Originally Posted by 1r0ns (Post 11068564)

....... it seems odd that I would be perceived to have made a gain when my UK home is financed in pounds, paid for in pounds, the rental is in pounds, the account is in the UK and I have no intention of selling or extracting any equity from the property.

Originally Posted by Pulaski (Post 11068706)

OwS
I suspect there is a little more to this than is being discussed here, and that a consultation with an experienced tax accountant would be recommended. Not least because in the example above, you would have "gained" $20,000, but the underlying asset would have created an offsetting loss. To keep the numbers simple, assuming you had 100% finance, your $170k house would now be $150,000k. I am not sure how the IRS would see this, but am fairly certain there is much more to this than has been discussed here.

So far as the "functional currency" issue goes, I think the possibility exists to create a business corporation and have it hold the house and book all income and expenses through it, as a "holding company", and off-shore from the US. It would have its own tax computation, and as owner you would only see the net flow of money between it and your personal account. That might be a bit excessive for a single house, but I mention it only to point out that there are additional complicating factors that a tax accountant would know.

Originally Posted by Pulaski (Post 11068706)

So far as the "functional currency" issue goes, I think the possibility exists to create a business corporation and have it hold the house and book all income and expenses through it, as a "holding company", and off-shore from the US. It would have its own tax computation, and as owner you would only see the net flow of money between it and your personal account. That might be a bit excessive for a single house, but I mention it only to point out that there are additional complicating factors that a tax accountant would know.

Originally Posted by JAJ (Post 11075158)

I see no reason why one would need to incorporate a foreign business for it to have a different functional currency and for personal real estate, incorporation would be a bad decision for a variety of reasons.

More importantly, and leaving aside the issue of functional currency, a decision not to sell the property within 3 years of it being a primary residence means that the entire capital gain, going back to original purchase, will generally be taxable in the United States, if the property is sold in the future (while a U.S. resident or citizen). There also will be a U.K. capital gains charge in future, starting 2015.

Obviously this all depends on how much capital gains are embedded in the property as of now but usually, a person leaving the U.K. for the United States should strongly consider a sale of the property and taking the tax free capital gain. Unless there is a definite intention to return to that property. If you decide not to sell, at least be aware of the tax and other consequences for the future (both U.K. and U.S.)

Originally Posted by moving2nyc (Post 11199199)

Been in the US for more than 3 years but kept our home in the UK. We are now looking at selling in UK so we can buy in US.

For example imagine we make $100k after paying off mortgage in UK. Does that mean I pay tax on the profit to IRS and if I sell after April 2014 I pay tax to HMRC too?

Originally Posted by nun (Post 11199216)

If you have lived in the house for 2 out of the past 5 years you will get the US CGT allowance of $250k ($500k if married) and as UK non-resident there will be no UK CGT. HMRC rules will change from April 2015.