jmood

I'm asking this on behalf of a friend. He is a USC. She is not a USC nor a GC holder. They recently decided to move to the US and they also want to sell their house overseas.

The sale of the house will be in the name of the wife.

1) What is the tax implication if she (the non USC, non GC holder) brings the money in?

2)If she applies for a GC, does her US tax liability start at the date she makes the application or the date her GC gets approved?

Thanks!

Michael

If she is currently a resident in the US, she would be liable for the capital gains on the sale of her home but as a married couple, there is a $500,000 exclusion from capital gains if it was their primary residence for the previous 2 out of 5 years.

As far as the transfer of any money, there is no tax.

If she is currently not living in the US, there are no taxes due if she sells the home prior to becoming a resident of the US. Therefore tax liability is based on whether she is a resident or not and not based on whether she has a green card or not.

nun

If a non-US citizen sells the house before she becomes US tax resident there will be no US tax implications.......this assumes that she is not included on an US citizen's joint (married) tax return. There would then be no tax issues with bringing the money into the US.

If she applies for a green card and is issued an IR1 or CR1 she would become a US tax resident on the day she enters the US.

jmood

What happens for tax purposes if she applies for a GC while she is in the US on a tourist visa? (For the purposes of the tax question please disregard all and any immigration implications of this. ) At which point does she become liable for US tax?

nun

I'm not sure if you can apply for a Green Card while on a tourist visa.....but if anyone meets the substantial presence test they will be liable to US tax.

jmood

So if she does NOT meet the substantial presence test, applies for the GC while in the US, and while the application is still in process she sells her house outside of the US and bring the money in to the US, there is NO US tax to pay?

nun

Too many "what ifs" there.

Michael

Now you are getting into very grey areas as to when residency starts for tax purposes. Although people normally file "dual status" for the first year and eliminate declaring income for when they weren't a resident, they still have to declare worldwide income once they become a resident. Usually that is the day they take up permanent residence and suspect that if her intent is to get married and file an AOS, she is already a resident for tax purposes. Not meeting the substantial presence test does not absolve her from US taxes while she is considered a resident for tax purposes.

The substantial presence test only determines whether form 1040 or 1040NR is filed.

jmood

Arrrgh! Thanks!
No, that doesn't answer their situation still.

First of all, obviously they want to twist this any way possible so as to avoid the tax. And the rest: They've already been married several years but were living together outside the US. The husband did declare his wife (as in that he is married) on his past years US tax forms.
They do intend to live here but that is a grey area as well. They just recently came over, the husband got a job, but she did not. She has a very long standing semi-government job, and she took a 6 month leave of absence. Depending on how things go, at the end of 6 months she may go back and continue living overseas or go back, resign from her job, settle her affairs and then come back to live for good in the US.

So coming back to the question of taxation if she sells her house outside the US and brings the money here....

Does this means perhaps she should postpone applying for a GC untill she does that?

nun

What visa is she in the US on?

I'd return to the UK, sell the house, and start the GC application

jmood

She's here on a tourist visa. Please let's not talk about pure immigration issues though.

So if she returns to the UK, sells, transfer the money here, and THEN applies for the GC, there would be no US tax implication?

Michael

As long as he file married filing separately, that shouldn't cause any problems. However if he filed married filing jointly, she is probably already liable for worldwide taxation.

However there are too many if's so I suggest that she talk to a tax accountant.

penguinsix

Let's deal with the easy bit. Brining scads of cash to the USA or a wire transfer to a USA bank does not, in itself, create a taxable event. There is no tax liability simply on transferring money.

However, amounts over $10,000 in cash have to be declared at the border for money laundering purposes, and banks may also report large transactions that are "out of character" for an account as part of their requirements for anti-money laundering. Some consider these reports as possible 'red flags' that may result in a secondary review of your tax filing to make sure the actual taxable event, the sale of a house, lottery winnings, etc is reported properly. But how often that's done is anyones guess.

Now, as for the other matter. Is she here on a true tourist visa, the B-2, or just a Visa Waiver (90 days at the airport)? Just curious and not sure if it makes a big difference on taxes but it might.

This is an interesting case where a person entered on a B2 and then entered again on a Green Card. They had a tough time trying to determine when residency truly started.

Tax Stringer

This is the IRS primer but it's a bit complicated.

Residency Starting and Ending Dates

jmood

Thank you. I think this clarifies things the most.

To simplify then, if she applies for a GC outside of the USA, for tax purposes her resident status will consider started when she enters the US after the grant of the GC.
If she applies for the GC while in the US but does not meet the substantial presence test, she is considered resident on the day her GC gets approved.

So, presuming the above is correct and presuming these are the only 2 GC scenarios which will apply to her (these are not what if's, these are the 2 options she may be in) then the question is:

If she sells her house and makes a bank transfer to her own US bank account before she becomes a US resident and a US GC holder, are there any US taxes to pay? For the sake of this question, assume that she will be able to open a US bank account w/o having a US social security number.


p.s. She's presently here on a tourist visa as per my earlier posts and intends to go back within 6 months. She hasn't yet decided when to apply for the GC.

Noorah101

It's impossible to apply for a green card from outside the USA. If she is outside the USA, she would apply for an immigrant visa.

One important question didn't get answered: does the USC spouse file his taxes "married filing jointly" or "married filing separately"? That will make a difference.

Rene