John McAfee’s Tax Problems: A tragic story which could have been easily avoided. Don’t make the same mistake!

Jun 29, 2021

The antivirus software entrepreneur John McAfee was found dead in his cell in Spain last week from an apparent suicide. His death came hours after the country approved his extradition to the United States. John McAfee’s tax problems had finally caught up with him. He was wanted on tax-related criminal charges that carry a prison sentence of up to 30 years.

In light of this the slogans of his pioneering American computer security software company McAfee Corporation:

Safe is not a privilege, it is a right

“Together is power

have somewhat of a hollow ring. With his situation, and subsequent death, we can ask ourselves – how could he have protected himself better.

John McAfee’s Tax Problems – how they could have been avoided

With his passing I can now share that I advised John McAfee soon after he sold his anti-virus company in the 90’s. This was long before his legal tax problems started. Tragically, I can also share that it is more than a bit ironic that the pioneer in protecting computers did not exercise his right to legally protect himself. He could have legally put himself in a position to completely avoid his future criminal tax difficulties.

Leaving aside judgement on his recent non-tax activities, I will state that had he taken the advice I gave him some 20 years ago, his life would have been quite different.

In short, my advice to Mr. McAfee was to acquire another citizenship. I advised him to then renounce his US citizenship and reorganize himself so that he did not have any future US-source income or situs assets. It’s important to note that times were different then. It was long before the 2008 changes which brought in a “mark to market” Exit Tax (i.e. deemed disposition of unrealized capital gains). At the time there was also some concern around the application of the newly passed Reed Amendment as a barrier to future entry into the US. Therefore, it was appropriate for him to acquire a new citizenship rather than rely on the UK citizenship that he already had through his mother.

John McAfee speaking at Def Con in 2014

John McAfee speaking at Def Con in 2014

My advice…

If Mr. McAfee were to approach me today, my advice would be different in two important ways. First, I would discuss his current net worth and unrealized capital gains. Assuming he had more than a $2M USD net worth, we would discuss how to minimize the impact of the s.877a deemed disposition. Secondly, I would confidentially advise that the Reed Amendment was no longer an issue. This would mean he would not need to acquire another citizenship beyond his existing UK nationality.

While the impacts of my prior and current advice would have been the same…severing future US tax obligations…the paths to get there would have been quite different. This is a dramatic illustration of the need to have a current personalized Backup Plan prepared by a team of tax and immigration experts who would design an escape plan which meets personal and professional goals in a tax efficient manner.

Sadly, despite having a path forward to a future free of US taxation, Mr. McAfee continually procrastinated on acting on this legal, effective and tested plan. Years later he made the stressful and ultimately tragic decision to engage in US tax evasion. Throughout my 30+ years of advising clients, I have seen this type of procrastination too often…and with almost inevitable unfortunate outcomes.

The slogans of the company that bears his name are a poignant reminder of what Mr. McAfee himself failed to do:

  1. Protect himself; and
  2. Take the advice of trusted advisors working together on his behalf.

John McAfee loved to communicate to large crowds in person and via social media…so let this be his final lesson for all of us.

 

Main image by Gage Skidmore

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