Non-Resident Sells Property Abroad, Becomes Resident – Do They Owe U.S. Tax?
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
- Does MIke owe any tax to the U.S?
- If Mike owes tax, on what amount is it calculated?
- 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.