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Does AIM share qualify to US Long-term Capital Gains?

Does AIM share qualify to US Long-term Capital Gains?

Old Oct 10th 2011, 11:35 am
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Default Does AIM share qualify to US Long-term Capital Gains?

Hi,
My wife being American, I would like to know if her potential profit on her ISA share would qualify for the US Long Term Capital Gain rate if they were held more than a year?

thank you.
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Old Oct 10th 2011, 1:24 pm
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Default Re: Does AIM share qualify to US Long-term Capital Gains?

Originally Posted by hisokajp View Post
Hi,
My wife being American, I would like to know if her potential profit on her ISA share would qualify for the US Long Term Capital Gain rate if they were held more than a year?

thank you.
The ISA is certainly taxable by the IRS. How it is taxed will depend on what sort of ISA she owns. From your mention of LTCG I assume it's a stocks and shares ISA. If it is invested in a UK unit trust (equivalent of US mutual fund) then it will be taxed under Passive Foreign Investment Company (PFIC) rules and you will need to file IRS form 8621.

http://www.taxesforexpats.com/expat-...IC-Regime.html
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Old Oct 10th 2011, 2:45 pm
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Default Re: Does AIM share qualify to US Long-term Capital Gains?

Originally Posted by nun View Post
The ISA is certainly taxable by the IRS. How it is taxed will depend on what sort of ISA she owns. From your mention of LTCG I assume it's a stocks and shares ISA. If it is invested in a UK unit trust (equivalent of US mutual fund) then it will be taxed under Passive Foreign Investment Company (PFIC) rules and you will need to file IRS form 8621.

http://www.taxesforexpats.com/expat-...IC-Regime.html
It is indeed a Share ISA with iii.co.uk, the funds are invested directly into individual AIM company shares, are they eligible as qualified shared for long term CGT rate in the US income declaration?
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Old Oct 10th 2011, 3:04 pm
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Default Re: Does AIM share qualify to US Long-term Capital Gains?

Originally Posted by hisokajp View Post
It is indeed a Share ISA with iii.co.uk, the funds are invested directly into individual AIM company shares, are they eligible as qualified shared for long term CGT rate in the US income declaration?
What are these "AIM company shares". There is a US based Mutual fund company called AIM, but I'd be surprised if it's the same .
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Old Oct 10th 2011, 3:16 pm
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Default Re: Does AIM share qualify to US Long-term Capital Gains?

Originally Posted by nun View Post
What are these "AIM company shares". There is a US based Mutual fund company called AIM, but I'd be surprised if it's the same .
OK I looked on iii.co.uk and I'm assuming the AIM you mean is "Alternative Investment Market". If you own an AIM fund it will be taxed under PFIC rules. As a general guide line it is a bad idea for US tax payers to invest in foreign based mutual funds because of the high tax rates and complications of PFIC regulations. If you own shares of individual companies traded on the AIM then there are no rules different from owning US shares. However, you have to make sure you have documentation to back up your cost basis, dividends, and the calculation of ST or LT capital gains. Also make sure you comply with FBAR is you have more than $10k in overseas accounts.

Last edited by nun; Oct 10th 2011 at 3:29 pm.
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Old Oct 10th 2011, 4:35 pm
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Default Re: Does AIM share qualify to US Long-term Capital Gains?

Originally Posted by nun View Post
OK I looked on iii.co.uk and I'm assuming the AIM you mean is "Alternative Investment Market". If you own an AIM fund it will be taxed under PFIC rules. As a general guide line it is a bad idea for US tax payers to invest in foreign based mutual funds because of the high tax rates and complications of PFIC regulations. If you own shares of individual companies traded on the AIM then there are no rules different from owning US shares. However, you have to make sure you have documentation to back up your cost basis, dividends, and the calculation of ST or LT capital gains. Also make sure you comply with FBAR is you have more than $10k in overseas accounts.
Thank you nun, it's a bit complicated since our UK broker does not give 1099 B. I was also not aware of the FBAR declaration... I am guessing the 10k limit would be reach if my wife had, for example, 5k in uk bank account as saving and 5k in AIM traded company?
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Old Oct 10th 2011, 6:31 pm
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Default Re: Does AIM share qualify to US Long-term Capital Gains?

Yes the $10k limit is the total of your foreign accounts.

Are your AIM shares in individually trade companies or in in a pooled investment like a unit trust as that will determine their US tax treatment.
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Old Oct 10th 2011, 7:02 pm
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Default Re: Does AIM share qualify to US Long-term Capital Gains?

Originally Posted by nun View Post
Yes the $10k limit is the total of your foreign accounts.

Are your AIM shares in individually trade companies or in in a pooled investment like a unit trust as that will determine their US tax treatment.
In a few individual trade companies only, no unit trust or the like
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Old Oct 10th 2011, 7:52 pm
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Default Re: Does AIM share qualify to US Long-term Capital Gains?

Originally Posted by hisokajp View Post
In a few individual trade companies only, no unit trust or the like
OK that's good as PFIC won't be an issue. Your stocks will be taxed just like US domestic stocks. The difficulty as you said is the documentation. You will need to get all the cost basis info ie when, how much and at what cost you bought shares and all the dividends and capital gains. You'll also have to factor in any UK tax you have already paid.
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