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House Sale and Tax Issues

House Sale and Tax Issues

Old Feb 22nd 2018, 6:31 pm
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Default House Sale and Tax Issues

We should complete on our house sale this month and have now been living here since Jan.

We bought the house in Oct 16 and will have sold it for £20k more than we bought it. Factoring in early settlement of the mortgage, stamp duty etc it hasnt been a money making exercise.

My wife is a USC and I understand there maybe exchange issues at play.

When we bought the house the exchange was at 1.22 and now its close to 1.4.

Will will owe the IRS any money ?

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Old Feb 22nd 2018, 6:58 pm
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Default Re: House Sale and Tax Issues

Providing it was your primary residence then I don't believe that you will owe any CGT on it in the US just as you wouldn't in the UK.

You also won't have any foreign mortgage gain either because the exchange rate is higher now than when you bought it.

Unless I've missed something, I don't think you'll owe anything to the IRS.
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Old Feb 22nd 2018, 7:01 pm
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Default Re: House Sale and Tax Issues

It sounds like you didn't own and live in it for 24 months, so yes, in principle CGT will be assessed by the US because the exemption for gains on your home won't apply to you.

Was there a mortgage on it? If so, you will also need to calculate if there was a gain on the repayment of the mortgage, which will mean looking at the dollar value of the mortgage amount repaid on selling the house, and calculating the dollar value of the same number of pounds when you took out the mortgage.

In calculating the overall gain, yes there will be a foreign exchange aspect to the calculation. You will also deduct the cost of sales, including estate agent fees and legal costs, so that may wipe out most of the gain based on the gross sale proceeds.

Last edited by Pulaski; Feb 22nd 2018 at 7:04 pm.
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Old Feb 22nd 2018, 8:29 pm
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Default Re: House Sale and Tax Issues

Originally Posted by Pulaski View Post
It sounds like you didn't own and live in it for 24 months, so yes, in principle CGT will be assessed by the US because the exemption for gains on your home won't apply to you.

Was there a mortgage on it? If so, you will also need to calculate if there was a gain on the repayment of the mortgage, which will mean looking at the dollar value of the mortgage amount repaid on selling the house, and calculating the dollar value of the same number of pounds when you took out the mortgage.

In calculating the overall gain, yes there will be a foreign exchange aspect to the calculation. You will also deduct the cost of sales, including estate agent fees and legal costs, so that may wipe out most of the gain based on the gross sale proceeds.

So if the dollar value of the mortgage when taken out was $502k and on disposal its $547k i am taking this as a loss. Plus about $5k in costs selling and stamp duty of about $15k when buying.


The property appreciated by $25k
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Old Feb 22nd 2018, 8:46 pm
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Default Re: House Sale and Tax Issues

Originally Posted by Chins View Post
So if the dollar value of the mortgage when taken out was $502k and on disposal its $547k i am taking this as a loss. Plus about $5k in costs selling and stamp duty of about $15k when buying.


The property appreciated by $25k
So the amount you paid off in £££ on the date you sold was worth $502k on the day you bought the house? ..... So yes, it looks like you made a dollar loss on the deal, primarily because of the appreciation of sterling increasing the dollar value of the loan.

We have seen a number of people here on BE stung because of the collapse of sterling after the Brexit vote, but I think you are the first one we've seen who has created a loss on the loan by borrowing deflated sterling and repaying after sterling recovered, so congratulations!
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Old Feb 22nd 2018, 8:48 pm
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Default Re: House Sale and Tax Issues

Originally Posted by Pulaski View Post
So the amount you paid off in £££ on the date you sold was worth $502k on the day you bought the house? ..... So yes, it looks like you made a dollar loss on the deal, primarily because of the appreciation of sterling increasing the dollar value of the loan.

We have seen a number of people here on BE stung because of the collapse of sterling after the Brexit vote, but I think you are the first one we've seen who has created a loss on the loan by borrowing deflated sterling and repaying after sterling recovered, so congratulations!
Unfortunately that loss isn't deductible against your earnings.

The foreign mortgage gain tax is a bit of a one-way street it seems.
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Old Feb 22nd 2018, 9:26 pm
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Default Re: House Sale and Tax Issues

Originally Posted by jammiie View Post
Unfortunately that loss isn't deductible against your earnings. ....
Against earnings, no, but AFAIK it nets against the capital gain on the home. Doesn't it?
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Old Feb 23rd 2018, 9:08 am
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Default Re: House Sale and Tax Issues

Originally Posted by Pulaski View Post
Against earnings, no, but AFAIK it nets against the capital gain on the home. Doesn't it?
No, the mortgage loss is a one way street provided the OP is neither an entity nor a QBU. Under these circumstances, the Section 988 loss cannot be used as an offset against anything. As has been mentioned, the exchange rate variance will affect the capital gains on the actual sale of the property (an increase in profits).
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Old Feb 23rd 2018, 1:37 pm
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Default Re: House Sale and Tax Issues

Originally Posted by theOAP View Post
No, the mortgage loss is a one way street provided the OP is neither an entity nor a QBU. Under these circumstances, the Section 988 loss cannot be used as an offset against anything. As has been mentioned, the exchange rate variance will affect the capital gains on the actual sale of the property (an increase in profits).
Or a loss in my case i hope

My next challenge will be where to invest the money I do get back until/if we buy a house here. Also when to move the money - sod knows what the exchange rate will do!
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