# Taxes On Sale of Home In USA Before Moving



## nick620y (Dec 21, 2015)

Hi Everyone - I've searched everywhere and can't seem to find an answer to my question but I feel like it's a common occurrence, so I thought I'd try here. I'm an expat-to-be that will be moving from the USA to Torino, Italy next year for about 3 years for work. My wife and I are very excited for the opportunity! However, I'm still trying to figure out some of the logistics. The most recent item is the sale of our home (primary residence) in the USA. 

We're in the process of selling our house and should have it sold before we move over to Italy. We're closing on the house in late January and moving to Italy in early February. We've owned the house for a little over 3 years. Because it is our primary residence, we won't owe any US taxes on the net gain from the sale. However, I've come to learn that in Italy, if you own any home for less than 5 years you do owe taxes on any net gain from the sale.

Since we're selling the home before moving overseas, my gut tells me that we should be fine and won't owe any taxes in Italy. However, since we'll be living in Italy for the majority of the year and will have to file taxes in Italy, I'm a little worried that logic may not come into play here...

I imagine others have come across this when they moved overseas. Does anyone have any insight? Thank you in advance for any help!


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## BBCWatcher (Dec 28, 2012)

I agree with your hypothesis that the date you become a resident of Italy will matter. In the unlikely event that's not true, take a look at the 1999 U.S.-Italy tax treaty, specifically Article 13 paragraph 1 (but with the savings clause caveat).


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## Bevdeforges (Nov 16, 2007)

Not familiar with Italian tax law per se, but generally speaking, your obligation for taxes doesn't begin until the date you actually take up residence in a country. And even then, not all countries tax based on worldwide income. Granted, most do, but not all.

If you're moving for work, you may want to ask your employer if there is any provision for income tax assistance while you are overseas for the company. 
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

Bevdeforges said:


> And even then, not all countries tax based on worldwide income.


We can be specific here: Italy does. Moreover, Italy also has wealth taxes that apply to overseas real property (IVIE) and overseas financial assets (IVAFE).


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## Bevdeforges (Nov 16, 2007)

Generally speaking, the tax treaties don't deal with the issue of "transfer" of residence. It's a long-standing international issue, complicated a bit by the notion of "intent." But check with the Italian tax authority to see how they define tax residence in Italy. Again, in very general terms, it begins when you physically arrive in a country with the intent to become resident there.
Cheers,
Bev


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## NickZ (Jun 26, 2009)

Bevdeforges said:


> But check with the Italian tax authority to see how they define tax residence in Italy. Again, in very general terms, it begins when you physically arrive in a country with the intent to become resident there.
> Cheers,
> Bev



Italy uses three tests for residence.

1) Register with the commune (Marie in France?) 

2) Centre of interest test

3) normal domicile

Art 2.2

"2. Ai fini delle imposte sui redditi si considerano residenti le persone che per la maggior parte del periodo di imposta sono iscritte nelle anagrafi della popolazione residente o hanno nel territorio dello Stato il domicilio o la residenza ai sensi del codice civile."

If you pass any of the above tests for 183 days you're an Italian tax resident according to the TUIR (Tax act) I can't remember what tests the USA uses but if they conflict the tax treaty then comes into play.

But the OP seems to be American he can't really delay registering for residence. OTOH the above tests are based on the calendar year. So arriving post July 1st means you get a pass until the next year.


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## Bevdeforges (Nov 16, 2007)

Just a question out of curiosity: is the 183 days thing a part of the rules/laws in Italy? I know it gets quoted most places, but oddly enough, it often turns out to be just a "rule of thumb" rather than a hard and fast principle.

France's residence rules are similar (though we don't have the registration at the mairie - instead it's if you "conduct business in France" kind of vaguely defined) - however there is no 183 days part. The key thing is where your "principal" home, centers of interest or business activity is located. And if you flit between multiple countries, they can claim you as tax resident in the place where you spend the most time during a given year. (It is also possible to meet the residence definition in more than one country in a given year.)

The US "rules" for residence are amazingly vague, in any event.
Cheers,
Bev


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## NickZ (Jun 26, 2009)

Bevdeforges said:


> Just a question out of curiosity: is the 183 days thing a part of the rules/laws in Italy?
> 
> And if you flit between multiple countries, they can claim you as tax resident in the place where you spend the most time during a given year. (It is also possible to meet the residence definition in more than one country in a given year.)


The part of the act I quoted states " che per la maggior parte del periodo" which translates into major part of the period. So it's not spelled out to be 183 days but with a year being 365 you pass the half way mark at 183.

Legally you aren't required to be in Italy to be taxed. If you can be deemed resident in more then one country the tie breakers kick in. This is from the US/Italy technical explanation the IRS provides

"If, under the laws of the two Contracting States, and, thus, under paragraph 1, an
individual is deemed to be a resident of both Contracting States, a series of tie-breaker rules are
provided in paragraph 2 to determine a single State of residence for that individual. These tests
are to be applied in the order in which they are stated. The first test is based on where the
individual has a permanent home. If that test is inconclusive because the individual has a
permanent home available to him in both States, he will be considered to be a resident of the
Contracting State where his personal and economic relations are closest (
i.e.
, the location of his
"center of vital interests"). If that test is also inconclusive, or if he does not have a permanent
home available to him in either State, he will be treated as a resident of the Contracting State
where he maintains an habitual abode. If he has an habitual abode in both States or in neither of
them, he will be treated as a resident of his Contracting State of citizenship. If he is a citizen of
both States or of neither, the matter will be considered by the competent authorities, who will
attempt to agree to assign a single State of residence. "


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## Bevdeforges (Nov 16, 2007)

Interesting, thanks for that explanation. I can't dig it up just now, but I do recall falling across something in the IRS literature that seems to imply (or maybe "admit") that it is possible to be considered tax resident in two countries at the same time. (Though thankfully, it's pretty rare.)
Cheers,
Bev


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## NickZ (Jun 26, 2009)

Bevdeforges said:


> but I do recall falling across something in the IRS literature that seems to imply (or maybe "admit") that it is possible to be considered tax resident in two countries at the same time. (Though thankfully, it's pretty rare.)
> Cheers,
> Bev


Yes it's possible but then the tie breakers in the treaty take over.


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## nick620y (Dec 21, 2015)

Thanks for all of the information! I am heading over there for work and will have tax assistance. I was able to chat with someone on it and most of the items that folks have brought up here came up. The initial interpretation seems to be that, as NickZ mentioned, I will be a tax resident in Italy for 2016 since I will be there for the majority of the year. Unfortunately, there's no way I can delay and avoid that part since I need to head over in February. 

It's clear that if I were in Italy and sold the house in say 6 months, I would definitely owe taxes on the sale. The only difference here is that I'm doing it before the physical move, so the question is whether that gets special treatment. The treaty in general seems to lay out who has a right to the taxes and rules to avoid double taxation but since the USA taxes are $0, I'm not sure how much that'll help me.

I'll definitely be working through this with the tax folks but I was curious to see if anyone had direct experience with it. Regardless, the discussion here has been great and definitely made me more aware of what to look at and ask about. If I learn anything I'll be sure to post back, but I'm not sure how quick the answer will be coming (and it probably wont' be final-final until a year from now  ).


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