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Lev
Lev, Tax Advisor
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My wife is both a Swiss and American citizen, living in the

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My wife is both a Swiss and American citizen, living in the US. She is thinking about selling a property she owns in Switzerland and bringing the money into the US. She will be paying capital gains taxes in Switzerland on the proceeds of the sale. Will she be taxed on the money when it's transfered to the US as well?
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

LEV :

Hi and welcome to Just Answer!
The fact of transferring the money is not a taxable event and she doesn't need to report it.
However the sale transaction and corresponding capital gain - should be reported.
As an US citizen - your wife is required to report all her worldwide income on US tax return.
Because that income is taxable for both - US and Switzerland - she will claim a credit on her US tax return. That effectively will eliminate double taxation.
To determine the amount of credit - the person should use the form 1116 and attach it to the tax return. - http://www.irs.gov/pub/irs-pdf/f1116.pdf Here are instructions - http://www.irs.gov/pub/irs-pdf/i1116.pdf .
On your tax return - form 1040 - http://www.irs.gov/pub/irs-pdf/f1040.pdf the credit is reported on the line 47.
In additional - if she will be using a bank account in Switzerland to accomodate the sale transaction - she might be a subject of FBAR reporting.
Let me know if you need any help or clarification.

Customer:

If I'm reading and understanding your reply correctly; since the Swiss will tax the sale proceeds at 20% and US capital gains is 15% (I think) then she will only be paying taxes on the income once in Switzerland but not again in the US so long as we handle the reporting correctly?

LEV :

Your understanding is correct.
However - that doesn't eliminate her reporting requirements and because additional income is included into her adjusted gross income (AGI) - that might trigger some side effect - such as eligibility for other deductions and credits which are based on AGI, AMT taxes, etc.
To be précised about additional tax liability - you need to prepare the tax return - but generally - your understanding is correct.

LEV :

Let me know if you need any help or clarification.

Customer:

I had to leave for a while so thank you for checking back - the frustrating thing is not knowing the actual tax impact of bringing the money into the country before doing it. As a Swiss citizen she only has tax liability in this country once she brings the money here. The income the real estate has produced is under $10,000 a year and is not brought here or accumulated there. We use it in Europe each year when we travel there. Any additional information you might think relevant would be appreciated otherwise thank you for your time.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23250
Experience: Taxes, Immigration, Labor Relations
Lev and 4 other Tax Specialists are ready to help you
Expert:  Lev replied 3 years ago.
Again - the fact of transferring the money is not a taxable event and she doesn't need to report it.
As an US citizen - your wife is required to report all her worldwide income on US tax return - regardless if the income is produced in the US or abroad and regardless in the money were transfered to the US or stay in a foreign country.
If for some reason you did not report that income - please be aware of a new 2011 Offshore Voluntary Disclosure Initiative (OVDI) that runs through Sept. 9, 2011.
See additional information here - http://www.irs.gov/newsroom/article/0,,id=210027,00.html
If you need help in estimating your possible tax liability - I will do that for you - if you provide more information about your tax situation.
Please be sure to ask any questions to clarify your concerns.

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