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Where Taxpayers and Advisers Meet

U.S. CGT for U.S./U.K. dual citizens residing in UK

jkat
Posts:1
Joined:Thu Jun 21, 2018 4:59 pm
U.S. CGT for U.S./U.K. dual citizens residing in UK

Postby jkat » Thu Jun 21, 2018 5:23 pm

Hi,

My husband bought a house in the UK back about 15 years ago. We met 5 years later and got married. I have dual citizenship (both UK and US passports from birth) but he is a UK citizen only - he had a greencard when we lived over there but it is now expired and we both live back in the UK. I have paid my taxes up to date both in the UK and US. We lived together in his property until last year when we moved and started renting it out. Recently we created a Trust Deed putting the property into my name since I earn a lot less than him and so I pay the tax on the rental income. Since this is the first year that we will receive rental income from the property I want to be sure that I do it properly and it doesnt negatively affect the CGT we'll owe to the US when we come around to selling it. We werent planning to sell any time soon, but it all depends on the situation re tax.

I believe that according to UK tax liability, since it was our primary residence up until recently we will only be liable for CGT after we moved out. I have received advice that the IRS would want CGT at 20% dating back to when my husband bought the property 15 years ago - which seems absurd since he is not a US citizen and we hadnt even met yet?! Furthermore, since we transferred the Trust Deed into my name, I believe that the US would now consider it to be 100% mine and I would be liable for 100% of the taxes rather than 50/50. I've been told that we cannot revoke the Trust Deed (although I'd rather not since we would end up making no profit at all if taxed at my husband's rate) since it is considered 'gifting' to the IRS. However, the property is registered to both of our names on the Land Registry and as far as UK laws are concerned we can just rip up the Trust Deed. I dont know whether to include the rental income in my 2017/18 self assessment in the UK and hence having it transferred over to my US tax return or if it would be better for the rental income to go to my non-US partner.

Any advice would be greatly appreciated. I am considering revoking my US citizenship, even though it incurs a fee of $2,300 but since I am up-to-date with my tax returns and am unlikely to work over there in the next 2 years it currently seems like the best option although I'd rather keep the option to work over there in the future if possible.

Many Thanks,
Jkat

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