# Capital Gains Income - Taxes - for American living abroad



## ex- (Sep 9, 2012)

Hello, this has been really confounding me.

Residence Situation:
American Citizen permanent resident in Norway living in Norway for years
Both countries want to tax citizens and residents on Worldwide income.

*Scenario A:
Buy stocks in*: Norway on Norweigan exchange
*Sell stocks in:* Norway on Norwegian exchange for profit
Who do I have to pay capital gains taxes to? How do I report this to the US and not get double-taxed?

*Scenario B:
Buy stocks in*: US stock market (NASDAQ) using US-based exchange
*Sell stocks in*: US stock market at a profit
Who do I have to pay capital gains taxes to? If it is to Norway how do I report this to the US and have them not try to double-tax me?

*Scenario C:*
Would any of this change if it were a Cryptocurrency like Bitcoin?
The US treats Cryptocurrency as property and the norway-us tax treaty seems to imply that property principally based in the US should be taxable by the US.
This is a high-stress very confusing situation.

Any advice would be tremendously appreciated.

Thanks in advance


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## 255 (Sep 8, 2018)

ex- -- I am not at all familiar with Norway's tax rules, but you're required to report and pay taxes on all capital gains, irrespective of whether it is on a U.S. or foreign exchange, to the U.S. (unless a tax treaty indicates something different , even then you would still report the gains and attach a note referencing the article in the tax treaty.) Of course, unless your talking about short term gains, long term gains are taxed based on your overall income and that can go from 0% to 37% (highest current tax rate.) So it might not be an issue. Generally, you can take a tax credit for taxes paid to a foreign government on income not excluded by the FEIE. 2020 Form 1116 (irs.gov) In your case, you'd have to breakout the foreign taxes paid and determine the taxes paid to Norway and then make an adjustment as to what the U.S. would charge. The part concerning crypto world be based on how Norway treats crypto, not the U.S. Reporting for crypto capital gains is no different from any other capital gains, e.g. stocks or real estate, in the U.S. Cheers, 255


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## ex- (Sep 9, 2012)

Thank you, that is very helpful.


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## Moulard (Feb 3, 2017)

I believe that sourcing rules for the sale of stock would be the same as the sale of any other form of personal property.

Without reading the US-Norway Tax treaty, and its technical memorandum... this is what would likely happen if it follows the model treaty.

Scenario A 

The gain is considered Norway sourced, Norway would have the primary right to tax the gain, the US would provide you a foreign tax for Norwegian taxes paid via Form 1116 (passive category)

Scenario B

The gain is considered US sourced, US would have the primary right to tax the gain, you would be able to offset Norwegian taxes according to domestic Norwegian rules (could be tax credit, offset or deduction)

It is definitely worth reading the treaty and technical memorandum along with any amending protocols. Just be mindful of the savings clause that allows the US to tax its citizens as if the treaty were not in effect. Why? Because it is not too uncommon for tax treaties to have a specific clause in the relief from double taxation article specifically addressing the taxation of US sourced income of a US citizen who is a tax resident of the other treaty party. Effectively the treaty allows both countries to tax this income (by virtue of US citzenship and foreign tax residency), and this paragraph addresses the double taxation that can result.

If such a paragraph existed, then Scenario B might look like....

The gain is considered US sourced but recharacterised as Noway sourced by treaty, Norway would have the primary right to tax the gain, the US would provide you a foreign tax for Norwegian taxes paid via Form 1116 (Certain income re-sourced by treaty category)

Note that regardless, you will end up paying the higher of the two tax rates, possibly split between the two countries.


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