Tax Planning Before Moving to the U.S. — 2026

Hanmi CPA · Cross-Border Tax Guide

Tax Planning Before Moving to the U.S.
미국 이주 전 사전 세금 계획 — 기준가액의 정확한 규칙 2026

Why basis does NOT automatically reset at the residency start date — and why the sell-and-repurchase strategy is therefore essential, not optional, plus the payment-timing rule for severance and the full pre-immigration checklist.

No Automatic Basis Step-Up Severance — Payment Date, Not Proration 10-Step Checklist

Section 01

Overview — Why Pre-Immigration Planning Matters 사전 이주 계획이 중요한 이유

The moment a person becomes a U.S. tax resident (via green card or the Substantial Presence Test), the U.S. begins taxing worldwide income, capital gains, and pension/retirement income, and imposes worldwide asset reporting (FBAR, FATCA, Form 5471, Form 8621, Form 3520). Gains realized — through an actual sale — before the residency start date are not taxed by the U.S. at all. This single timing fact is the foundation of nearly every pre-immigration planning strategy.

Section 02

Residency Start Date — The Foundation 거주자 시작일 — 모든 계획의 기초

Green card test: first day of U.S. physical presence as a green card holder (if approved abroad), or the approval date (if already in the U.S.).
Substantial Presence Test: first day of physical presence in the U.S. during the calendar year SPT is met — not the date the weighted formula mathematically reaches 183.
Elective First-Year Election: may allow an earlier or more favorable start date in specific circumstances, requiring its own analysis.
Income, gains, and asset values are split strictly by this date — everything realized before is outside U.S. tax jurisdiction; everything realized on or after is fully within it.

Section 03

Basis Does NOT Automatically Reset — This Is Why Action Is Required 기준가액은 자동으로 리셋되지 않음 — 그래서 행동이 필요함

⚠ There Is No General Rule Stepping Up Foreign Asset Basis to FMV When Someone Becomes a U.S. Resident: A foreign national who becomes a U.S. tax resident while still holding Korean stocks, real estate, or other appreciated assets keeps the original purchase price as their U.S. tax basis in those assets — converted to USD at the original purchase-date exchange rate. There is no general IRC provision that automatically marks foreign asset basis up to fair market value simply because someone becomes a U.S. tax resident. (The one narrow exception — IRC §877A(h)(2) — applies only to the separate exit tax calculation for covered expatriates leaving the U.S., using FMV on the date the person first became a U.S. resident as a basis floor for that specific later calculation; it does not create a general basis step-up at the time of immigration itself.) This is precisely why the sell-and-repurchase strategy (Section 4) is a deliberate, necessary action — not a description of something that happens automatically.

No Action Taken — Carryover Basis

Korean stock or property simply held through the residency start date, never sold
U.S. basis remains the ORIGINAL purchase price (converted at the original purchase-date rate)
The ENTIRE gain since original purchase — including all pre-residency appreciation — becomes taxable in the U.S. whenever the asset is eventually sold

Action Taken — Realized (Sold) Before Residency

Asset actually sold before the residency start date — even if immediately repurchased
The gain from original purchase to this sale is Korean-source, non-resident-period income — NOT taxed by the U.S. at all
If repurchased, the NEW purchase price (at the repurchase date) becomes the U.S. basis going forward — only appreciation AFTER repurchase is ever taxable in the U.S.

The "step-up" language commonly used to describe this strategy refers to the practical result of an actual sale-and-repurchase transaction — not an automatic basis adjustment that happens by operation of law at the residency start date. Holding the asset through the move, with no sale, locks in the original low basis and the full pre-residency appreciation as a future taxable gain.

Section 04

Korean Stocks — Sell-and-Repurchase Before Moving 한국 주식 — 이주 전 매도 후 재매입

The mechanism: sell appreciated Korean stocks before the residency start date, then repurchase the same (or similar) position. The sale realizes the pre-residency gain outside U.S. tax jurisdiction; the repurchase establishes a new, higher USD basis for any future U.S.-taxable gain.
Particularly valuable for Korean listed stocks because Korea generally exempts small shareholders (소액주주) from capital gains tax — meaning the sale-and-repurchase can often be executed with zero Korean tax cost while still resetting the U.S. basis.
Timing and execution matter: the sale must be a genuine transaction completed before the residency start date, with the repurchase establishing basis at the actual repurchase-date price and exchange rate. Document both transactions (trade confirmations, dates, prices) thoroughly.

