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Advice/Help on selling our UK Flat

Advice/Help on selling our UK Flat

Old May 12th 2017, 6:38 pm
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Default Advice/Help on selling our UK Flat

Hi, it would be great to get some advice from people here.

We've been in the USA since Nov 2016.
We bought our 2 bedroom flat in London in Feb 2015 and now looking to sell.
It's been rented out since Dec 2016. Their contract ends June 2017.

I've spoken to a few people who have different thoughts on what VAT, Capital Gains and anything else we might have to pay.

I've read that we will incur more Tax if you sell a place within 3 years of owning it as it's classed as a short term investment as opposed to long term. I don't know if that's the case.

Someone also said we shouldn't have to pay VAT because we are now in the US. Not sure if that's correct.

If I'm right, we shouldn't have to pay Capital Gains or any Tax on it in the US because we've been here under 3 years.

Any knowledge on all this would be much appreciated.

I think we'll look to make about 100k profit all being well and good. I don't know if we still have to pay Tax on this after Capital Gains, or if that covers it.

I obviously need to get expert advice on this, but would like to have more of an understanding first - ideally be good not to have to pay someone else too!

Thanks X100!
Dave
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Old May 12th 2017, 6:48 pm
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Default Re: Advice/Help on selling our UK Flat

If you're subject to US tax, and you almost certainly are then you will have to pay CGT because you didn't live in the flat for "two of the past five years".

UK CGT rules are more complex and you may have to pay CGT in the UK too, but anything paid in the UK can be set against your US liability for CGT. The UK allows exemption for period when you lived in the home, and periods when you were deemed to live in the home, which can include period when you are working overseas. So on balance I doubt you will have much if any CGT to pay in the UK.

You will also have a taxable gain from the US IRS's perspective on the payoff of the mortgage loan because of the fall in the value of the pound.

Last edited by Pulaski; May 12th 2017 at 6:56 pm.
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Old May 13th 2017, 3:19 pm
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Default Re: Advice/Help on selling our UK Flat

From a US perspective you will:
1. Need to recapture allowable depreciation (although given the time it has been rented this will be small)
2. Be able to claim any suspended passive activity losses (although given the time it has been rented these will be small)
3. Need to figure the gain or loss using spot exchange rates on purchase & sale
4. Need to figure what will be a significant gain on repaying the foreign currency mortgage
5. Need to decide if that gain is taxable at ordinary income rates or at capital gains rates
6. Need to decide if that gain can be treated as foreign source and the tax ameliorated at all by any unused excess foreign tax credits
7. Need to find out if and how these items are taxed in the State where you reside
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Old May 13th 2017, 3:21 pm
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Default Re: Advice/Help on selling our UK Flat

Originally Posted by Cook_County View Post
From a US perspective you will:
1. Need to recapture allowable depreciation (although given the time it has been rented this will be small)
2. Be able to claim any suspended passive activity losses (although given the time it has been rented these will be small)
3. Need to figure the gain or loss using spot exchange rates on purchase & sale
4. Need to figure what will be a significant gain on repaying the foreign currency mortgage
5. Need to decide if that gain is taxable at ordinary income rates or at capital gains rates
6. Need to decide if that gain can be treated as foreign source and the tax ameliorated at all by any unused excess foreign tax credits
7. Need to find out if and how these items are taxed in the State where you reside
Which is why out usual advice is "sell before you leave".
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