1031 Exchange on UK property
Hi All
Trying to get some decent answers on 1031 exchange for UK-UK property - US tax resident since 2010 and GC since 2014 , likely getting citizenship given already within period of being a 'covered expat' per IRS - bought home in 2005 for approx 220K, current value around 500K - thinking about selling in the UK and doing a part exchange - property has been rented since 2008 - mortgage on property for approx 200K interest only for last 10 years my assumptions - won't pay any capital gains in the UK as I am a non-resident - and the value of the property has decreased since 2015 when capital gains started to be calculated for non-residents. - won't pay anything to IRS as doing a part exchange other idea is we potentially move to the UK for a year or two once we get US citizenship and nominate the above as our primary residence and use the $500K waiver filing jointly to not pay Capital gains to the US but not sure on this one Queries - is the above correct? Or does the fact we have rented out the property trigger something else in the UK/ HMRC? - does having a mortgage impact the part exchange, as I know if we sold it the mortgage is an issue in so much the exchange rate has moved fairly significantly in the last 10 years and the US/ IRS treat this as a taxable gain. Anything else? And I guess who is an expert in these areas should we proceed as my calls to a few UK lawyers suggests I have more understadning than they. |
Re: 1031 Exchange on UK property
Is the first line a typo, are you doing the 1031 for another investment property in the UK of equal or greater value or did you mean in the US? If you plan is to buy in the US and convert it to use as your primary residence I recall there is a 5 year hold period. I would get a RE Attorny to look at this give the possible sums involved.
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Re: 1031 Exchange on UK property
correct UK-UK equal or greater value , home is central and likely getting something further out , you cannot do a UK-US exchange as that is not a like kind exchange .
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Re: 1031 Exchange on UK property
Originally Posted by ajlondon
(Post 12888466)
.... my assumptions
- won't pay any capital gains in the UK as I am a non-resident ... "You have to pay tax on gains you make on property and land in the UK even if you’re non-resident for tax purposes" |
Re: 1031 Exchange on UK property
can you show me where this is wrong? As per HMRC (I can't post links it seems) though copied some of the relevant info below. I am using the market value as of 2015 and there has been zero gain since 2015 (it has actually declined)
Calculate your gain or loss for UK residential propertyThere are 3 ways to calculate your gain or loss:
Rebasing from 2015For disposals of UK residential properties by non-residents where you owned the property before 6 April 2015 the standard approach for calculating the gain is to use the market value at 5 April 2015.
Example of the rebasing method for residential propertiesRebasing computation – gain from 5 April 2015 to disposal:
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Re: 1031 Exchange on UK property
Originally Posted by ajlondon
(Post 12888688)
can you show me where this is wrong? As per HMRC (I can't post links it seems) though copied some of the relevant info below. I am using the market value as of 2015 and there has been zero gain since 2015 (it has actually declined)
Calculate your gain or loss for UK residential propertyThere are 3 ways to calculate your gain or loss:
Rebasing from 2015For disposals of UK residential properties by non-residents where you owned the property before 6 April 2015 the standard approach for calculating the gain is to use the market value at 5 April 2015.
Example of the rebasing method for residential propertiesRebasing computation – gain from 5 April 2015 to disposal:
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Re: 1031 Exchange on UK property
when I put the first post together I had the link , but wouldn't post and i felt enough context with dates would have helped given the 2015 date is crucial in this calculation;
thus you concur I won't pay ? thankyou. This is the link as i have now past 5 posts https://www.gov.uk/guidance/capital-...e-gain-or-loss |
Re: 1031 Exchange on UK property
Originally Posted by ajlondon
(Post 12888698)
..... thus you concur I won't pay ? thankyou. ....
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Re: 1031 Exchange on UK property
Originally Posted by ajlondon
(Post 12888466)
other idea is we potentially move to the UK for a year or two once we get US citizenship and nominate the above as our primary residence and use the $500K waiver filing jointly to not pay Capital gains to the US but not sure on this one
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Re: 1031 Exchange on UK property
in case anyone needs to follow up the answer is yes provided you are non-resident CGT can be avoided in the UK https://www.gov.uk/guidance/capital-...e-gain-or-loss just use this calculator to get the answer ,generally you can rebase the property value to 2015. Then you need to assess if your country of residence would tax you or in the case of the USA you can use 1031 exchange to defer the gain
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