Section 05

Korean Real Estate — Sell or Prepare to Report 한국 부동산 — 매도 또는 신고 준비

Sell Before Moving

Entire gain from original purchase to sale: Korean-source, non-resident period — NOT taxed by the U.S.
Best option if a sale within a few years of the move was already being considered
Korean 양도소득세 still applies under Korean domestic rules independently

Keep the Property

Original purchase-price basis carries over — no automatic reset
Prepare for U.S. rental reporting (Schedule E) if rented after residency begins
U.S. depreciation rules (27.5/39 years) apply prospectively from the point of U.S. tax relevance
Track Korean taxes paid for future FTC claims

Sale-and-repurchase is generally impractical for real estate (unlike stocks) due to transaction costs (취득세, 등록세, 중개수수료) — the decision is typically a genuine sell-or-keep choice rather than a basis-reset technique.

Section 06

Korean ETFs/Funds — Exit Before Becoming PFICs 한국 ETF·펀드 — PFIC 적용 전 정리

The Single Most Valuable Pre-Immigration Action for Fund Holdings: Korean ETFs, mutual funds, and wrap accounts become Passive Foreign Investment Companies (PFICs) the moment the holder is a U.S. tax resident — triggering Form 8621 and, absent a timely QEF/Mark-to-Market election, the punitive §1291 excess distribution regime (gains taxed at the highest ordinary rate plus compound interest dating back to acquisition). Selling these holdings before the residency start date avoids the PFIC regime entirely for that holding period — the gain is simply Korean-source, non-resident income.

Section 07

Korean Corporations — Restructure or Elect Disregarded Status 한국 법인 — 구조 재편 또는 디스리가드 선택

10%+ ownership triggers Form 5471 from the first year of U.S. tax residency — no grace period.
If the corporation will be a CFC(50%+ combined U.S. ownership, which a sole owner triggers immediately), GILTI/NCTI inclusions begin taxing the corporation's tested income currently, whether or not distributed.
The check-the-box election (Form 8832) — converting a qualifying Korean entity to disregarded status — can eliminate this exposure going forward, and should be evaluated before or very shortly after the residency start date, since it is a U.S. classification election independent of when it's filed relative to immigration (though earlier is generally cleaner for compliance purposes).
Liquidation or restructuring before the move is one option but carries its own Korean-side tax and legal consequences that must be weighed against simply electing disregarded treatment afterward.

Section 08

Korean Severance — Payment Timing, Not Proration 한국 퇴직금 — 지급 시기, 비례배분 아님

⚠ Severance Is Not Split Proportionally Across Years of Service: For a cash-basis taxpayer, severance (퇴직금) is recognized entirely in the year it is actually paid — not allocated across the years of underlying employment. A person with 10 years of Korean service who moves to the U.S. partway through does not have severance "1 year taxable, 9 years non-taxable" based on a service-period calculation. Instead: if the ENTIRE lump-sum payment is received before the residency start date, none of it is U.S.-taxable, regardless of how many years it represents. If received on or after the residency start date, the ENTIRE payment is U.S.-taxable, even if nearly all underlying service occurred before the move. The planning lever is the payment date, not a proration formula — coordinate the payment timing with the Korean employer's HR department to receive it before departure if at all possible.

