[Moulard]

So therefore wouldn't it be plausible that the IRS could read the detail on the payments that are made to my , and think (based on the detail on the payments) that they are independent contractor payments?

No. The IRS is not sent transactional information under FATCA IGAs

The following is what the ATO sends to the IRS (according to an Australia FOI request from a contributor to FixtheTaxTreaty ). I assume other taxing authorities will send similar, if not exactly the same information (given it all has to be fed into the same IRS systems)

• msg_bet_id: unknown field
• atchd_doc_ref_id: a long alphanumeric code that includes the name of the financial institution and perhaps an RFI identifier number?
• FirstName: my first name and, sometimes, my middle name
• LastName: Last name
• Address: my address of record
• Type: listed as NULL on my reports
• Number: “CAPAU#########” where ######### is the number
• Amount Balance Cur: Currency, AUD in my case
• Amount Balance: balance (in AUD as above)
• Number Closed Indicator: NULL in my case as no s closed
• Number Type: unknown but listed as NULL in my reports
• Payment Amount: a dollars.cents number
• Payment_type: listed in all my s as “Interest”
• TIN: Taxpayer Identification Number, in this case my social security number
• TIN Country: Listed as “US”
• RFI Name: name of the RFI

Further, while the IGAs require reporting in USD using US published spot rates, in the case of the FOI request above, the report provides calendar year-end balances not maximum balances which might make automated matching and exception identification against any Fincen FBAR or Form 8938 you file challenging if your tax agency does similar.

 

[Nononymous]

So therefore wouldn't it be plausible that the IRS could read the detail on the payments that are made to my , and think (based on the detail on the payments) that they are independent contractor payments?

It's already been answered above in more detail, but I'll reiterate. For any s reported under FATCA, the IRS will only see your year-end balance and any interest/dividend income. Banks are not required to report s with balances under US$50,000, but they are not prevented from doing so. In some countries certain types, typically tax-protected savings schemes, are not required to be reported. You should look at the text of the US - Costa Rica Intergovernmental Agreement to see exactly what is and is not reportable.

If the IRS decided that you were worth a serious investigation, it could request assistance from the Costa Rican government (I'm assuming this - check the tax treaty for details). But there would not be any automatic bulk transfer of information beyond what's included in the FATCA agreement.

 

[sasep]

I have a question about owning foreign property. My wife is an NRA spouse and I do NOT include her in my US tax return. We would like to buy a house in Europe, and we are discussing if the house should be owned only in her name.
I can see that there would be issues of owing capital gains tax upon sale - either with or without a 250K main-residence deduction. In our resident country, the sale would most probably be exempt from capital gains tax.
I thought of co-owning the property with her, and gifting her my share before sale (well under the lifetime gift limit), but I would have to pay large real estate transfer tax which would probably be as much as the US tax.
The advantages of her owning the full property seem clear.
What about the disadvantages? I lose some rights in the property (for instance, I guess she can sell the place without asking me if she wanted).
If these disadvantages can be mitigated by g some sort of contract by a notary, would giving her full ownership be the way to go?
And another question- if we co-own the property, and sell it later, and all of the money goes into her separate bank , then would this somehow exempt me from tax? And if not, how could the IRS ever even know that we sold the place, or owned it in the first place, for that matter, since there does not seem to be a place where ownership of foreign property is reportable...

 

[Jamie D]

HI Tabitha! Thank you!!

I am considering applying for residency in Costa Rica. There are two options for this (rentista and investor) but once approved I would be a temporary resident for three years. After three years as a temporary resident I can apply to be a permanent resident. As an "official" temporary resident, would I qualify, after a year, for FEIE under "bonafide resident"?

Thank you!

 

[Nivie]

Hi Tabitha

So we just sold property in the States. Owned 10 years, last 5 were rented while we were resident here in the UK on a spouse visa, now ILR. We are reinvesting to buy our first home here in the UK.
We calculated the calculated capital gains we were likely to pay using a H&R calculator and same for HMRC. Will claim double tax relief.

Our USA A has just informed us that she should or could have claimed Depreciation Expense on the real estate during its time providing a rental income. This was never claimed on her returns. Regardless, it now appears IRS will calculate the property depreciation and use to generate a depreciation expense tax, basicaly anther 25% of the difference between its depreciation and its selling value, (on top of her capital gains).
Investors can use 1031 Tax Exchange to avoid this tax and any gains but pretty certain this is not possible as we are reinvesting this in our new property here in the UK. In effect we will be penalised for not being able to use a 1031 tax exchange.

So my question is, as we were resident overseas here in the UK during the entire period the property was being used to generate a rental income, is Depreciation Expense relevant and more importantly, will the difference between depreciation and selling price mean another tax over and above the capital gains?

 

[Bevdeforges]

Given that Tabitha hasn't been around for quite some time now, I'm closing this thread. I see you have set up a separate thread in the tax forum, so I would check there for replies.