How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lev Your Own Question

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23168
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

I reside in the US as a green card holder, am a UK citizen

Resolved Question:

I reside in the US as a green card holder, am a UK citizen but am non-domiciled from a UK tax perspective. I hold some investments in the UK that I expect to sell in the near term. I have two questions relating to this:
1) I believe that any capital gain on the investments will only be taxable in the US due to my non-domiciled status in the UK and the UK/US tax treaty. Is this correct?
2) One of my investments is within an Individual Savings Account (ISA) an investment vehicle that makes all capital gains and income tax free (similar to a Roth IRA). While the UK government treats this as tax free, is it safe to assume that the US government would expect taxes to be paid on any capital gain?
Thanks in advance for any assistance.
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

(1)

You are correct that as a green card holder you generally is considered an US resident for tax purposes and all your income worldwide is taxable in the US.

 

If the same income is taxable in the US and abroad - you will be able to claim a credit for foreign taxes paid on your US tax return.

 

(2)

The distribution from Individual Savings Account (ISA) is treated as a pension income. Your contributions are part of your Cost basis and only earnings are included into taxable income.

 

As a general rule, the pension/annuity articles of most tax treaties allow the country of residence (as determined by the residency article) to tax the pension or annuity under its domestic laws. This is true unless a treaty provision specifically amends that treatment.

US-UK tax treaty specifically exclude pensions paid from public funds, but not the type of payment you mentioned.

You may review tax treaty here - http://www.ustreas.gov/offices/tax-policy/library/uktreaty.pdf

and here are nice comments - http://www.uscib.org/index.asp?documentID=1940

 

Let me know if you need any help.

 

Customer: replied 4 years ago.

Lev,

 

thanks for your reply and apologies for the delayed response. I'm clear on part 1 of your answer but wasn't entirely sure about point 2 so was hoping to clarify further....

I have read elsewhere that ISAs are treated as "Passive Foreign Investment Companies" rather than pension income as you mention - do you have any information relating to this please?

Thanks for any clarification,

Customer/p>
Expert:  Lev replied 4 years ago.

An Individual Savings Account (ISA) is designed for the purpose of retirement savings with a favorable tax status for UK residents - similar to IRA accounts in the US (to be more précised - Roth IRA).

 

Thus the US-UK tax treaty - each Contracting State recognizes a pension scheme established in the other Contracting State - see also the tax treaty document referenced above - Article 18 Pension Schemes - which covers ISA accounts.

So if you transfer funds from your ISA into another ISA under UK rules - that will not trigger a taxable event in the US. See for instance this Memorandum which disallows transfers from UK tax deferred account into the US tax deferred account - http://www.irs.gov/pub/irs-utl/am2008009.pdf

 

I am aware of discussions (while I disagree that it is correct - unfortunately - there is no guarantee that in case of audit the IRS agent will take my side...) in which ISAs are treated as PFICs - for instance - http://britishexpats.com/forum/showthread.php?t=514993

 

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23168
Experience: Taxes, Immigration, Labor Relations
Lev and other Tax Specialists are ready to help you
Customer: replied 4 years ago.
Thanks for your help.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
 
 
 
Chat Now With A Tax Professional
Lev
Lev
Retired
19288 Satisfied Customers
Taxes, Immigration, Labor Relations