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Capital gains and the IRS

Discussion in 'Accounting, Tax & Legal' started by broadscott, 24th Jan, 2013.

  1. broadscott

    broadscott Active Member

    Joined:
    15th Oct, 2008
    Posts:
    40
    Location:
    Melbourne
    I am about to go work in America for a few years as an expat and I have a question about capital gains. If I buy shares in Australia while overseas, I am not deemed to have acquired the shares for capital gains purposes until I return to Australia and become a tax resident. If I then sell the shares, do I have to pay US capital gains on the gain made while I was in the US?
     
  2. tax guy

    tax guy Member

    Joined:
    9th Dec, 2010
    Posts:
    14
    Location:
    Sydnye, NSW
    Hello BroadScott,

    The first thing that you will need to determine is which country you are a tax resident of. It is possible to still be a tax resident of Australia, whilst you are working as an expat in the USA.

    Both countries tax worldwide income, so which ever country you are a tax resident of is likely to tax your worldwide capital gains.

    In the scenario that you are a tax resident in the USA then the USA would tax the capital gains on your Australian shares and these would not be taxable in Australia (assuming you do not own more than 10% of an ASX listed share).

    If you return to Australia and become a tax resident of Australia, then your CGT assets that you hold at that time inherit a cost base equal to the market value at the date you become a resident.

    If you have CGT assets when you cease becoming an Australian tax resident there are a few options available to you on how you treat the gain up to that date.

    You should check with you accountant or tax advisor to advise you on your personal situation
     
  3. broadscott

    broadscott Active Member

    Joined:
    15th Oct, 2008
    Posts:
    40
    Location:
    Melbourne
    Thanks. I recently found out that if I have Aus shares that yield a fully franked dividend I will not be able to claim the imputation credit and then will also be taxed on the dividend income by the IRS. Double whammy! Doesn't seem like a good strategy ...