This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.


Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

CGT Eligibility Test on Sale of Property

Posts: 2
Joined: Wed Oct 09, 2019 8:05 pm

CGT Eligibility Test on Sale of Property

Postby paulg13 » Wed Oct 09, 2019 8:38 pm


My wife and I who are UK citizens have just received a huge tax demand from the IRS based on an unreported gain from a property sold in 2017. We were living and working in the US between 2014 and early 2018 and were resident aliens.

The tax demand relates to a property in which we lived and owned from April 2014 to June 2017. Based on the IRS publication 523 we pass all the normal eligibility tests i.e. Ownership, Residence and Look-Back tests. This means we should be entitled to an exclusion gain of $500,000 which is well in excess of the gain we made. Our concern however relates to Eligibility Test 1 - Automatic Disqualification and the following bullet point:

. You are subject to expatriate tax

Does this just relate to US citizens, or does it relate to non US citizens? I would be very grateful if someone could put my mind at rest and confirm that we are not subject to expatriate tax.

Many thanks

Posts: 368
Joined: Wed Aug 02, 2017 9:09 pm

Re: CGT Eligibility Test on Sale of Property

Postby darthblingbling » Thu Oct 10, 2019 8:28 am

From my short stint working in US tax, expat tax covers US citizens who renounced their citizenship and long term residents who gave up their legal residency.

I think in addition it only covers the above if they were actually subject to the expat tax charge. This doesn't seem to apply to you based on the info you gave.

I'm not a US tax expert tho, but there are some on this board and they'll probably chip in soon.

I think the IRS are annoyed that you didn't report the sale on your return and going for worst case scenario.

Posts: 2
Joined: Wed Oct 09, 2019 8:05 pm

Re: CGT Eligibility Test on Sale of Property

Postby paulg13 » Thu Oct 10, 2019 10:21 pm

Thanks for your response which matches what I thought, but was uncertain about.

I also think you are right about the IRA being annoyed that I did not report the sale, although according to Publication 523 you do not need to report a home sale if there is no gain to report.

Posts: 229
Joined: Thu Aug 16, 2012 4:31 pm

Re: CGT Eligibility Test on Sale of Property

Postby DavidTreitel » Sat Dec 14, 2019 4:09 pm

Paul - You and your wife had US green cards. Were these abandoned? Were you subject to the expatriation tax? If so, did you file Forms 8854? These issues are common and the kind of US tax question we help with professionally every day. Feel free to contact me if this is not yet resolved.

David Treitel | Managing Director | American Tax Returns Ltd
The Old Exchange, 12 Compton Road, London, SW19 7QD

Tel: 020 3542 6330


Return to “Capital Gains Tax, CGT”