Prince Harry, Meghan Markle: Be Aware of IRS Rules
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What headlines open this Money Briefing episode?
Your Money Briefing. Money and Market Stories from The Wall Street Journal. I'm J.R. Whalen in New York. It won't be just pomp and circumstance leading the day when Prince Harry marries Meghan Markle in May. They'll have to add complex U.S. tax laws as they live happily ever after. We'll have details in a moment. First, let's check money headlines. The Wall Street Journal's Heard on the Street team says if every jobless worker in the U.S. could be matched with every available job, the unemployment rate would fall to near zero. That'll never happen in reality, but the jobs are there. On Friday, the Labor Department reported there were 6.1 million open jobs in the U.S. at the end of February, 0.9 for every unemployed worker.
That compares with 0.75 per unemployed worker a year earlier. and 0.15 jobs when the recession ended back in 2009. And in a sign that companies are struggling to fill positions, the share of hires per job opening is near an all-time low. One view is that there are lots of potential workers who aren't looking for work and therefore aren't counted in the unemployment rate that stands at 4.1%. This hidden labor market slack is acting as a sort of pressure valve on wages. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. There's a big day on the world calendar coming up in May, the marriage of Prince Harry and Meghan Markle.
How does the jobs data illustrate U.S. labor-market imbalance?
But this isn't about the goings on at Buckingham Palace. It's about the financial reality that will set in after Meghan literally marries her prince charming. And Wall Street Journal tax reporter Laura Saunders is here to discuss. So, Laura, Meghan Markle might have thought warming up to the queen would be the most intense experience she'll face. But she's an American expat who is marrying a non-U.S. citizen. And as such, Uncle Sam, back in the good old U.S. of A., he wants some love, too.
Yes, absolutely. She and Harry may find that the IRS is a not-so-silent partner in their marriage.
That's all they need is a third person in the marriage.
Exactly.
Now, you point out in your story, even if the queen lends her jewelry, it has to be reported at the fair market value. Even free rent at Kensington Palace, that has to be reported also?
Yes.
Well, we think so. We don't know enough to say. It probably all has to be reported. It may not be taxable, but some of it may be taxable if these assets are owned in certain kinds of trusts. We just don't know about the trusts. And this all has to do with how the tax law treats individuals. Ex-pats, but U.S. citizens who are married to non-U.S. citizens. It's not like when two U.S. citizens are married to each other, they can trade assets back and forth. They can give each other gifts. There's no problem. This, it has to be reported. And there are very severe penalties for not reporting it. So I think that, you know, she's going to have her tax advisors on speed dials.
And this is not just the IRS that's getting the blame here. This is a lot of Congress is doing.
Well, the IRS only enforces the law. Congress is the one that sets the law. And there are two big principles going on here. One is that U.S.
Why does hidden labor-market slack put pressure on wages?
citizens are taxed on their worldwide income. even if they don't live in the U.S. And that's different from almost every other country. So no income is really out of bounds. And so if the queen lends her or gives her a tiara, the value of the loan or the gift would probably have to be reported. Now, the other issue, which is very important, is that the U.S. laws Congress has passed on gifts from foreigners is a real crazy quilt. And usually each provision was passed in response to some abuse or some scandal or something like that. And nobody's ever regularized them or made them make sense or put in exceptions or anything like that. So there are all these crazy rules you have to comply with that can be just weird and awful.
And also the compliance is very, very expensive. Sometimes the taxes are too.
And this maze of laws affecting foreign income and assets has interesting results. You make a mention in your story about a fascinating rule in Australia.
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Chapters
5 chapters
1
What headlines open this Money Briefing episode?
0:00–1:23
2
How does the jobs data illustrate U.S. labor-market imbalance?
1:23–3:02
3
Why does hidden labor-market slack put pressure on wages?
3:02–4:15
4
What tax issues arise when Meghan Markle marries Prince Harry?
4:15–6:21
5
Which royal gifts and benefits might need to be reported to the IRS?
6:21–6:34
Speakers
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