Additional Taxes If European Investor?
My wife is a US citizen however I am a European. I have been told that we are liable to pay an additional 10% tax on the purchase of a property in Florida because I am a European. The mortgage will be in both our names, and although we will not be living in the house as our primary residency (we currently live abroad) it would be our only property in the US. Would there be any difference if we subsequently purchased a pre-construction property with the intention of flipping it?
A couple of points, for the exchange to be completely tax deferred the replacement property must cost at least as much as the sale price of the relinquished property, and, all of the net proceeds from the relinquished property sale must be reinvested in the replacement property acquisition.The amount by which you fail on either point, is taxable. For example, if the replacement property value is $50K less than the sale price of the relinquished property, that $50K is taxable boot. If you fail to reinvest some portion of the relinquished property sale proceeds (say $50K) into the replacement property acquisition, that amount is taxable boot.
These two points are not mutually exclusive. If you sell your relinquished property for $250K and acquire your replacement property for $200K, then if the $50K difference in the property prices also represents the amount of money taken from the relinquished property sale proceeds, then only $50K is taxable.
It is true that only money taken out of the exchange is taxable, everything left in the exchange is tax deferred.[ Edited by NewKidinTown2 on Date 02/01/2005 ]
Thanks, that is what I thought.
The closing attorney is telling me that I would be taxed on cash taken plus the difference is relinquished and replacement property.
I have done a couple of exchanges, but I am not an expert. Perhaps Bill Exeter, who is a professional exchange facilitator, will weigh in on this question.