US TAX - Do I PAY TAX ON FUNDS I AM BRINGING INTO THE US FROM ABROAD ?

[50 cool 50 0]

Hi everyone

Thanks for a wonderful forum.

my question is quite self explanatory.

I am a permanent resident in California for 3 years.

I have a green card and social security number etc.

I pay my taxes, me and my wife file jointly each year.

I have an apartment in Berlin that is in the process of being sold. i have owned it for 7 years and bought it before I came to the US.

I want to transfer $240,000 USD from Germany when the sale is complete and use the money towards a house for my family in the USA.

I have and will be paying German capitol gains tax on the money before it leaves Germany.

Will I have to pay a second US tax on this money in the USA when it arrives?

If so how much?

I spoke to my accountant who said 'no because it is money that was made before i came to the US'.

I spoke to my lawyer who said 'yes I will have to pay tax'.

If I have to pay the secondary tax then its quite off putting and i will just buy more property in germany and forget the idea.

Has anyone ever been in a similar situation?

thank you everyone for your answers and understanding

Barry

[Anh map 2,098]

It sounds like you will have the gain on the sale which would be taxable. But if you are taking that money and putting toward a new home there are exclusions.

Take a look here (or do some Googling) for some info >>> http://www.bankrate.com/finance/real-estate/capital-gains-home-sale-tax-break-a-boon-for-owners-1.aspx

[Harpa Timsah 13,258]

There is no tax to bring money into the US, but earning money anywhere might be taxed, depending.

How much will you earn from the sale?

[Ron-Tanya 23]

I have done what you are talking about. If you bring the money into the US and you have paid the tax in Germany you will not have to pay taxes on it in the US. If you bring the cash in as I did, report it on the form on the airplane for customs. They will question you on it, tell them the truth. Then put it in the bank in one lump sum!!!! Very important, I have read many wrong answers on this site as to put the money in the bank in sums under $3000 so it will not be reported.WRONG!!!!!!!!!!!!!! If you do the bank will report you and that is called MONEY STRUCTERING it is illegal to put your money into a bank in this fashion. The IRS thinks you are trying to hide something and they will take you to court if you put it piece mill into the bank. What you are doing is fine and legal just put it all in the bank at one time. Then use it to pay for a new house or what ever. NO TAXES are due the Americans as you have already paid the Germans. I know this for a fact as I have also brought a large sum of money in from Germany that the taxes had been paid. It was in cash and I was questioned at the Airport by customs. Everything was fine no taxes due the US.

[50 cool 50 0]

I have done what you are talking about. If you bring the money into the US and you have paid the tax in Germany you will not have to pay taxes on it in the US. If you bring the cash in as I did, report it on the form on the airplane for customs. They will question you on it, tell them the truth. Then put it in the bank in one lump sum!!!! Very important, I have read many wrong answers on this site as to put the money in the bank in sums under $3000 so it will not be reported.WRONG!!!!!!!!!!!!!! If you do the bank will report you and that is called MONEY STRUCTERING it is illegal to put your money into a bank in this fashion. The IRS thinks you are trying to hide something and they will take you to court if you put it piece mill into the bank. What you are doing is fine and legal just put it all in the bank at one time. Then use it to pay for a new house or what ever. NO TAXES are due the Americans as you have already paid the Germans. I know this for a fact as I have also brought a large sum of money in from Germany that the taxes had been paid. It was in cash and I was questioned at the Airport by customs. Everything was fine no taxes due the US.

thanks for all the replys!

I will have it wired from my german account to my USA bank account. The wire will be for $240,000 to 250,000 USD.

So do I just do the wire and say nothing about it in my 2013 taxes in April?

just out of curiosity, if i became a citizen and did this, would i have to pay taxes on it then?

[Anh map 2,098]

thanks for all the replys!

I will have it wired from my german account to my USA bank account. The wire will be for $240,000 to 250,000 USD.

So do I just do the wire and say nothing about it in my 2013 taxes in April?

just out of curiosity, if i became a citizen and did this, would i have to pay taxes on it then?

The bank will report it to the IRS coming in.

Talk it over with your accountant as to what it proper. And be sure that they will be available to answer any questions from IRS based on their advice.

Citizenship would not change anything.

[JohnR! 5,495]

thanks for all the replys!

I will have it wired from my german account to my USA bank account. The wire will be for $240,000 to 250,000 USD.

So do I just do the wire and say nothing about it in my 2013 taxes in April?

just out of curiosity, if i became a citizen and did this, would i have to pay taxes on it then?

