- Buy 1 ETH @ $100
- Jan 1 2021
- ETH is @ $500
- March 2021
- Move to PR.
- 1 ETH is now $1,000
- Apply for Act 60.
- Meet the residency, etc requirements for the year of the move exception for the rest of 2021
- Jan 2022
- Act 60 Application Approved
- Sell 1 ETH @ $5,000
- Jan 2025
- Move out of PR, having been a BFR-PR for 3+ years after the year of the move as required by the year of the move exception
IRS-owed taxes are the gains from $100 → $1,000 = $900 Captial Gains @ 20%
Puerto Rico-owed taxes are the gains from $500 → $5,000 = $4,000 @ 0 %
On my 2022 Tax Return, I will pay a total of $180 to IRS.
Note that the bifurcation date and corresponding asset price are calculated differently for PR and the IRS. for PR taxes, your bifurcation date is on Jan 1 of the year of the move, because you met the requirements for the year of the move exception, an IRS rule that PR recognizes to determine their own internal residency status.
For IRS taxes, the March 2021 value should be used.
If, say, you left without meeting the requirements for the exception in the year of the move between 2021-2025, your act 60 benefits would not be valid for the year of the move, and you would have to pay any resulting back taxes/clawbacks.
further IRS treatment is described in pub 570:
example 1 (don’t elect to bifurcate)
In 2010, Cheryl Jones, a U.S. citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U.S. corporation listed on the New York Stock Exchange. On March 1, 2013, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. Cheryl satisfied the presence test in 2013 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2013. On March 1, 2013, the closing value of Cheryl’s stock in the Rose Corporation was $2,000. On January 5, 2016, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. Under the special rules discussed earlier, none of Cheryl’s $6,000 gain will be treated as income from sources within Puerto Rico.
Example 2. (elect to bifurcate)
Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U.S. and possession holding periods. Cheryl’s possession holding period began March 1, 2013, the date her tax home changed to Puerto Rico. Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2016 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income.