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Selling UK house

Selling UK house

Old May 11th 2020, 6:44 pm
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Default Selling UK house

Hi All,

I bought my house in London in 2010 for 440K GBP and I moved to the USA in 2015.

I am aware of the effects of the forex gains :-(

In terms of US CGT, will that be based on the value on the purchase date in 2010 (when I lived in the UK) or 2015 (when I moved to the USA please)?
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Old May 11th 2020, 6:56 pm
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Default Re: Selling UK house

The date of purchase is the date that is used in US CGT calculations, for both the gain on the home and the FX gain/ loss on the repayment of the loan.
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Old May 11th 2020, 10:35 pm
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Default Re: Selling UK house

Originally Posted by Pulaski View Post
The date of purchase is the date that is used in US CGT calculations, for both the gain on the home and the FX gain/ loss on the repayment of the loan.
Not the answer I especially wanted but thankyou Pulaski.
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Old May 12th 2020, 4:21 am
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Default Re: Selling UK house

Originally Posted by capin View Post
Not the answer I especially wanted but thankyou Pulaski.
You're welcome ...... but that is why I always recommend that anyone coming to live in the US from the UK, sells their home in the UK before they become subject to US taxes (or at very least while they still have the allowance for a gain on your home) unless either [1] they are 100% certain that they will return to the UK,. or [2] they are equally certain that they will never sell the home and will be leaving it in their will.
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Old May 25th 2020, 1:02 am
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Default Re: Selling UK house

Originally Posted by Pulaski View Post
You're welcome ...... but that is why I always recommend that anyone coming to live in the US from the UK, sells their home in the UK before they become subject to US taxes (or at very least while they still have the allowance for a gain on your home) unless either [1] they are 100% certain that they will return to the UK,. or [2] they are equally certain that they will never sell the home and will be leaving it in their will.
if moving on a K1 visa how soon will I be subject to US taxes. Still waiting for my case to reach London embassy after getting case number. But I own a house with my mum who does not want to sell or move and house is in my name and will have to continue paying mortgage when she gets a lodger. Hoping to sell it eventually though but the deposit was paid by my mum and we have a deed of trust so not sure how that will work with regards to taxes either.
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Old May 27th 2020, 2:51 am
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Default Re: Selling UK house

Originally Posted by nikkif99uk View Post
if moving on a K1 visa how soon will I be subject to US taxes. Still waiting for my case to reach London embassy after getting case number. But I own a house with my mum who does not want to sell or move and house is in my name and will have to continue paying mortgage when she gets a lodger. Hoping to sell it eventually though but the deposit was paid by my mum and we have a deed of trust so not sure how that will work with regards to taxes either.
On a K1 you have a few options for when your tax residency begins:
  1. Declare yourself as a tax resident for the entire year in which you marry
  2. Become a tax resident after you've been in the USA for 183 days (substantial presence test)
  3. When you become a permanent resident (green card test)
I would get it all squared away before you move. Can your mom go ahead and buy the house from you?
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Old May 27th 2020, 12:39 pm
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Default Re: Selling UK house

Originally Posted by tom169 View Post
On a K1 you have a few options for when your tax residency begins:
  1. Declare yourself as a tax resident for the entire year in which you marry
  2. Become a tax resident after you've been in the USA for 183 days (substantial presence test)
  3. When you become a permanent resident (green card test)
I would get it all squared away before you move. Can your mom go ahead and buy the house from you?
my mum has no savings everything is invested in the deposit and doesn’t qualify for a mortgage and usually only works 8 hours a week but nothing right now as socially isolating but not furloughed as only a newsagents and her choice to not work. So either sell which she doesn’t want to and with current climate not sure it’s a good time to sell or her bf move in and covers the mortgage
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Old Nov 14th 2020, 8:14 pm
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Default Re: Selling UK house

Dredging up an old thread but.....

Does anyone know on what basis the IRS (or I) calculate the forex rates on certain days or months please?

Thanks,
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Old Nov 14th 2020, 10:19 pm
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Default Re: Selling UK house

This is a good start: https://www.irs.gov/individuals/inte...exchange-rates
That page has 2014 to 2019 yearly averages, and links to other pages that go back further.

That page also says "In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item."
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Old Nov 14th 2020, 10:31 pm
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Default Re: Selling UK house

Originally Posted by OldJuddian View Post
This is a good start: https://www.irs.gov/individuals/inte...exchange-rates
That page has 2014 to 2019 yearly averages, and links to other pages that go back further.

That page also says "In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item."
Thankyou, I did have a look at that.

edit - Understand that UK CGT will come into this too but I think I can claim this as a credit against USA CGT
If I decide to sell, I will take professional advice.

Have I got my rough calculations correct here please?

Lets say I bought a house in 2010 for 400K GBP with a 200K GBP mortgage and the exchange rate was 1.5 dollars to the pound.

I moved to USA in 2015 and after getting my GC I decide to sell the house in 2020. The house is now worth 600K GBP and the mortgage is still 200K GBP but the GBP is now only worth 1.3GBP.

Can I calculate the gain (without deducting costs for this example) as -

(600,000 * 1.3) - (400,000 * 1.5) = $180,000

and the forex when I redeem the mortgage as

(200,000 * 1.5) - (200,000 * 1.3) = $40,000

The gain on property value to be CGT ~ 15% and the forex as ordinary income ~ 30%

= $27000 + $12000 = $39000

Have I goit that right roughly please? Is that how it works?

Thanks,

Last edited by capin; Nov 14th 2020 at 10:36 pm.
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Old Nov 15th 2020, 1:51 pm
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Default Re: Selling UK house

XE.com has historical exchange dates rather than IRS yearly averages.

https://www.xe.com/currencytables/

XE.com is listed by the IRS as an acceptable source of exchange rates.

https://www.irs.gov/individuals/inte...exchange-rates

Currency Exchange Rates

An exchange rate is the rate at which one currency may be converted into another, also called rate of exchange of foreign exchange rate or currency exchange rate. Below are government and external resources that provide currency exchange rates.

Note: The exchange rates referenced on this page do not apply when making payments of U.S. taxes to the IRS. If the IRS receives U.S. tax payments in a foreign currency, the exchange rate used by the IRS to convert the foreign currency into U.S. dollars is based on the date the foreign currency is converted to U.S. dollars by the bank processing the payment, not the date the foreign currency payment is received by the IRS.

Governmental Resources

External Resources





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Old Nov 15th 2020, 4:32 pm
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Default Re: Selling UK house

If your total income from all sources exceeds $200,000/$250,000 single/married then you will also have to budget for the 3.8% for the ObamaCare Net tax. Don’t forget state tax as well.

Last edited by Glasgow Girl; Nov 15th 2020 at 5:00 pm.
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Old Nov 15th 2020, 5:16 pm
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Default Re: Selling UK house

Thanks all for the replies.

The real crux of the issue for me comes down to 2 points -

1. If the purchase price is converted to dollars using the value on the day the property was purchased and the sale price is converted using the dollar value on the day of sale. This would work out nice and help offset the gain through currency fluctuation on the mortgage.

2. If I can offset or claim on my US tax return the capital gains tax I pay on the house in the UK. (A note on this - I am going to get some advice on using the rebased method for CGT in the UK which means that I should only have to pay CGT on a modest gain since 2015. If I can do this then Sunak's mooted CGT rate rise may not affect me very much).



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