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Selling my flat

Selling my flat

Old Oct 5th 2006, 6:37 pm
  #1  
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Question Selling my flat

I came over to the US last October and since then I have married the lovely American who was the reason for my initial move!

And to cut a long story short (!!??) I have been granted my Green Card.


My question now is regarding a flat I still own in the UK. I have not been living there for over a year now and am renting it out. According to advice I sought over there, because the flat was my primary (and only!) residence, I have 3 years before I would be subject to CGT on any profits on the sale of it. Does anyone know what my tax liability would be over here? And would my Residency period count from the day I was approved for the Green Card or from the time I married my husband (which was whilst I was here on the VWP?)

If anyone has been in the same situation it would be great to hear from you!

Thanks
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Old Oct 5th 2006, 7:03 pm
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Default Re: Selling my flat

Originally Posted by Sazzybnewyork
I came over to the US last October and since then I have married the lovely American who was the reason for my initial move!

And to cut a long story short (!!??) I have been granted my Green Card.


My question now is regarding a flat I still own in the UK. I have not been living there for over a year now and am renting it out. According to advice I sought over there, because the flat was my primary (and only!) residence, I have 3 years before I would be subject to CGT on any profits on the sale of it. Does anyone know what my tax liability would be over here? And would my Residency period count from the day I was approved for the Green Card or from the time I married my husband (which was whilst I was here on the VWP?)

If anyone has been in the same situation it would be great to hear from you!

Thanks
There have been a few threads on this.

1. cos u rented it out, there is some kind of allowance. (rental relief??)
2. the CGT involves tapered relief....ie it's not automatically x% or ALL the CG.
3. yes, after three yrs of non-occupancy for CGT.
4. remember, holding on to a property may or may not be advantageous in your situation. (ie holding onto it for longer in hope of a rise, rather than selling it now for what it's worth etc.) It depends on what u might want to do with the funds
5. now that u are married, for UK purposes, only one home can be your prime home. (ie if both u and ur hubby each own a home, only one can be classified as being your primary residence.)
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Old Oct 8th 2006, 2:09 am
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Default Re: Selling my flat

Sale of your primary residence is tax exempt up to $250,000 of gain (sales price less (cost + allowable expenses)) if you lived in it for two of the last five years. .... So effectively Uncle Sam is also giving you three years to sell it.

There are complex rules about making it allowable for your husband too, but if it is worth it (if the gain is over $250,000) then you will need to find a knowledgable tax accountant to work out if it ispossible for you to do.
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Old Oct 8th 2006, 5:59 am
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Default Re: Selling my flat

Originally Posted by Pulaski
Sale of your primary residence is tax exempt up to $250,000 of gain (sales price less (cost + allowable expenses)) if you lived in it for two of the last five years. .... So effectively Uncle Sam is also giving you three years to sell it.

There are complex rules about making it allowable for your husband too, but if it is worth it (if the gain is over $250,000) then you will need to find a knowledgable tax accountant to work out if it ispossible for you to do.
Ah, yes, the US standpoint. Ooops forgot about that....I was just concentrating on things from the UK end.
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Old Oct 8th 2006, 2:05 pm
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Default Re: Selling my flat

Originally Posted by Sazzybnewyork
I came over to the US last October and since then I have married the lovely American who was the reason for my initial move!

And to cut a long story short (!!??) I have been granted my Green Card.


My question now is regarding a flat I still own in the UK. I have not been living there for over a year now and am renting it out. According to advice I sought over there, because the flat was my primary (and only!) residence, I have 3 years before I would be subject to CGT on any profits on the sale of it. Does anyone know what my tax liability would be over here? And would my Residency period count from the day I was approved for the Green Card or from the time I married my husband (which was whilst I was here on the VWP?)

If anyone has been in the same situation it would be great to hear from you!

Thanks
I sold a house in the UK a few years ago, I deposited the money into a UK bank account, then transferred it to my account in the USA, I was new to the USA and didn't declare anything (I wouldn't advise you to do this), by the time I realized what I had done it was too late, my taxes were already filed, that was 4 years ago and I have never heard a peep from anyone.

If you are ever audited by the IRS they can only go back 3 years, unless they find that you have understated any tax return by 25%, then they can go back another 3, no matter what happens they can't audit any further back than 6 years (so my accountant tells me).

So if you do decide to wing it, make sure you are squeaky clean on every tax return you file for the following 3 years.
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Old Oct 8th 2006, 2:18 pm
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Default Re: Selling my flat

Originally Posted by Pulaski
Sale of your primary residence is tax exempt up to $250,000 of gain (sales price less (cost + allowable expenses)) if you lived in it for two of the last five years. .... So effectively Uncle Sam is also giving you three years to sell it.