Section 09

Pre-Immigration Gifts and Estate Tax 사전 이주 증여 및 상속세 계획

Gifts of foreign assets made before U.S. residency begins are not subject to U.S. gift tax — gift tax applies to U.S. citizens and residents (domiciliaries), and a non-resident has not yet entered that regime.
After residency begins, U.S. gift tax applies to transfers of worldwide assets, subject to the annual exclusion ($19,000/recipient for 2026) and lifetime exemption.
U.S. estate tax applies to worldwide assets once a person is a U.S. tax resident (or domiciliary for estate/gift tax purposes specifically, which uses a different, more subjective domicile-intent test than the income tax residency tests) — Korean real estate and other Korean assets become part of the U.S. taxable estate.
Pre-immigration gifting of appreciated Korean assets to family members who will remain non-U.S. persons can reduce the eventual U.S. estate, though this requires careful Korean-side gift tax analysis (Korea has its own gift tax regime) alongside the U.S. planning.

Section 10

10-Step Pre-Immigration Checklist 10단계 사전 이주 체크리스트

1 Determine the exact residency start date under the applicable test (green card or SPT)
2 Sell and repurchase appreciated Korean stocks to reset USD basis (Section 4)
3 Decide whether to sell Korean real estate before moving, or prepare for ongoing U.S. reporting (Section 5)
4 Sell Korean ETFs, mutual funds, and wrap accounts to avoid PFIC treatment (Section 6)
5 Evaluate restructuring or check-the-box election for any Korean corporation owned (Section 7)
6 Coordinate severance payment timing with the Korean employer to receive it before the residency start date if possible (Section 8)
7 Consolidate or close dormant Korean bank accounts to simplify future FBAR/FATCA reporting
8 Consider pre-immigration gifts of appreciated assets while still outside U.S. gift tax jurisdiction (Section 9)
9 Review Korean pension and insurance products for PFIC or foreign trust characterization risk
10 Document residency start date, pre-residency asset values/basis, and all transaction dates and rates — this documentation is the primary defense in any future IRS examination

Section 11

5 Fully Computed Examples 실제 계산 사례 5개

Case 01 Korean Stock — Holding Through the Move vs. Sell-and-Repurchase

KRW 300,000,000 Korean stock portfolio purchased years ago for KRW 150,000,000. Korea: no tax on the gain (소액주주). Residency start date approaching.

Two Paths, Very Different Future U.S. Tax

Path A — hold through the move, no sale: U.S. basis remains the original KRW 150,000,000 (converted at the original purchase rate)	The ENTIRE appreciation since original purchase becomes taxable in the U.S. whenever eventually sold — including all pre-residency gain
Path B — sell and repurchase before the move: realize the full KRW 150,000,000 gain at $0 Korean tax (non-taxable in the U.S. either, since it's pre-residency); repurchase establishes new basis at KRW 300,000,000 (current value)	Only appreciation AFTER repurchase is ever taxable in the U.S. — the pre-residency gain is permanently outside U.S. tax jurisdiction

Case 02 Korean Real Estate — The Decision to Sell or Keep

No Automatic Reset for Real Estate Either

Bought at KRW 300,000,000, now worth KRW 600,000,000, no sale planned	U.S. basis remains KRW 300,000,000 (converted at original purchase rate) — full appreciation since purchase is eventually taxable in the U.S. when sold, regardless of when the move happened
If a sale within a few years was already being considered	Selling before the move removes the entire pre-residency gain from U.S. tax jurisdiction entirely

Case 03 Korean ETF — PFIC Avoidance

Sell Before, Not After

Korean ETF held 10 years, sold BEFORE the residency start date	Korean-source gain, non-resident period — no U.S. tax, no PFIC analysis at all
Same ETF held through the move and sold afterward, no QEF/MTM election ever made	§1291 excess distribution regime applies — gain allocated across the holding period, taxed at the highest rate plus compound interest from each year's original due date

Case 04 Korean Severance — Payment Timing

10 years of Korean service. Moving to the U.S. partway through year 9 (residency start date in year 9).

Binary Outcome Based on Payment Date

Severance paid before the residency start date (even by a few days)	$0 U.S. tax on the entire amount, regardless of the 10-year service history
Severance paid on or after the residency start date	The ENTIRE amount is U.S.-taxable — not 1/10th

There is no "9 years non-taxable, 1 year taxable" proration. Coordinate the payment date with HR before finalizing the move date.

