NicDC

I moved from Scotland to San Diego, USA in October 2006, where I am now a Resident Alien for US tax purposes. I rented out my Scottish house until Feb 2007 (also signed up for the non-resident landlord's scheme in the UK). The house in Scotland is now up for sale.

My question is - do I have to let any authorities in the US know, ie IRS, Customs etc once I sell the UK property and also that I will be transferring the funds to the US, to use as a downpayment for a US property, which is currently being built?

I have read that as the house proceeds, even though will be over $10,000, will be electronically transferred from my UK bank account, direct into my US bank account, I do not have to personally let CBP know, as it's not a personal monetary instrument. The US bank should inform the IRS for me.

But do I need to report this on next year's US tax return or anywhere else??

I am reporting any gain on the sale to the UK Tax Office by 5 October 2009, so that should cover the UK Capital Gains Tax/Income Tax side of things.

BritishGuy36

Can you be more clear as to your immigration status? When you say "Resident Alien" do you mean you are here on a non-immigrant work visa, or that you have Legal Permanent Resident status (i.e. you have a green card)? That may make a difference as to whether you are liable for US CGT or not.

Yes if it has not been your primary residence (it hasn't, as you have been letting it out) then you are going to be liable to UK CGT. You may also be liable to US CGT depending on a number of factors, not least of which my first question above.

NicDC

We are currently here on L1/L2 intercompany (non-immigrant) visas, and are apparently classed as "resident aliens" for tax purposes. We've just applied for Green Cards, but they may not be processed until well into 2009.

We are hoping the Capital Gain is going to be under $50,000/25,000 GBP. So should only have a small UK tax burden. But it's whether or not we even have to declare this transaction - the sale and subsequent transfer of funds to any US authority.

Thanks for your help!! There's only so much info on US websites I can decifer!!!

Jerseygirl

I pretty sure you do have to declare it on your tax return. All money coming into the US over $10K is automatically reported to the US Gov.

Giantaxe

Those two things are unrelated. The mere transfer of money to the US is not a taxable event. The pertinent issue is whether capital gains on the house sale would be taxable as there is no reporting requirement for the sale of a property that does not incur such a liability. This is the relevant requirement for the gain being non-taxable:

So based on the information the original poster provided, effectively she would have had to have lived in the house for two years prior to moving to the US and close on the house sale before October 2009. [There are other possible scenariois that avoid liability, but this is the most likely one.]

lansbury

Isn't CGT covered the same as income tax for double jeopardy purposes under the UK/US tax treaty?

BritishGuy36

Not sure.

I reckon the OP will need to consult a tax professional on this one, to be sure and cover all the bases.

Elliott

not sure about the tax, i never disclosed my UK house sale for US tax purposes.
Also you should amount under $10K. I did several using my nationwide flexaccount card, no transfer fee.

NicDC

I lived in the house in Scotland for two years, prior to moving to the US in Oct 2006 (it was then rented out from Oct 2006 to Feb 2008).

The capital gain in the UK may be between 20,000/30,000 GB Pounds, so we will have a small amount of CGT to pay in the UK.

The amount of the house sale proceeds we are transferring to the US - UK bank to US bank, may be in the region of 60,000 GB Pounds/$119,000 US.

Jerseygirl

It's really not a good idea to disclose such things on a public forum.

meauxna

It doesn't matter what you are transferring to the US or not. The US requires reporting of the *worldwide* income of its citizens and Permanent Residents.

You need to find out whether or not the reporting, and therefore CGT rules, apply to you or *not* based on your immigration status.


PS: the under/over $10,000 thing is a money laundering hedge, nothing to do with taxes. When there is talk of 'declaring' or 'reporting' regarding transfers, that is what they're referring to. There is no tax for transferring money into the US, but it must be reported to Customs/Treasury if it's 10k+.
Again, nothing to do with taxes.

meauxna

What's the missing verb? "Also you should amount" ???

dbj1000

Your immigration status is not your tax status. You either pass the IRS's Substantial Presence Test or you don't. Having a visa or a Green Card doesn't come into it.

dbj1000

As for the sale of your home, it does all depend on whether you can claim it as your Principal Residence (lived in it for 2 of the last 5 years). You still declare it on your tax return, but exclude up to the CGT limit. It's all explained in very simple terms on the IRS website, and selling your home is covered in Publication 523.

md95065

Yes - the IRS really doesn't care how or why you are in the US, permanent or not, legal or illegal - they just care that are here and that you pay your taxes.

Also don't forget to declare any illegal income that you might have - the IRS want you to pay taxes on it as well