[breaker1]

Here is my situation: I am now an American citizen. I have lived in the US since 2004. Prior to coming here I lived in Italy. I am married to a native born male American citizen. While in Italy, I was a teacher and used my money to buy land.

Rather than selling the land before moving to the USA to marry here, I decided to keep the land in my native surname only in case things did not workout as sometimes they don’t. Well, they have worked out and we have a son. Now, we could use the money from selling the land to buy a home here to raise our son in a neighborhood with children and a good school system.

I could probably sell the land for approximately $ 350,000.00 USA dollars. So how can I transfer this money to the USA without paying exorbitant taxes, or any taxes for that matter, for the sale of land that never was paid for using even one American dollar; but through the sweat of several years of me working in my then homeland before marriage?

1) Can I transfer the money to the US all at one time if is coming from a savings account I still have in Italy without paying the IRS taxes on the amount transferred?
2) OR….. can I transfer it to the USA as a gift to my son? Keep in mind I was not an American citizen until he was 4 years old. He was born in American.

We need a house. What can I possibly do to not have to pay taxes on money I earned and invested while I was then, and am still considered a dual citizen of Italy as well as the USA?

Thank you.

[AtlantaTaxExpert]

There are NO transfer taxes in the United States, though you would have to file Form 3520 to report the transfer to the IRS. That is informational only; no taxes are due on the transfer.

However, because U.S. citizens MUST report all world-wide income (WHEN you bought the land is irrelevant), you WOULD have to report the sale of the land on Schedule D and pay long-term capital gains tax on the difference between what you paid for the land and what you sold it for. If you paid similar taxes in Italy on the land sale, you can claim a Foreign Tax credit on this PASSIVE income by filing Form 1116.

Right now, the maximum capital gains tax is 15%, and it may be as low as 5%.

Suggest you get professional tax help when you file your annual tax return when you include the land sale on that return.

[The Junoo]

“So how can I transfer this money to the USA without paying exorbitant taxes, or any taxes for that matter, for the sale of land that never was paid for using even one American dollar; but through the sweat of several years of me working in my then homeland before marriage?”

>>>>>>>Then, as long as it was your primary home before marriage and you lived, in the house for at least 24 months in that 5-year period, you can exclude up to $250K in profit from the sale of a main home.So you are NOT subject to US taxes , capital gain tax, to both the IRS and your state.




“1) Can I transfer the money to the US all at one time if is coming from a savings account I still have in Italy without paying the IRS taxes on the amount transferred?”


>>>>>>Of course;however,as long as the aggregate value of the account in ITALY exceeds $10K at any time during the calendar year,you must file Form TD F 90-22.1 with the U.S. Department of the Treasury due by June 30 of the year following the year that the account holder meets the $10K threshold.



2) OR….. can I transfer it to the USA as a gift to my son? Keep in mind I was not an American citizen until he was 4 years old. He was born in American.




>>>>>>>Then, you need to file form 709(even if you split the gift with your spouse); if the cash value of all gifts given to a single person does not exceed $13K($26K for gift splitting) within a year, neither party owes a gift tax.But gifts in excess of the annual exclusion may still be tax-free up to the lifetime estate basic exclusion amount $5,140K in 2012-13, I guess,although for estates over that amount such gifts might increase estate taxes. Taxpayers that expect to have a taxable estate may sometimes prefer to pay gift taxes as they occur, rather than saving them up as part of the estate.I mean Even if you give a gift exceeding the annual exclusion amount to your child, you may still be able to avoid paying gift tax. Any amounts you give your children above the annual exclusion amount count toward your lifetime exclusion amount, which was $5.14 million as of 2012-13. As long as you keep your lifetime gifts under this amount, which is subject to change annually, you can avoid paying gift tax. Even after you die, however, your estate still cannot take a tax deduction for any amounts that pass to your children due to inheritance.



We need a house. What can I possibly do to not have to pay taxes on money I earned and invested while I was then, and am still considered a dual citizen of Italy as well as the USA?



>>>>>>>>As mentioned above, you can exclude up to $250K in profit from the sale of a main home , you lived, in the house for at least 24 months in that 5-year period.

[ebaines]

>>>>>>>>As mentioned above, you can exclude up to $250K in profit from the sale of a main home , you lived, in the house for at least 24 months in that 5-year period.

In order to exclude the capital gains on the sale of a home it must have been your principal residence for at least two years of the previous five. Since the OP has been in living in the US since 2004 it's pretty clear that the sale of property in Italy doesn't qualify for this tax break. He must report the sale and pay capital gains tax on the proceeds from the sale less his tax cost basis.

[AtlantaTaxExpert]

Good catch, ebaines!

[The Junoo]

"In order to exclude the capital gains on the sale of a home it must have been your principal residence for at least two years of the previous five. Since the OP has been in living in the US since 2004 it's pretty clear that the sale of property in Italy doesn't qualify for this tax break. He must report the sale and pay capital gains tax on the proceeds from the sale less his tax cost basis"


>>>>>Exactly. Agreed.

Breaker1 said,” quote,” I have lived in the US since 2004. Prior to coming here I lived in Italy. I am married to a native born male American citizen.”


>>>>>>When did you get married? I assume that you got married in 2004.So,as you said, you started to live in the US from 2004 but you actually get married to a US citizen in 2004. As long as you have lived in the US since 2004(I mean UNLESS you lived, in the house in Italy for at least 24 months in that 5-year period, you can't exclude up to $250K in profit from the sale of your main home in Italy.Then you, now as a US resident, are subject to US taxes, both fed and state taxes, on your US source and world wide income on your return.Since the home in Italy is in your name, then you'll need to report the LTCG on the sale on your tax return. You would compute your cost at the prevailing exchange rate at the time the condo was purchased in your name. Please contact the Intl tax repre at the IRS form more info in detail.

[MukatA]

Sale of a land does not qualify under "Exclusion for main home." So
1. You must report sale on your US tax return.
2. If you paid taxes in your home country, file Form 1116 to claim credit for the taxes paid.

[The Junoo]

breaker1, I am so sorry for my misunderstanding(Now you may try to sell the land, NOT your primary home, right? )
;Mukat is totally accurate;sale of a land, NOT PRIMARY HOME(sorry my misundrstanding) does not qualify under "Exclusion for main home. So in any case,foreign transfer of land is NOT subject to $250K gain exclusion.Sorry for my misunderstanding again~~~

[AtlantaTaxExpert]

Kudos to MukatA for noticing that the OP was speaking of land and not a primary home.

[IntlTax]

Form 3520 is needed if it is a gift or inheritance from a nonresident alien. Form 3520 is not needed if you are transferring your own money.