USA tax on tax-exempt UK bonds

[Blank]

I am a 48 yr.old UK resident. I am buying a USA rental property and, next year, will have to start filing tax returns in the USA. On the basis of days spent in the USA in the last three years I will be classed as Resident for tax purposes.

I am retired and almost all my UK income comes from tax-deferred "bonds" - ie I can take out up to 5% of my initial investment each year without incurring UK tax.

Do I have to state this as taxable "Income" on future USA tax returns, or does it fall into a similar tax-exempt status over there - if so, what?

[Taxbar]

Dear Blank,

The US treatment of what is called the 5% tax-free portion of a UK life product is a matter of US tax law and as such needs a US tax adviser to comment. In UK tax law the 5% is treated as a repayment of capital and is not taxable on that basis, if the US sees it in the same way then no tax is due.

If you want to be put in touch with a US tax adviser let me know

Daniel M Feingold
Barrister-at-law (NP)
Strategic Tax Planning
International & UK Tax Consultants
 
Treen House 72 Park Road,
Prestwich Manchester M25 OFA
Tel: 0161 720 7244
E-mail: sedrate @easynet co.uk