I have been in the same situation with property in France and England. Make sure you have the paperwork for the purchase and sale and convert to US dollars using the exchange rate from the day the transactions took place. If you are wiring the money from Germany, the transfer papers will show both amounts. You must declare the sale of the property as you would were it in the US, when you file your 2012 taxes. You can also deduct any foreign taxes paid in Germany and that may generate a residual tax amount owed to the IRS.

If you don't declare the money, you may end up being audited by the IRS and you'll have to produce evidence as to the origin of the money, lest you are seen as a potential money launderer.

By declaring it in your taxes, you may get a break if you use the money to purchase a new house in the US within two years (?) from the sale date, and in that manner you may not owe money on the profit from the sale. Also by declaring it, the money is considered clean and you need not worry about the IRS being intrigued by a quarte million dollars showing up, as though by magic, in your bank account.

This procedure would not be any different were you a US citizen. When it comes to taxes, citizens and LPRs are subject to the same rgulations.

Good luck!!

[Brad and Vika 129]

I work for a bank, and want to post agreement with several points here that may appear at first to conflict.

1) I agree that if you wire or deposit small amounts in an attempt to avoid IRS scrutiny, the bank will report the deposits. I don't work in retail banking, but the branch folks are required to fill out a SIR (suspicious incident report I think) when they see some one laddering small deposits. The concerns are money laundering (as stated above) and/or other illegal activity like drug dealing.

2) I agree that a transfer of the full amount will also be flagged, and result in questions, first from the bank, then from the government.

3) I agree that your tax liability MAY depend on where/how the money was earned, as well as your status. If you are a German citizen, I think you may have to pay German taxes on the gain, and will owe the US the difference between that amount and the US tax on the gain-on-sale if the US tax results in a higher amount. If you earned the money here, the US would tax it first, then presumably Germany would require the same calculation. The point of all this is to say that a tax expert is needed to sort it out. Resident aliens get punished this way all the time, as do expats that earn money abroad.

4) I am honestly not sure about sheltering the gain by investing it in US real estate. If you sold the property here, you can. Selling foreign property probably eliminates that shelter.

Good luck to you. I am curous as to what you do next.

[Nich-Nick 3,353]

Will I have to pay a second US tax on this money in the USA when it arrives?

If so how much?

I spoke to my accountant who said 'no because it is money that was made before i came to the US'.

I spoke to my lawyer who said 'yes I will have to pay tax'.

If I have to pay the secondary tax then its quite off putting and i will just buy more property in germany and forget the idea.

Has anyone ever been in a similar situation?

thank you everyone for your answers and understanding

Barry

There is a tax treaty with Germany that you might want to read http://www.irs.gov/pub/irs-trty/germany.pdf

It discusses which place should tax you and about gains.

[peonyflowers99 4]

Hi everyone

Thanks for a wonderful forum.

my question is quite self explanatory.

I am a permanent resident in California for 3 years.

I have a green card and social security number etc.

I pay my taxes, me and my wife file jointly each year.

I have an apartment in Berlin that is in the process of being sold. i have owned it for 7 years and bought it before I came to the US.

I want to transfer $240,000 USD from Germany when the sale is complete and use the money towards a house for my family in the USA.

I have and will be paying German capitol gains tax on the money before it leaves Germany.

Will I have to pay a second US tax on this money in the USA when it arrives?

If so how much?

I spoke to my accountant who said 'no because it is money that was made before i came to the US'.

I spoke to my lawyer who said 'yes I will have to pay tax'.

If I have to pay the secondary tax then its quite off putting and i will just buy more property in germany and forget the idea.

Has anyone ever been in a similar situation?

thank you everyone for your answers and understanding

Barry

Hi Barry,

You pay taxes on income earned in the US and all you have to do is do an electronic transfer. I have transferred from Switzerland and I never paid taxes on it as I paid in Switzerland before the transfer was done. You can bring up to 10'000 USD in cash and declare at the POE (ex. 9'999) and you still don't have to pay taxes. You still have to declare it.

If you want to be sure ask a tax service.

Best regards,

Andrea

[JudyKCski 12]

Hi Barry,

You pay taxes on income earned in the US and all you have to do is do an electronic transfer. I have transferred from Switzerland and I never paid taxes on it as I paid in Switzerland before the transfer was done. You can bring up to 10'000 USD in cash and declare at the POE (ex. 9'999) and you still don't have to pay taxes. You still have to declare it.

If you want to be sure ask a tax service.

Best regards,

Andrea

Just as Andrea says...

however if you have had a bank account in another country with more than $10,000 in that account you should have filed a TD F 90-22.1 which is to be filed by June 15.

