# USA Tax question – overseas property sale



## pjdy70 (May 14, 2017)

Wondering if anyone has sold overseas and would know the answer to this?

I'm currently selling my UK house, but I won’t have lived in it for 2 of the last 5 years, so I can’t claim main residence tax allowance. I bought the house, before I ever knew I was going to move to the USA and become a citizen. Can I take the value of the house, as being at the time I became liable for USA taxes? (eg: when I got the green card, citizenship was 5 years later). The house purchase was 5 years prior to getting the green card, and due to rapid house price acceleration in the UK, we are talking a difference of $50,000 between the different values, over the 5 year period. 

I am hoping this theory may be right, as what if you had bought a property, say 15 years prior, the potential tax would be horrendous and very unjust. Then again, this is tax we are talking about……..

Thanks for any insights!


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## JustLurking (Mar 25, 2015)

pjdy70 said:


> Can I take the value of the house, as being at the time I became liable for USA taxes? (eg: when I got the green card, citizenship was 5 years later).


Unfortunately, no. There is no step up in basis when you move to the US, so it will cheerfully tax capital gains that occur long before becoming a US resident. See the example on page 16 of this paper on pre-immigration planning:

https://www.carltonfields.com/files...immigration-tax-planning-brochure-english.pdf



pjdy70 said:


> I am hoping this theory may be right, as what if you had bought a property, say 15 years prior, the potential tax would be horrendous and very unjust.


It's both of these things. Worse still, you have to take forex rates into account; that is, your basis is the USD value of the house at the GBP/USD rate in effect on the date that you bought it. If currency movements work against you, this can result in a _phantom_ US tax liability that nevertheless has to be paid with _real_ money.

There are only two ways I can think of currently to avoid this tax hit. One is to move back into this house for two years before selling. The other is to renounce your US citizenship.


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## Nononymous (Jul 12, 2011)

Also a third option - sell the house but do not report the sale or the gain to the IRS. 

Depending on personal circumstances, that may be perfectly safe. Or not.


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## pjdy70 (May 14, 2017)

Thanks both for your responses. 

Justlurking - that was a really good link you posted. Only wish the financial people allocated by my husband's company, had been a bit more like them, then the liability would be less.

Nonymous - that has crossed the mind as well. Stopped renting it out last year, and it has been a 'holiday home.' However, we do have some reasonable assets in the USA still, so may not be brave enough for that!

I do have quite a few things that can be offset, so will dig through my 'treasure trove' of 18 years, and see what else I can turn up!


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## Nononymous (Jul 12, 2011)

Just remember, with the exception of year-end balance on FATCA-reportable accounts, the IRS only knows what you tell it. But if you are a US resident with assets then yes, you would be taking a non-zero risk.


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## NickZ (Jun 26, 2009)

https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/teus-uk.pdf

The UK has first rights to tax real estate in the UK. Unless the US tax exceeds the UK tax you really shouldn't have any extra tax to pay


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