The Exit Tax

Justin Ryan Schmidt founded Translunar Crypto LP, an Austin-based hedge fund focused on cryptocurrency investments. Between 2019 and 2022, he earned at least seven million dollars from his fund but reported income of five thousand dollars or less on each of his federal tax returns. He held millions in undisclosed foreign bank accounts, never filed an FBAR, and failed to pay the income taxes he owed.In March 2022, Schmidt renounced his U.S. citizenship at the American Embassy in Kingston, Jamaica. When he filed Form 8854, the expatriation statement required by the IRS, he reported his net worth as twenty-five thousand dollars. Court records established that his net worth exceeded two million dollars. He also falsely certified that he had complied with his tax obligations for the preceding five years.After expatriating, Schmidt purchased a home in Snowmass Village, Colorado, for 5.8 million dollars and sold it three months later for approximately nine million dollars. He submitted false documentation to prevent FIRPTA withholding on the sale and did not report the gain.On July 27, 2026, U.S. District Judge Robert Pitman sentenced Schmidt to 37 months in federal prison and ordered him to pay approximately 3.4 million dollars in restitution.Jason explains how the IRS exit tax works under IRC Section 877A, why renouncing citizenship triggers a final tax accounting rather than ending one, and what Schmidt should have done instead: voluntary disclosure, accurate expatriation filings, FBAR compliance, and proper FIRPTA procedures.Key TakeawaysRenouncing U.S. citizenship does not end your tax obligations. It triggers a final accounting under IRC Section 877A, including a potential exit tax on unrealized gains.Form 8854, the expatriation statement, is filed under penalty of perjury. False statements on this form carry criminal consequences.Foreign bank accounts exceeding $10,000 must be disclosed annually on an FBAR. Willful failure to file is a separate federal crime.FIRPTA requires withholding on real property sales by foreign persons. Submitting false documents to avoid withholding is a prosecutable offense.Voluntary disclosure and amended returns, filed through a tax attorney, can eliminate criminal prosecution risk when the facts are addressed early.Expatriation tax planning is a legitimate practice area with legal structures available at every step. The crime is choosing the illegal version of a legal process.Resources MentionedDOJ sentencing announcement: https://www.justice.gov/opa/pr/expatriated-hedge-fund-manager-sentenced-prison-tax-evasionDOJ indictment announcement: https://www.justice.gov/opa/pr/hedge-fund-manager-indicted-tax-fraud-chargesIRS-CI guilty plea announcement: https://www.irs.gov/compliance/criminal-investigation/hedge-fund-manager-pleads-guilty-to-tax-evasion-in-austinIRS Expatriation Tax guidance: https://www.irs.gov/individuals/international-taxpayers/expatriation-taxIRC § 877A (Tax responsibilities of expatriation): https://www.law.cornell.edu/uscode/text/26/877AIRC § 7201 (Tax evasion): https://www.law.cornell.edu/uscode/text/26/7201 31 U.S.C. § 5314 (FBAR filing requirements)Oleg Tinkov case (DOJ, October 2021): https://www.justice.gov/archives/opa/pr/founder-russian-bank-pleads-guilty-tax-fraudThe Law Office of Jason Carr, PLLC: https://carrtaxlaw.comDisclaimerThis video is for informational and educational purposes only and does not constitute legal or tax advice. Viewing this video does not create an attorney-client relationship between you and The Law Office of Jason Carr, PLLC. The discussion is based on publicly available information and is not a complete analysis of any person’s legal rights, defenses, tax obligations, or case facts. Any commentary about what a taxpayer, business owner, or advisor “should have done” is general educational discussion only and may not apply to your situation. If you have a specific legal or tax question, consult a qualified attorney or tax professional licensed in your jurisdiction.Comment PolicyPlease do not post confidential, sensitive, or personally identifiable tax information in the comments. We do not provide individualized legal or tax advice in the comments or social media replies.