davenay67

Background:

I am a UK citizen who has lived in the US for 15+ yrs now, as a permanent resdient on a Green Card. I currently live in the state of IL.

I owned a house in the UK, which I rented when I first moved over the the US, and subsequently sold. The profits from the house where deposited into my UK bank (savings account). The savings rate at the time was very poor (still is), so my Mum (who has power of attorney over my bank details) took the money and deposited it into a fund with Axa....now Friend Life. For some reason (not exactly sure why), she deposited an equal amount in the same fund.


Situation:

I am preparing to leave my current house and will be moving into rented accomodation for at least a year. I would like to purchase another home in a year or two from now, and my portion of the funds in the FL fund would come in very useful as a down-payment.

My Mum established the fund under her name, so the funds would be deposited into her bank account initially.


Question(s):

What is the best way to get my portion of the money over here in my US bank account..??

Should she put money into my UK account, and then I will transfer from my UK account to my US account..??

Or would it be better if she transferred funds from her UK account to my US account..?? Could a 'gift' help avoid any questions from IRS about taxes..??


Would would you all do in my situation..??

Thanks..!!

Dave.

Bob

direct to xe.com would be the easiest to get the money to you...

And you should have been filing FBAR anyway.

davenay67

I didn't even know what FBAR was until joining BE a short while ago. Ignorance is no excuse, but I did kinda forget about the whole policy that was established with house proceeds, and it wasn't until I went back for my Dad's funeral a couple of months ago that my Mum reminded me about the money.

I guess you could technically argue that I 'gifted' her the money by letting her set up the policy entirely in her name.

And the "direct to xe.com" confuses me a little. When I set up an account, can I set it up as US resident transferring my UK bank money to my US bank money..?? In other words, what country should I use when I register in step 1..??

ian-mstm

Yah... but that'd be a lie, right? The US Treasury Department doesn't have a sense of humor!

Ian

davenay67

Working on the principal that ignorance is not a form of defense, then a court would probably find fault with me.

Bottom line is I am where I am....can't change the past. I need to figure out what is the cheapest / simplest way to get my half of the funds in a legal fashion.

In any case, wouldn't I have been taxed by the Inland Revenue on the proceeds from the sale of the house..?? The money has already been taxed, so no need for Uncle Sam to double-dip..??

Noorah101

Right...you probably don't have to pay tax twice, but it was supposed to have been reported on your US tax return.

Rene

Giantaxe

If the title of the account is in the mother's name alone it wouldn't have been a lie - the money belongs to the mother. In terms of reporting, an FBAR should have been filed for the time when the money was in the OP's bank account and if and when it's there again prior to being moved to the US (assuming it's over the threshold for reporting). Ditto now for FATCA.

Jerseygirl

The OP gave the money to his mum to invest in her name...then she gives it back...one way or another gift tax is probably owed to HMRC on the amount in question.

JAJ

A whole variety of issues here, including:

1. When the house was sold, there may (or may not) have been a U.S. capital gain, as that would be calculated in U.S. dollars. Tax payable in the United Kingdom might offset some, but not all of it.

2. If he was outside the U.K. for 5 years there may not have been any British capital gains tax due anyway. So - how long ago was the house sold?

3. Since then, has interest and other income from the investments been reported on U.S. tax returns? There may be a credit for U.K. tax paid but still could be some extra U.S. federal and state tax. Same goes for rental profit before the house was sold.

4. What exactly the nature of the transactions with his mother are: gift, loan, acting as agent, etc. Depending on the answers there may be U.S. and/or U.K. tax implications.

5. FBAR reporting (and FATCA for 2011 fiscal years) - all these are relevant, however the first step should be to determine if U.S. tax has been underpaid. If no, then it's probably open to file these forms backdated. If yes, then there's a more significant issue involved. The IRS is looking at a new initiative for non-resident U.S. taxpayers who have unpaid tax less than $1,500 per year. It's not clear if it includes U.S. residents but obviously, if outstanding tax is due it needs to be paid and either through filing amended tax returns and/or a form of disclosure to the IRS.

I would counsel the original poster not to share too many specifics on an open forum and secondly to seek a competent CPA to work out the extent of underpaid U.S. tax. After that discuss with CPA and/or attorney the best option to settle the issue with the IRS.

Giantaxe

If the party in question dies within 7 years of the gift, I believe. And of course that applies to the gifting in both directions. I agree with JAJ that some competent professional advice is needed here.

Jerseygirl

I agree...that's why I raised the question of gift tax. Normally you can't move significant amounts of money around in the UK from person to person without incurring gift tax.

nun

It sounds like the OP's mum was acting as an agent and the IRS will look back to the source of the money to determine it's ownership. Also as there was no gift tax paid and the intent was obviously not to gift the money I think the OP is on the hook for any tax.

The "Axa Fund" also worries me as it sounds as if it might be a PFIC and if the OP hasn't been filing the appropriate forms and paying the tax due on any gains there could be nasty IRS fine and tax bill.

I'd encourage the OP to contact a dual qualified tax professional and get this sorted out asap.

nun

You are a non-UK resident for tax purposes, so when is the tax withheld and paid when you get rent or sell a house in the UK. For the rent I assume you did a UK self assessment form and paid the UK tax and took a tax credit on your US taxes when you entered the rent on them. As the house was not your main residence then capital gains tax is payable and you should have filed a UK self assessment to declare any capital gain?

davenay67

Thanks for all the inputs, folks. This situation is more complicated than I originally imagined, so I will take the underlying advice and speak to the CPA we use for our (US) taxes.

The house was sold within 2 years of moving over here and all taxes were paid to the Inland Revenue at the time.

Thanks..!!

Jerseygirl

IMO you need to make sure you consult with an accountant who has experience in UK/US taxes.