Case 05 Korean Corporation — Check-the-Box Instead of Liquidation

An Alternative to Pre-Move Liquidation

100%-owned Korean 유한회사, would otherwise become a CFC at residency	Liquidating before the move avoids Form 5471/GILTI but triggers Korean-side liquidation tax consequences and ends the business
Alternative: keep the entity operating, file Form 8832 to elect disregarded status (timed appropriately around the residency start)	Avoids GILTI/NCTI exposure going forward without liquidating the business — Form 8858 applies instead of Form 5471

Section 12

Common Mistakes 자주 발생하는 오류

1 Assuming foreign asset basis automatically resets to fair market value at the residency start date. There is no general rule providing this — basis carries over from the original purchase price unless an actual sale (and, if desired, repurchase) is completed before residency begins.
2 Holding appreciated Korean stocks through the move without selling. This locks in the original low basis and makes the entire pre-residency appreciation taxable in the U.S. whenever the stock is eventually sold — the opposite of the intended planning outcome.
3 Prorating Korean severance across years of service relative to the residency start date. The entire payment is taxed (or not) based on the payment date alone — there is no service-period split.
4 Not selling Korean ETFs and mutual funds before the move. Once held through the residency start date, these become PFICs subject to the punitive §1291 regime — selling before the move avoids this entirely.
5 Not evaluating the check-the-box election as an alternative to liquidating a Korean corporation before the move. Disregarded entity treatment can achieve a similar tax result (no GILTI/NCTI exposure) without ending the business.
6 Not coordinating severance payment timing with the Korean employer's HR department. This single timing decision can mean the difference between $0 and substantial U.S. tax on the entire severance amount.
7 Confusing gift tax non-resident status with the separate, more subjective domicile test used for estate tax. Income tax residency (green card/SPT) and estate/gift tax domicile are evaluated under different standards — a person might be a U.S. income tax resident without yet being domiciled for estate/gift tax purposes, or vice versa in edge cases. This distinction matters for the timing of gift planning specifically.
8 Not documenting pre-residency asset values, transaction dates, and exchange rates contemporaneously. Reconstructing this information years later, if ever audited, is far more difficult and less reliable than documenting it at the time of the pre-immigration planning itself.

Section 13

Hanmi CPA Insight

Practitioner's Note

The single most important correction to how this topic is usually explained is recognizing that nothing happens automatically to an asset's basis when someone becomes a U.S. tax resident. The phrase "basis resets at residency" understandably gets used as shorthand for the sell-and-repurchase strategy's result, but taken literally, it leads people to believe they can simply hold their Korean stocks through the move and arrive with a fresh, higher basis — when in fact the opposite is true. An appreciated Korean stock portfolio held through the residency start date carries its original, low basis forward indefinitely, and the entire accumulated gain — including years or decades of pre-residency appreciation — becomes a single, large taxable event whenever it is eventually sold as a U.S. resident. The deliberate action of selling and repurchasing before the move is not a description of something automatic; it is the entire mechanism that achieves the basis reset, and skipping it because of a misunderstanding about automatic step-up is one of the costliest pre-immigration planning errors available.

The severance timing principle deserves the same precision. A person with substantial accumulated Korean severance who assumes it will be "mostly non-taxable" because most of the underlying service occurred before the move is working from an incorrect mental model. The U.S. tax outcome is entirely binary, hinging on a single payment date — and getting that date wrong by even a few days, in either direction, can mean the difference between zero U.S. tax and tax on the full amount. This is exactly the kind of detail that pre-immigration planning exists to catch before it becomes irreversible.

For Korean entrepreneurs with an existing Korean corporation, the choice between pre-move liquidation and a post-arrival check-the-box election deserves real comparison rather than defaulting to liquidation as the only option. Liquidating a functioning business to avoid future U.S. compliance is often a more drastic and costly step than necessary — when the underlying entity type qualifies, electing disregarded treatment preserves the business while achieving substantially the same U.S. tax outcome (no GILTI/NCTI exposure). This comparison should be run explicitly, with a CPA who understands both the Korean-side consequences of liquidation and the U.S.-side mechanics of the entity classification election, before assuming the business needs to be wound down.