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Old 12-03-2011, 12:07 AM
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Dad moving to USA selling his house in the UK

My father is about to apply to be a permanent resident here in the USA.

Should he sell his house before he immigrates to avoid having to pay capital gains taxes?

If he is has started the application process is he liable for capital gains?

If he sells the house worth around 550k how how can we limit the taxes that have to be payed, for that matter are there any taxes that have to be payed on money he already has before becoming a permanent resident?

If the monies are in a UK bank and he wanted to transfer them to the USA would there be a way to put it into a retirement or savings account or investment of some sort again to limit any taxes to be payed?

Finally is there a way he could either purchase our/my house with the monies and then I pay him a loan payment back again to lower the taxable amount of funds or could he gift some of it to me (his son) or my wife again to lower the taxes that would need to be payed?

I need to keep as much of these funds as possible to pay for any medical expenses that may occur until he can buy into medicare in 5 years.

Thanks for any help given.
Kris



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Old 12-03-2011, 01:47 AM
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“Should he sell his house before he immigrates to avoid having to pay capital gains taxes?”---->If he sells the house in UK, then he probably needs to pay LTCG tax to UK, then if this is true, he can claim his LTCG tax that he paid to UK on his US return, federal return, I mean, he can’t claim LTCG paid to UK on his US return if he also needs to file his state return in US(in US, nine states do NOT impose income tax on residents.). To claim his LTCG tax paid to UK, he needs to file Form 1116 and report the amount on the form on Form 1040 line 47 or he can itemize it on form 1040 Sch A line 8 as other income, I guess. AS long aas the house in UK is treated as his primary residence, then he can exclude up to $250,000 in profit from the sale of a main home (or $500,000 for a married couple) as long as he has owned the home and lived in the home for a minimum of two years. Those two years do not need to be consecutive. In the 5 years prior to the sale of the house, your father needs to have lived in the house for at least 24 months in that 5-year period. In other words, the home must have been your father’s principal residence. So, needless to say, as long as he sells it in UK and pays LTCG tax to UK, he needs to file Form 1116 to claim his tax credit onhis US return. If he doesn’t sell the house in UK and rent it out for example, then he needs to file Sch E to report his rental income on his US returns, federal and state return, as taxable income. So, if the home is his principal residence( I mean he has no home in US yeat) and he has owned it for at least five years and lived in the house for at least 2 years, then he can exclude up to $250,000 if he is single(or $500,000 I f he files his return as MFJ in US) from his LTCG when he disposes of the the home after he immigrates to US. The right to exclude profits from the sale of a home applies only to the taxpayer's primary residence. The sale of a second residence, or the sale of a home used as rental property, is considered by the IRS as a taxable event.
Please visit the IRS Website here: http://www.irs.gov/pub/irs-pdf/f1116.pdf
“If he is has started the application process is he liable for capital gains?”---> As said above; it depends. As long as the home in UK is his primary residence( he has only one home there and he has no home in US) then he can claim hsd LTCG tax credit on the LTCG that he paid to UK on his US return,OK???
“If he sells the house worth around 550k how how can we limit the taxes that have to be payed, for that matter are there any taxes that have to be payed on money he already has before becoming a permanent resident?”---> As said above.
“If the monies are in a UK bank and he wanted to transfer them to the USA would there be a way to put it into a retirement or savings account or investment of some sort again to limit any taxes to be payed?”---->Yes I think so;however, as long as the amount in his UK bank account exceeds $10,000 during the calendar year after he becomes an US resident( I mean the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.) ,either Under the US INS rules or US Tax law, then he needs to file Form TD F 90-22.1; the FBAR, TDF 90-22.1, is due by June 30 of the year following the year that the account holder meets the $10,000 threshold.
“Finally is there a way he could either purchase our/my house with the monies and then I pay him a loan payment back again to lower the taxable amount of funds or could he gift some of it to me (his son) or my wife again to lower the taxes that would need to be payed?”--->He can purchase your home( I assume that the home is your primary residence that you have owed for at least five years and have lived there for at least two years) then you can exclude up to $500,000 as MFJ tax filer when you dispose of the home to your father as long as you satisfy the conditions as said above( 2 year/5 year rule). If he gives the home to you as a gift after he becomes an US resident, then he is subject to the gift tax; as long as the the FMV of the home that he gives you exceeds $13,000 for 2011, your father needs to file IRS form 709;however, UNLESS he made a huge gift exceeding $1.13,000 million before or in 2011 alone, your father that now an US resident, is NOT subject to the gift tax due to the existence of unifies transfer tax credit. I guess to lower LTCG tax, your father needs to file Form 1116 to claim his LTCG paid to UK on his US return and he can buy your primary home as his primary home and then you can exclude up to $500,000 as MFJ tax filer and you can buy another primary home with the money. After you father purchases your home , and as you said, if you give your father the loan payments back can let you file the IRS Form 709 as long as the amount that you give back to your father exceeds $13,000 per year as a gift,OK??? If the amount of the gift is less than $13,000 or $13,000 for 2011, then you do NOT have to file Form 709.
“I need to keep as much of these funds as possible to pay for any medical expenses that may occur until he can buy into medicare in 5 years.”--->Then as said above, you can exclude your LTCG up to $500,000 as MFJ tax filer when you dispose of your primary home to your father as long as you own it for at least five years and lived there for at least for two years.



