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Non-Resident Sells Property Abroad, Becomes Resident – Do They Owe U.S. Tax?

Situational analysis

A UK citizen (Mike B) purchased a home in the UK in 1998 for $100,000 USD, selling it 20 years later for $600,000, resulting in a capital gain of ~$500,000. Coincidentally, Mike moved to the U.S in July 2017 on an L visa.

Questions to consider 

  1. Does MIke owe any tax to the U.S?
  2. If Mike owes tax, on what amount is it calculated?
  3. What, if any, are Mike’s options to mitigate this unfortunate situation?

Cost Basis – is step-up an option?

What is Mike’s cost basis? Is it $100,000 (1998 cost), or can he use the ‘step up’ basis?

Step up basis, allows the taxpayer to ‘recalculate’ the cost basis not from the date of purchase, but from a new date in the future. Unfortunately, in general, this is not an option for a non-US person immigrating to the U.S.

Whole Story at TFX.

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