Yorkieabroad

Very true, but at that time there is a "transaction" taking place, or at least a transfer of ownership, and a proper valuation is likely to be done. I know when my grandmother died, a surveyor and valuer was appointed to value her property for the estate...are we really going to have to go that route on change of residency, or "new tax day" in order to be able to justify our self assessments of the value of a property that is not changing hands?

JAJ

Australia and Canada assume that, in general, when someone becomes tax resident they sell and repurchase all of their assets at that point.

Usually that benefits the new resident, who gets a free pass on capital gains (at least as far as new country is concerned) up to that point. Obviously, it can also lead to disadvantage since any accumulated losses cannot be used. As inferred earlier, valuation of property at that point is self assessed and it's up to the individual to keep records that will document value, if audited by the tax authorities.

Note that a person planning to become resident in the U.S. may consider selling and repurchasing assets before becoming tax resident. However, this can trigger capital gains in existing country of residence, and if planning to file married/joint in the U.S. then may need to be completed in the prior calendar year. However, it is a clear tax planning strategy that prospective U.S. residents may wish to consider.

Yorkieabroad

Bought in 2007 - value 90
Move to us in 2011 -value 50
Sell now -value 65-70

So if value at original purchase taken, it's a loss of 20-25.
If value at immigration, it's a gain of 15-20.

JAJ

This is where the U.S. tax rule (to take the original purchase price) can work to someone's advantage, subject to confirmation with a competent tax CPA to ensure there's no special rule to stop the loss being claimed.

In fact, the loss may be greater when translated to USD, if these figures are quoted in British pounds.

Yorkieabroad

Works fine on a rising market....bit of a crapshoot on a fluctuating market...

Yorkieabroad

Yes, as long as there is a provision to take either/or, it should work. If it is a fixed valuation at time of event (immigration, new law etc), then that's when problems potentially arise.

JAJ

Not clear what's meant by this. There's no "either/or" option.
In the U.S., you generally take original purchase cost.
In Australia/Canada, you generally take value at time of becoming tax resident.

Generally => there may be exceptions, but the exceptions themselves are normally mandatory where they apply.

Yorkieabroad

I thought that was what you were referring to in post #25.
In any event, if not, then IF the new UK law is implemented with value at date of implementation, then my comment ref "either/or" stands - I don't see how it can be implemented fairly otherwise.

JAJ

The new U.K. law will make absolutely no difference to the U.S. capital gains calculation. Except that any U.K. tax generated by the transaction may be allowed as a foreign tax credit. Usually the U.K. tax will be relatively limited, due to private residence relief (for period of occupancy + up to 3 years) and letting relief (for much of the remainder), plus the personal allowance.

Yorkieabroad

I know, but the original "date of valuation" discussion came up on the back of a comment about valuations being taken at the date of implementation of the new UK tax, and then somehow morphed into the US immigration chat.

JAJ

If the new U.K. law is introduced it is probable that the tax would apply based upon the original purchase cost (or value as of March 31, 1982, if acquired earlier), as opposed to the valuation as of the date of new legislation taking effect. However nothing is certain until the actual legislation goes through.

Yorkieabroad

Having come full circle to my post #10, I am declaring "now" a good time to go to bed