Selling UK property - Taxes, any advice?!
#16
Re: Selling UK property - Taxes, any advice?!
The good news (and presumably the reason for the gift) is that US tax on capital gains is probably still a little lower than UK inheritance tax if your mum had died while owning the property. If this was not the reason, making the gift to you as a US resident makes little sense in terms of global tax planning.
#17
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Re: Selling UK property - Taxes, any advice?!
Too much information missing to make a judgment on the tax situation... the UK tapers taxation of gifts to 0% if the donor dies seven years or more after the gift is made. We don't know whether that was what happened in this case, nor whether the property was gifted before or after the poster became a US resident etc.
Last edited by Giantaxe; Apr 10th 2018 at 11:06 pm.
#18
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Re: Selling UK property - Taxes, any advice?!
Too much information missing to make a judgment on the tax situation... the UK tapers taxation of gifts to 0% if the donor dies seven years or more after the gift is made. We don't know whether that was what happened in this case, nor whether the property was gifted before or after the poster became a US resident etc.
- House given to me in 2009 by Mum who was disable and struggling to manage the home
- Agreement was that Mum would live in the home Indefinitely or to a point her medical condition forced us to look at other options
- My Mother unfortunately lost her battle with Renial and past away in January 2017
- I moved to USA via L1 visa from work in October 2007
- Obtained Green Card in Feb 2008
#19
Re: Selling UK property - Taxes, any advice?!
BTW, taxes are from the Internal Revenue Code - the President has no direct powers.
#20
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Re: Selling UK property - Taxes, any advice?!
Hopefully the below information helps clarify possible tax implications for me to consider.
- House given to me in 2009 by Mum who was disable and struggling to manage the home
- Agreement was that Mum would live in the home Indefinitely or to a point her medical condition forced us to look at other options
- My Mother unfortunately lost her battle with Renial and past away in January 2017
- I moved to USA via L1 visa from work in October 2007
- Obtained Green Card in Feb 2008
- House given to me in 2009 by Mum who was disable and struggling to manage the home
- Agreement was that Mum would live in the home Indefinitely or to a point her medical condition forced us to look at other options
- My Mother unfortunately lost her battle with Renial and past away in January 2017
- I moved to USA via L1 visa from work in October 2007
- Obtained Green Card in Feb 2008
You were a US resident in 2009, so would have filed IRS Form 3520 for 2009. However, you still took on your mother's basis for US tax purposes.
While your mum's assets may have been below the UK IHT threshold; and equally there may be no gain in the UK (and hence no CGT on sale) you have a large potential US income tax bill on the eventual sale.
What US and UK tax and legal advice did you each receive in 2009? Even from a pure UK perspective the transaction in 2009 looks unconventional because of the deprivation of assets rules had your mum needed care.
#21
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Re: Selling UK property - Taxes, any advice?!
From a UK perspective the property remained in her estate for UK IHT because she continued to occupy. You owe UK CGT on any gain from 2009 to sale.
You were a US resident in 2009, so would have filed IRS Form 3520 for 2009. However, you still took on your mother's basis for US tax purposes.
You were a US resident in 2009, so would have filed IRS Form 3520 for 2009. However, you still took on your mother's basis for US tax purposes.
Unfortunately I got very mixed advice and get did not do anything about the situation, now I’m trying to work out what I need to do.
#22
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Re: Selling UK property - Taxes, any advice?!
Yep, CGT = Capital Gains Tax. Depreciation claimed on the property while owned it is recovered at your normal tax rate (39% for high earners under Obama), remaining gain taxed at 20% under Obama, and then just for all the Obamacare fans, another 3.8% tax added on top of the regular capital gains to help pay for it. Altogether a long way from a planned 15%.
#23
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Re: Selling UK property - Taxes, any advice?!
Yep, CGT = Capital Gains Tax. Depreciation claimed on the property while owned it is recovered at your normal tax rate (39% for high earners under Obama), remaining gain taxed at 20% under Obama, and then just for all the Obamacare fans, another 3.8% tax added on top of the regular capital gains to help pay for it. Altogether a long way from a planned 15%.
#24
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Re: Selling UK property - Taxes, any advice?!
Yep, CGT = Capital Gains Tax. Depreciation claimed on the property while owned it is recovered at your normal tax rate (39% for high earners under Obama), remaining gain taxed at 20% under Obama, and then just for all the Obamacare fans, another 3.8% tax added on top of the regular capital gains to help pay for it. Altogether a long way from a planned 15%.
#25
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Re: Selling UK property - Taxes, any advice?!
39% income tax only applied to taxable income (after deductions, and credits) of $445,045 for individual filers, and the NIIT tax of 3.8% only applies to taxable income of $200,00 for single filers so affects/affected very few taxpayers. (MFJ allowances were $447k and $250k)
....edit for attempted clarity after the morning coffee
Last edited by FatFrank; Apr 14th 2018 at 1:02 pm.
#26
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Re: Selling UK property - Taxes, any advice?!
Yep, but if I recall correctly (which is questionable?) our effective tax bracket for the capital gain calcs was triggered into the 39% because the capital gain from house sale was added together with our regular annual income for the year.
....edit for attempted clarity after the morning coffee
....edit for attempted clarity after the morning coffee
Your terminology is wrong though. Your effective tax bracket will have been nowhere near 39% but your marginal tax bracket may have been which means that only the taxable income above $439k would be taxed at 39%. (Effective applies to all your income, marginal applies only to the income above the highest bracket that you are in)
Here are the recent historical tax brackets (scroll down a little to see the table).
https://en.wikipedia.org/wiki/Capita..._United_States
#27
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Re: Selling UK property - Taxes, any advice?!
From that thread of yours when you sold your house the CG was under $250k so you would still have needed additional taxable income over $200k to get into the 20% bracket. If you did have that sort of income then good on you, very well done.
Your terminology is wrong though. Your effective tax bracket will have been nowhere near 39% but your marginal tax bracket may have been which means that only the taxable income above $439k would be taxed at 39%. (Effective applies to all your income, marginal applies only to the income above the highest bracket that you are in)
Here are the recent historical tax brackets (scroll down a little to see the table).
https://en.wikipedia.org/wiki/Capita..._United_States
Your terminology is wrong though. Your effective tax bracket will have been nowhere near 39% but your marginal tax bracket may have been which means that only the taxable income above $439k would be taxed at 39%. (Effective applies to all your income, marginal applies only to the income above the highest bracket that you are in)
Here are the recent historical tax brackets (scroll down a little to see the table).
https://en.wikipedia.org/wiki/Capita..._United_States
#28
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Re: Selling UK property - Taxes, any advice?!
Sorry for the terminology and thanks for clarifying the correct terms. I didn’t think we earned anything near those limits, but maybe the other half was pushing it that year. There may too have been some “price simplification” in the prior thread - can’t get the link to work now for some reason - I do though remember our tax advisor commenting about the expiration of Bush tax cuts and Obama increases hitting us.