR will continue to be a great deal even if that loophole is closed, and there's broad political support for IBR as standard practice.

The ability for a small number of people to take out U.S. federal student loans and then to invest that money -- even in a safe bond fund -- to earn a small return (profit) is very unlikely to be removed even in the next 25 years. That option has been available for many decades already with nobody worried about it, probably as long as subsidized U.S. federal student loans have been around. Money is highly fungible, and there's no avoiding that. There's no need for the government to worry about the few students who earn a few extra dollars this way. The federal government still gets its money back, at a profit, because that $31K of cash still floats through the economy, including especially through faculty and staff income tax payments. The federal government doesn't really care about the time value of money anyway, at least not in any conventional accounting sense, and especially now with negative real interest rates over fairly long time horizons. So no, I'm going to disagree with you on that one. It's quite reasonable to assume a minority of students will continue to be able to enjoy a bit of interest on their subsidized student loan floats.



> On edit: with the "direct unsubsized" loan, interest accrues during the deferral period and is added to the principal.


Correct. I specifically referred to the subsidized federal loans -- the "rich uncle/aunt" sort of scenario. That is, students who meet the financial tests to receive subsidized (i.e. zero interest accrual) loans but who have low educational expenses (below their maximum loan eligibility), have some access to financial support that is not counted in the financial tests (e.g. a rich and helpful uncle), or some combination of the two.

There are many, many examples of situations when somebody, such as a government, might offer an interest free loan that you would be smart to take even if you don't need the money. Another example is with car financing. Often a car manufacturer will offer 0% financing as a promotion, and the dealer might even receive a bonus if you take the zero interest loan. (There are certain reasons why this makes sense even for the manufacturer, notably that the loan payments themselves can create "impending sales events" to bring you back to buy another new car. So the loan itself has some sales value.) Typically you cannot negotiate a lower cash purchase price precisely because of that dealer incentive paid if they provide that 0% financing. So the smart thing to do, even if you can pay cash for the vehicle, is to take the loan -- indeed, to take as much 0% loan as the manufacturer is willing to give, over as long a term as allowed -- and then set the loan up for automatic payments to avoid any late payment penalty interest. Then take that cash you otherwise would have paid for the vehicle and buy a U.S. Savings Bond or whatever else you like that generates a positive yield. There are some people who even take 1% or 2% loans when they're offered because they know they can put that money to better, higher yielding use with high confidence in their particular circumstances. Donald Trump is one such person who routinely does that, quite profitably so. Myriad businesses do this, too. There's nothing wrong with that at all. It's just good business sense to take advantage of such opportunities when they are available. Free money is great stuff.

Full disclosure: I took out a subsidized U.S. federal student loan, and I was fortunately able to pay it off just before interest started to accrue. So I enjoyed the "free float" for about 7 years, courtesy of the U.S. government. I didn't have a rich uncle, but it worked out for me nonetheless.


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