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Old 12-03-2011, 11:23 AM
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Thank you so much for the very thorough answers.
I am not positive but I think as his home is his primary residence and not a rental or second home there is no LTCG tax on the sale in the UK.
I could be wrong on this but from what I have seen on expat sites it seems the best way to is to sell before you leave put the money offshore and only pay taxes on the interest.
What do you think about this idea?
I'm assuming also LTCG means long term capital gains?
What is the the capital gains tax rate in GA am I correct that you have to pay federal capital gains and federal?

Again thank you so much for your assistance I'm sure I will have to speak to a financial advisor but its always good to have some idea before the meeting.
Kris



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Old 12-03-2011, 11:30 AM
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Thank you so much for the very thorough answers.
I am not positive but I think as his home is his primary residence and not a rental or second home there is no LTCG tax on the sale in the UK.
I could be wrong on this but from what I have seen on expat sites it seems the best way to is to sell before you leave put the money offshore and only pay taxes on the interest.
What do you think about this idea?
I'm assuming also LTCG means long term capital gains?
What is the the capital gains tax rate in GA am I correct that you have to pay federal capital gains and federal?

Again thank you so much for your assistance I'm sure I will have to speak to a financial advisor but its always good to have some idea before the meeting.
Kris



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Old 12-03-2011, 12:00 PM
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Posts: 5,236
“I could be wrong on this but from what I have seen on expat sites it seems the best way to is to sell before you leave put the money offshore and only pay taxes on the interest. What do you think about this idea?”---> Quite frankly, I am NOT quite sure if it is the best option;as you said , if he doesn’t pay LTCG tax to UK, then he doesn’t need to file Form 1116 since he has no foreign capital gain tax that he can claim on his US return. Of course, he needs to pay tax to UK on the interest income generated from his money in his bank account in UK and he also needs to claim the foreign tax that he pays to UK on his US return.As said previously( I guess), as long as he A, as an US resident, who has a financial interest in or signature authority or other authority over any financial account in a foreign country , in UK in this case, as long as the aggregate value of these accounts exceeds $10,000 at any time during the calendar year, he MSUT file the IRS form TD F90-22.1which is due by June 30 of the year following the year that the account holder meets the $10,000 threshold.
“I'm assuming also LTCG means long term capital gains?”------> Correct.
“What is the the capital gains tax rate in GA am I correct that you have to pay federal capital gains and federal?”----> It depends on your marginal tax rate; if your marginal tax rate is 15% or lower than 15%, your LTCG rate is 0% up to 2012; if your tax bracket is higher than 15%, then your LTCG rate is 15% up to 2012; after 2012, your LTCG rate’d be 10% if your marginal rate is 15% or lower; your LTCG ‘d be 20% once your marginal tax rate is 20% or higher. For example, assume that your LTCG is $500,000 abd your marginal tax rate is 25% then your LTCG liability to the IRS is $75,000;$500,000*15%; if your tax bracket is 15%, then your LTCG tax liability to the IRS is $0; as LTCG rate is 0% for your tax bracket, 15%. Federal LTCG tax is federal level LTCG tax; you may pay two LTCG taxes;federal(to the IRS)and your state GA state. I guess CG tax rate of GA state was 6% in 2007. You may visit the Dept of Rev of GA state here.
https://etax.dor.ga.gov/IndIncTax.aspx
Also, Please visit the Website here: Capital gains tax in the United States - Wikipedia, the free encyclopedia



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