# US Taxes Advice Wanted



## rajat5000 (Jul 4, 2018)

Hi,

I am an Indian national moving to USA from Bahrain and needed help with a few tax related questions. Would be glad if anyone is able to provide some guidance or point me to online resources where i could get some more information on these topics:

1. Gifting - will i have to pay tax on cash gifts that i receive from family living outside of US? 
2. Loans to Family - is it necessary to show interest income on loans provided to family even if loan was made on the condition that there are no definite repayment terms - i may not even receive the full principal back. If i write-off the loan today but receive some repayment later, will i have to consider the full amount as income?
3. Sale of property - i own an apartment in india which is valued more than the purchase price - if i sell this apartment after moving to US, will i have to pay capital gains tax on the full gain (sale price less purchase price) or does US allow for some cost adjustment based on inflation or similar parameter? Are there any options to offset the capital gains such as buying property in the US in the same year?
4. I am moving to US in August and have not been in the country during the last few years. Therefore i would not meet the substantial presence test for 2018. Therefore, is it correct to assume that in 2018 i would have to pay US taxes only on US sourced income (i.e. salary in US and any US investments) and i would not have to pay US taxes on foreign income earned after moving to US in August but before Dec 31, 2018 even if the income is credited to a US bank account?

Thank you in advance for your help.

Regards,

Rajat


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## JustLurking (Mar 25, 2015)

rajat5000 said:


> 1. Gifting - will i have to pay tax on cash gifts that i receive from family living outside of US?


You won't. You might have to report them on an annual IRS form 3520, but no new tax liability from that, just 'informational'.



rajat5000 said:


> 2. Loans to Family - is it necessary to show interest income on loans provided to family even if loan was made on the condition that there are no definite repayment terms - i may not even receive the full principal back. If i write-off the loan today but receive some repayment later, will i have to consider the full amount as income?


Don't know. It sounds complex enough that it may well drop you into some horrible US tax trap. Unless there's no option, finding another way to achieve this seems useful.



rajat5000 said:


> 3. Sale of property - i own an apartment in india which is valued more than the purchase price - if i sell this apartment after moving to US, will i have to pay capital gains tax on the full gain (sale price less purchase price) or does US allow for some cost adjustment based on inflation or similar parameter? Are there any options to offset the capital gains such as buying property in the US in the same year?


The usual US rules for CGT on primary residence apply. Exemption of $250k if you have lived in the property in two of the past five year ($500k if married), no exemption otherwise.

There are no offsets or step-up at residency start. This can easily mean facing US capital gains tax on gains that accrued long before even setting foot in the US. Worse still, you have to use the USD exchange rate on purchase and the one on sale. That can work both ways, but in the worst case you could face a _real loss_ on a property in local currency terms but a _phantom taxable gain_ when viewed in USD.

The usual advice is to sell assets that have a built-in gain before becoming US resident. That seems particularly appropriate while you live in Bahrain. Conversely, selling assets with a built-in loss after becoming a US resident will get you a usable US tax offset.

For rental properties, there is a '1031 exchange' that will _defer_ (but not negate) the tax on the gain where you buy another investment property. The rules on this are fiddly though, particularly so if you later move into the property you bought within the exchange.



rajat5000 said:


> 4. I am moving to US in August and have not been in the country during the last few years. Therefore i would not meet the substantial presence test for 2018. Therefore, is it correct to assume that in 2018 i would have to pay US taxes only on US sourced income (i.e. salary in US and any US investments) and i would not have to pay US taxes on foreign income earned after moving to US in August but before Dec 31, 2018 even if the income is credited to a US bank account?


I _think_ so, but no direct experience. Check carefully before proceeding, I guess.


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## rajat5000 (Jul 4, 2018)

Thanks JustLurking for the response - very helpful.


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