# Stocks and shares isa



## Bluetyre (Feb 11, 2021)

Hi

I invested a small amount (1500) in a stocks and shares Isa in December 2020.
I have not sold the shares so no profit/loss has been realised.

when would I notify the IRS?

thanks


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## 255 (Sep 8, 2018)

Bluetyre -- Assuming you're an American, the U.S. IRS has no special treatment for UK Stocks and Shares ISAs. So also assuming you purchased individual company shares -- you have no reportable gain/loss until the shares are sold and you realized a profit. You have to report gains, interest, and dividends as they are credited to the account, even if you don't withdraw them.

The problem with this type of account and any other "foreign" tax advantaged account, is the ability to trade foreign trusts, foreign ETFs, foreign mutual funds, and other foreign group investments within the "wrapper," these are considered Passive Foreign Investment Companies (PFICs) by the U.S. Reporting requirements for PFICs are another "kettle of fish," with punitive tax rates and reporting requirements. Annual PFIC reporting is mandatory!

As long as you are just trading shares in individual companies, you should not have any issues and don't have to report any gains until you sell the stock. Cheers, 255

P.S. The other problem you might run into with your account is how the "cash" is held. If the cash is held as cash, in a deposit account -- no problem; but if the cash is held in a foreign "Money Market Fund," you now have a PFIC issue.


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## Bluetyre (Feb 11, 2021)

Hi

Thanks for the reply.
Just for the record I am a dual, USA/UK citizen. Just for my peace of mind, any response to the below would be greatly appreciated. Sorry if it’s long winded.

Hypothetical 1

I sell the stock and make a 300 dollar profit. The money sits in the ISA for a couple of days before it is transferred to my checking account. Because all of this took place in less than a year, I will be paying 12 percent tax on the profit, as my salary earnings are in the lower threshold.
What form, and where on the form would I show this? Also, how would I get the 36 dollars to the IRS?

Hypothetical 2

I sell the shares and make the 300 dollar profit. After a couple of weeks I then decide to reinvest the money but unfortunately I end up losing 400 dollars. I sell the shares but am now in a negative balance/loss. Is there a need to report this?

Hypothetical 3

During the year there are 20 trades inside the ISA - buying and selling 10 different companies. At year end the money is still invested in a company and overall on the year I am positive 800 dollars. But I have not sold the shares so profit/loss has not been realised. How would this be reported?

many thanks


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## 255 (Sep 8, 2018)

Bluetyre -- In answer to your hypotheticals:

#1 -- Q1: As you surmised, this is a "short-term" gain (held less than one year.) You report it in Part I of IRS form 8949, which the totals of all short term transactions will be transferred to Schedule D of IRS form 1040 and the bottom line of Sch. D will go on line 7 of IRS form 1040. Q2: There are numerous ways to pay; go to Internal Revenue Service | An official website of the United States government (irs.gov) , click on the "Pay" tab on the top of the main page and it'll give you numerous options, check, credit card, bank wire, ACH transfer -- your choice. I usually just write a check, from my U.S. Credit Union, but I always do my returns on paper (thus far.) There are also various options to do your return "online" that will give you options to make a payment.

#2 -- Yes, you should still report it. On IRS form 8949, your loss will flow to Sch. D, then line 7 of form 1040, where you'll be able to take your $100 loss (you can claim losses up to $3000 per year and carry any losses over $3000 to future years,) to offset other income.

#3 -- There is no reporting requirement until you "close" a stock position and "realize" the gain or loss. If you have $800 of "unrealized" gain, there is no reporting requirement, but if you you closed some of those 20 trades, then there is a reporting requirement. Also be aware of the wash sale rules. If you close a position, at a loss, and re-enter the same, or similar, position within 30 days -- you've created a wash sale, and you will not be able to claim your losses on those trades now (you can use the losses to adjust the "basis" in your new positions, so they're not lost forever.)

Cheers, 255


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