Capital loss in UK and gain in USA – What CGT do I pay?

by Readers Question

2 weeks ago

Capital loss in UK and gain in USA – What CGT do I pay?

Make Text Bigger
Capital loss in UK and gain in USA – What CGT do I pay?

I am selling one of my rental properties in the UK at a loss. Next year I shall be selling my holiday home in Florida at a good profit.

My accountant has confirmed that I will be able to offset the UK loss against the US gain. However, he’s not very clear on whether I would have to pay CGT in the USA.

I’m not back in the US until February and would like some answers before then as I need to plan the sale.

I know some 118-ers have US property (Mark?) Anyone know about UK/US tax arrangements, or recommendations for an accountant who may know?

Many Thanks

Ann

 

Comments

Neil Patterson

2 weeks ago

Howdy Ann 🙂

I have just spoken with Mark and unfortunately for him he has only sold once in the US (Florida) and it was at a loss.

We cannot give tax advice on US taxes, but Mark was allowed to offset his US loss against his UK gains.

Mark thinks it is possible you will have to pay CGT in the US, however there is a double taxation treaty between the two countries so the tax paid in the US could be taken into consideration on your UK tax return.

He also said that you will need an accountant in the US to assist.

Paul Mullally

2 weeks ago

Hi Ann,
All I can say is that it will get complicated.
To start with:
It depends on how you originally purchased the property i.e. Is it residential or commercially owned via an LLC?
If residential, you have to calculate the gain based on the cost in sterling (converted at the $/£ rate at the time of acquisition) and the sterling value of the proceeds less the cost of sale, capital improvements etc.
The US has prime taxing rights in respect of the gain and you will have to account for tax in the US. The gain, unsurprisingly, is also taxable in the UK but you will receive a credit for the US taxes against your UK liability.
A percentage of the tax owed by you in the US will also be held on sale as part of the closing distribution.
You will need a tax advisor who knows his way around UK and US tax law.
Good luck.

Annie Landlord

2 weeks ago

Thanks Neil and Paul. It was purchased in dollars as a holiday home, by a private individual. It has never been rented out. The exchange rate at time was, I recall about $1.5 to the £. Now of course its hovering around $1.3.
I had heard that US taxation rules will take precedence and there is a reciprocal tax arrangement between the two countries. I know I will have to pay the higher of the two calculations of the two countries. They get you all ways, don't they! I'm rather hoping to speak to an accountant with knowledge of both systems before my next visit to the US, so I am armed with the correct information.

Mark Alexander

2 weeks ago

Reply to the comment left by Annie Landlord at 06/12/2017 - 12:37
Hello Annie

When I sold a holiday home in Florida the closing agents liaised with their recommended tax advisers on my behalf. Presumably you are also aware that 20% of the sale proceeds will be withheld until your tax affairs are resolved, and this can take well over a year?

andy adewale

2 weeks ago

Hi Ann
I'll be happy to give you contact details for my certified public account CPA in America who deals with our property tax matters in the USA if that is of interest to you. Please let me know. I recommend him highly.

Annie Landlord

2 weeks ago

Thanks Andy, that would be very helpful. I tried clicking on your name in order to pm, but it didn't seem to work. Can you try to pm me, unless you're happy to give out his contact details here

Mark Alexander

2 weeks ago

Reply to the comment left by Annie Landlord at 06/12/2017 - 13:07
Property118 does not have a private messaging facility

Annie Landlord

2 weeks ago

Reply to the comment left by Mark Alexander at 06/12/2017 - 12:46
I knew there was a retention Mark. I didn't know it could take so long, but not much I can do about that. I have an excellent realtor. She arranged the initial purchase and is well known to my Florida friends. She recommended an insurance broker who turned out to be very helpful, so when I sell I will probably go with her recommendations for closing agents and tax advisers.

Mark Alexander

2 weeks ago

Reply to the comment left by Annie Landlord at 06/12/2017 - 20:37
That's what I did.

Who is your Realtor as a matter of interest and where is she based?

Annie Landlord

2 weeks ago

Reply to the comment left by Mark Alexander at 06/12/2017 - 20:45
Hi Mark, I did answer but it isn't showing up. Apologies if it appears twice now! My realtor's name is Jenn Clements. She was based in Merritt Island. I have her number and email address

1 2 3

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Luxury Retirement Home Investment In Stately Manor