gbtbag

I have been a US citizens for 17 years. When I sell a house I co-own with my relative who lives in the UK, if estate tax is paid in the UK, will it be taxed again by the IRS?

Can I keep open a bank or building society account I have in the UK which has my family address as my official address even though I haven't lived there--the UK or my family home--for years?

md95065

As a US citizen you are taxed on your worldwide income but you should be able to claim a credit for any foreign tax that you have already paid on that income.

By the way, I assume that you really mean "capital gains tax", not "estate tax" (which is normally levied on the estate of a person who is deceaed)

In order to work out the amount of the capital gain you will need to calculate the adjusted basis value for your share of the property - I believe that the Inland Revenue and IRS rules for this are somewhat different so you may have to calculate this two ways - I am not sure. This will also be more complicated if you inherited the property rather than buying it. You also need to figure out the extent to which the gain is taxable - from your description it seems unlikely that you can claim this as your principal residence for either UK or US tax purposes but you should look into that carefully.

That really depends on the financial institution in question.

Don't forget that you need to file an FBAR disclosure if you have more than $10,000 in foreign accounts at any time during the year.

civilservant

I wondered this- if I had just won the Euromillions and was now worth £148 million, the IRS would presumably tax te hell out of me upon moving at the turn of the year.

md95065

Well, as long as you received the money before you became a US resident for tax purposes you would be OK ...
(at least as far as US taxes are concerned)

nun

You can get into some residency mis-understandings by using an address where you no longer live. You can keep a UK account open and use a foreign address, however, you cannot open a UK account with a foreign address. Make sure you understand how the IRS treats the account, ie an ISA is very different from a current account and that you comply with FBAR and FATCA laws.

nun

Given the lower US top rate of income tax any UK tax paid would probably be more than enough to cover the US tax liability.

Jerseygirl

For some reason I thought USC's could not enter lotteries outside the US.

md95065

I doubt that is the case (although almost anything is possible with the US government) but it was my impression that the person who asked that question (civilservant) isn't even a US resident yet never mind a citizen.

gbtbag

Actually I did mean estate tax. If my one remaining parent dies and leaves thing equally divided among two kids, one of whom lives in the UK, the other in the USA, what is the tax situation for the US resident?

Would it be better for the parent to sell the house to the kids before dying? I know there was a 7-year rule that if assets were passed onto the kids and the parents die after 7 years, capital gains tax (I think) didn't have to be paid.

Basically what I am asking is if I am left 50% of my parent's estate, where will I have to pay tax in both the US and UK? If so, what steps can be taken when the parent is still alive to avoid that?

Thanx for your answers, everyone. My knowledge of the intricacies of UK and US tax laws is pretty limited.

civilservant

Im not a USC, even if that were the case

nun

You don't pay any tax in the UK or the US. Your parent's estate might have to pay UK tax if the value of the estate is large enough, but there will be no US tax liability. If you are a US resident or citizen and you inherit over $100k you have to file a 3520 for informational purposes though.

md95065

... and if you subsequently sell the house then you will be liable to capital gains tax on any gain in the value of the property since the time that you inherited it ...

Poppy girl

Bit off topic but relevant, I have just inherited a few quid and a house, US Citizen, moving back to the US (I think) why, do I have to tell Uncle Sam about my accounts and inheritance in the UK.....I was going to sell the house and invest in an off shore account!!...........

nun

You only have to inform the IRS about foreign inheritances over $100k. Of course you have to keep the IRS informed about foreign accounts over $10k under FBAR regs and comply with FATCA which requires reporting of foreign investments but with higher initial limits. The reason you have to do this is because you are a US citizen and if you don't you are liable to severe fines. If you don't like it write to your congressman/woman.

celticgrid

Technically correct, but in practical terms not so. It is possible to open a Sterling account at an institution that is essentially part of the UK banking system, using branches in Jersey, Guernsey, Isle of Man. These banks, including the offshore branches of the main UK banks, will open an account with a foreign address. Those accounts have every attribute of UK accounts - except local limits of recompense in case of bank failure.

I mention this for clarification as the need, when people ask, is usually expressed as a "UK account" but what they usually mean is a Sterling account with chequebook, plastic, etc.