# Sale of house in UK - for new Green Card holder



## rangdaa

Bevdeforges said:


> ..
> Do check the pub 523 or the chapter in pub 17, though, to make sure. ....


Hi Bev,

I am glad that I have discovered this site as there is so much useful information in it and for the reference to pub 523 - the 2011 edition is now online.

I hope you don’t mind me asking you a question as I find it difficult to believe that as a _new_ Green Card holder, I am to be treated for tax purposes as if I was a Green Card holder who had lived in the USA for the last 30 odd years! Our situation……….

My wife and I are both British and we lived in the UK until I retired – we are now both non UK residents. My wife’s late mother was American and my wife had a US passport until she was 23 although she spent very little time in America. Because of this, she was required to give up her US passport at age 23 as she had not lived in the US for 5 years or, if she wanted to retain her US passport, she was required to remain living in the US for the balance of the 5 years. She chose to give up her US passport.

We believe that she can now obtain a US passport (on account of her late mother being American) and I would therefore obtain a Green Card.

We bought our home in the UK 31 years ago. We lived in it for the first 25 years and have rented it out for the last 6 years. It was bought for a very modest sum and is now worth quite a lot of money.

I have had a good look through pub 523 (not allowed to post a link yet) and the document has been written by an American for Americans and does not mention any transitional arrangements for those moving to the US. It appears that the cost basis in order for me to work out the gain is the cost of the house 31 years ago rather than the value of the house when we get our Green Card/citizenship.

My question: is this correct or are there some special rules for people who move to the USA for the first time? I find it difficult to believe that if we sell our UK home one year after moving to the USA, we are to pay US CGT on the gain, not just over one year, but on 32 years, in 31 of which we were not entitled to live in the USA!


----------



## Bevdeforges

I've moved this over to the Expat Tax section because this is a REAL interesting question and seems to come up more and more often lately.

Probably best to take this one step at a time. While your wife probably can reclaim her US citizenship, it doesn't automatically mean that you'll get a Green Card. It does mean that she can apply to sponsor you for a spouse visa (and the Green Card that goes with that). But that process still takes a good 6 to 10 months.

But the reason that Pub 523 doesn't mention any transitional arrangements for those moving to the US is that there aren't any. If you are subject to US taxation on the date that you sell your house (in the UK or anywhere else in the world) then you are subject to the whole thing. You can claim credit for income taxes paid on the sale of your house to another jurisdiction (such as the UK, or Cyprus if you're still living there as of the date of sale), but all the regular tax rules apply to whichever of you (or both of you) subject to US taxation.

What's worse is that the basis of your house is the cost of the house 31 years ago, *reduced by the depreciation expense you could have taken *had you been reporting the rental income on US tax returns you would have been filing had you been subject to US taxes all these years.

I guess the moral to that story is: sell the house now, before your wife reclaims her US citizenship. Then, you'll just have the UK (I suppose) capital gains tax to worry about.

Of course, after your wife regains her citizenship, she'll then have to show that she has the resources to support you in the US and a place for you to live so that you won't have to resort to "welfare." 

They don't make it easy...
Cheers,
Bev


----------



## rangdaa

Bev,

Thank you very much indeed for your reply and for such a quick reply as well!

I am grateful that you have warned me not to expect my Green card immediately but I expect that there will be some sort of visa which would allow me to live with my wife in the USA whilst the sponsorship is being processed - off to do some more research...


----------



## Bevdeforges

rangdaa said:


> Bev,
> 
> Thank you very much indeed for your reply and for such a quick reply as well!
> 
> I am grateful that you have warned me not to expect my Green card immediately but I expect that there will be some sort of visa which would allow me to live with my wife in the USA whilst the sponsorship is being processed - off to do some more research...


For that you should go back to the US forum and check the posts on spouse visas. It's possible for her to apply to sponsor you from abroad - but she needs to have some plan for how she is going to support you when you both get there.
Cheers,
Bev


----------



## rangdaa

Thanks Bev - off to have a look now...


----------



## robnw

On the question of gains tax in the USA, the principal private residence exemption of up to $500k is likely to be still available for some months (must have lived in it for at least two of the last five years). 
But there is also gains tax in the UK to consider of course since it is no longer one's principal residence, and although you may not be resident ni the UK, one needs to also be not ordinarily resident to be exempt for UK CGT.
It would have been useful to tax plan this before going to the USA - but there may be a chance to do something before the Green Card is applied for. If not, then there's nothing for it but to work through the numbers now, considering options for renting it, gifting it, putting it in trust,, having an offshore company buy it etc.


----------



## rangdaa

Thanks robnw - we have decided to get some tax advice before leaving the UK for the USA - as you say, planning is required if we don't want to pay more tax than is necessary.


----------