There are complex rules about making it allowable for your husband too, but if it is worth it (if the gain is over $250,000) then you will need to find a knowledgable tax accountant to work out if it ispossible for you to do.
It's $250,000 per named owner, so if there are 2 names on the property deed (say husband and wife), and the same 2 people are filing joint tax returns, then you can claim $500,000. If they are not filing joint tax returns, the money must be split 50/50 then they can file individually for the $250,000.

This is only true if the house is your primary residence, if the house is an investment property then forget any exemptions.

What you can do is file what's called a "1031 exchange", you must employ someone to handle this, it's usually a lawyer but doesn't have to be. When you transfer the money you transfer it to the lawyer, he will hold it for 90 days. If you buy another house out here within 90 days and have the lawyer handle the transaction, you will pay nothing in the way of anything, other than the lawyers fees and closing costs. If you don't re-invest the money into another property within 90 days the money will be given back to you and you will be taxed.

Because profits from the sale of a house is classed as income, you can be taxed, if you never see the money (because the lawyer has it in escrow), you have not received any income, thus you cant be taxed. It's merely a means of giving you 90 days to move the money from one place to another without getting slapped with a tax bill.

http://www.realtor.org/libweb.nsf/pages/fg408#topica

EDIT.... Here is a better link.

http://www.realtyexchangers.com/

Last edited by Rodney you plonker; Oct 8th 2006 at 2:21 pm.
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Old Oct 8th 2006, 6:26 pm
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Default Re: Selling my flat

Originally Posted by Rodney you plonker
....
What you can do is file what's called a "1031 exchange", you must employ someone to handle this, it's usually a lawyer but doesn't have to be. When you transfer the money you transfer it to the lawyer, he will hold it for 90 days. If you buy another house out here within 90 days and have the lawyer handle the transaction, you will pay nothing in the way of anything, other than the lawyers fees and closing costs. If you don't re-invest the money into another property within 90 days the money will be given back to you and you will be taxed....

http://www.realtyexchangers.com/
good point. not correcting or anything...just want to add to 1031 xchgs... 90 days to identify at least 3 replacement (investment) properties from the date of closing/settlement of the original subject (investment) property (and contract for one of them) and 180 days to close on the replacement property (again from the date of closing on the original subject property). Also, the replacement (investment) property has to be equal or greater value than the original property. 1031s only defer the tax liability and are for investment properties...you can't intertwine 1031 proceeds with primary residences, you are then subject to capital gains etc.

Not to add complications but one may be able to do a reverse 1031 xchgs.

www.irs.gov have guidelines etc relating to 1031s.
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Old Oct 8th 2006, 10:24 pm
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Default Re: Selling my flat

Originally Posted by Rodney you plonker
It's $250,000 per named owner, so if there are 2 names on the property deed (say husband and wife), and the same 2 people are filing joint tax returns, then you can claim $500,000. If they are not filing joint tax returns, the money must be split 50/50 then they can file individually for the $250,000. ......
You are absolutely right - but I DID say that the tax allowance doubles if there are two named owners - and as the OP said " ..... I married the lovely American ....." it is a fair assumption that the flat bought several years ago was bought in the sole name of the OP, or at very least not jointly with the aforementioned American.
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Old Oct 8th 2006, 10:49 pm
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Default Re: Selling my flat

Originally Posted by Pulaski
You are absolutely right - but I DID say that the tax allowance doubles if there are two named owners - and as the OP said " ..... I married the lovely American ....." it is a fair assumption that the flat bought several years ago was bought in the sole name of the OP, or at very least not jointly with the aforementioned American.
okay........ I was merely adding to what you stated, I was just giving more info as I refuse to make assumptions if it can be avoided.

Sorry if I upset you.
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Old Oct 9th 2006, 12:08 am
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Default Re: Selling my flat

Thank you all very much for the useful advice, and yes the property is owned in my name only! And was my primary residence for 7 of the past 8 years.

The 1031 exchange may well be a solution for us.
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Old Oct 9th 2006, 2:56 am
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Default Re: Selling my flat

Originally Posted by Rodney you plonker
I sold a house in the UK a few years ago, I deposited the money into a UK bank account, then transferred it to my account in the USA, I was new to the USA and didn't declare anything
I doubt you are alone here, there's at least one more I know who did this
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Old Oct 9th 2006, 3:51 am
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Default Re: Selling my flat

Originally Posted by Pulaski
Sale of your primary residence is tax exempt up to $250,000 of gain (sales price less (cost + allowable expenses)) if you lived in it for two of the last five years. .... So effectively Uncle Sam is also giving you three years to sell it.

There are complex rules about making it allowable for your husband too, but if it is worth it (if the gain is over $250,000) then you will need to find a knowledgable tax accountant to work out if it ispossible for you to do.
Including or excluding any gain made before he became a US Tax payer.
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