Sure wish someone would write a book in layman's terms of everything a person needs to do that is understandable for non-lawyer's.

[50 cool 50 0]

thanks for all the advice guys.

i think I have to talk to another accountant. I need to be sure because I don't think it is fare to pay taxes on earnings invested and realized pre USA dreams.

If i will get heavily taxed then I will just re invest in germany or somewhere else

[aaron2020 11,651]

Hi everyone

Thanks for a wonderful forum.

my question is quite self explanatory.

I am a permanent resident in California for 3 years.

I have a green card and social security number etc.

I pay my taxes, me and my wife file jointly each year.

I have an apartment in Berlin that is in the process of being sold. i have owned it for 7 years and bought it before I came to the US.

I want to transfer $240,000 USD from Germany when the sale is complete and use the money towards a house for my family in the USA.

I have and will be paying German capitol gains tax on the money before it leaves Germany.

Will I have to pay a second US tax on this money in the USA when it arrives?

If so how much?

I spoke to my accountant who said 'no because it is money that was made before i came to the US'.

I spoke to my lawyer who said 'yes I will have to pay tax'.

If I have to pay the secondary tax then its quite off putting and i will just buy more property in germany and forget the idea.

Has anyone ever been in a similar situation?

thank you everyone for your answers and understanding

Barry

Barry,

Are you selling this house for a profit? If no, then you do not have a US tax issue. If yes, then you do have a US tax issue.

First, you will only be taxed only on the profits. You will not be taxed on the amount you paid for the house (your basis in the asset). For example: You paid $200,000 for the house. You sold it for $250,000. You made a $50,000 profit. Only the $50,000 is taxable income.

Second, the accountant is plain wrong that you earned the money before you came to the US if profits are involved. Profits are recognized in the year that you sell an asset. For example: You bought your house in 2005 for $200,000. The value of your house fluctuated between then and now - from $150,000 to $500,000. You sell the house in 2012 for $250,000. You recognize $50,000 profits in 2012.

Third, a green card holder is treated like a US citizen. Income earned worldwide are taxable in the US. It the responsibility for the privilege of living here.

I don't know enough about the US/Germany tax treaty, but I do about tax treaties in general. The reason for tax treaties is to encourage foreign investment and eliminate both country taxing the same income. Generally, there are exemptions for securities, bank interests, etc. because you can choose banks anywhere and you can buy securities on foreign exchanges. Because you have the option to invest your money anywhere, these types of assets are tax in only one country. However, if you want to invest in German real estate, you don't have an option to buy German real estate in another country. Real estate is unique. And because it is unique, it will be taxed by the country where the real estate is located.

If you pay capital gains taxes on the profit income in Germany, you will get a US tax credit.

It doesn't matter if you don't bring the money to the US. You realized the income when you were a green card holder, so you must report it as income on your tax return. If you fail to report it as income, you are risking a giant tax bill and fines for failing to report your income.

Sorry.

Edited September 10, 2012 by aaron2020

[aaron2020 11,651]

thanks for all the advice guys.

i think I have to talk to another accountant. I need to be sure because I don't think it is fare to pay taxes on earnings invested and realized pre USA dreams.

If i will get heavily taxed then I will just re invest in germany or somewhere else

You will earned the money this year when you sell. This may not seem fair to you when you acquired the asset before immigrating to the US, but it is US law. Profits are earned and taxed in the year you sell the asset.

It doesn't matter if invest in Germany or somewhere else. That's your decision. Investing the proceeds after you sell the apartment does not erase the fact that you sold it for a profit in 2012 while you are an LPR which means you must report it as income on your US tax return for 2012.

Generally, taxes in Germany is much higher than in the US. If you pay income taxes on the profits in Germany, you will get a US tax credit that will eliminate your US tax liability on the profits.

The bottom line is that you will likely owe nothing or very little in US taxes. Do the right thing and report your income on your US tax return.

P.S. If you used the apartment as your personal residence for at least 2 years in the 5 years before you sold it, then you qualify for the personal residence exclusion of profits up to $250,000 which would eliminate any US taxes.

Edited September 10, 2012 by aaron2020

[Nich-Nick 3,353]

Brilliant reply by aaron2020. He understands taxes and explained it well. Not every accountant is well versed in international issues. And not every accountant specializes in taxes. So maybe show him aaron2020's replies so he can study your issue more. However I would expect him to already know the basics, which he didn't seem to know. Or maybe you just misinterpreted what he said. The good news is you won't be paying double taxation because of the tax treaty between the US and Germany.