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Capital Gains and Tax Treaty

I am a U.S. citizen currently residing in a country which has a tax treaty with the USA. It specifies that capital gains, regardless of in which country they occur, are to be treated as having taken place in the country of residence. I would then have to file a Form 8833 indicating this.

But my question is where/if the gain should be listed? On form 8949, but not transferred to Schedule D? Forward to Schedule D, but not included in the calculation of tax? Included in the calculation of tax, but getting the Foreign Tax Credit?

Reply to
Lawrence Israel
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You first need to look at the savings clause in the convention. US treaties typically have a savings clause that says the US reserves the right to tax its citizens as if the convention had not been in place except for the following ....... Typically, Capital gains are not one of the exceptions. Assuming, the convention has the savings clause and Capital Gains are not excepted, then those gains wind up on your 1040 and you avoid double taxation (assuming your country of residence also taxes the gains) via the FTC on the US return.

Reply to
Alan

So what do you do if there are things taxable first by the US, and others taxable first by the foreign country? Each tax is reduced by the other's tax on certain objects. But how do you separate out the taxes taxable first by the US and given a credit in the foreign country, and those taxable first by the foreign country and given a credit by the US?

Reply to
Lawrence Israel

You consult a tax preparation professional. You don't say which country you are in, but there are US qualified tax preparation professionals in many parts of the world. You can see if there is one near you, using the IRS Preparer Directory, here:

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Reply to
Stuart O. Bronstein

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