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Boris Johnson Evaded Taxes On Property Sale

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He should just ditch his US passport if he doesn't want to pay US taxes.

As I understand it that has become rather expensive. When you renounce your US citizenship high net worth individuals like Boris are hit with an "expatriation tax" which I believe is capital gains tax on all your worldwide assets based on current market value. He will also have to be square with Uncle Sam before they will let him renounce, as stated in this article:

http://rt.com/usa/207375-boris-johnson-capital-gains/

“When you exit you must certify five years of US tax compliance to the IRS. And any tax for the current or prior years must be paid"

I don't know what coercive powers the US has to come after its citizens living abroad who don't pay their taxes. Can they get a British court to collect the debt from him?

Might cause a few problems if he ever becomes PM and isn't able to visit the US without getting arrested :o

Edited by subspace

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I didn't think he was that bright before, but he's seriously stupid if he thinks he can get away with this.

http://www.telegraph.co.uk/news/politics/london-mayor-election/mayor-of-london/11243742/Boris-Johnson-could-be-hit-with-six-figure-tax-bill.html

He'll brush it aside, people will just ignore it or say "good old Boris, ha ha" his personality cult is too strong.

This song sums-up the likes of Boris and Nigel very well.

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The rates of tax in the US are considerably lower than in the UK - and 'double taxation relief' is available, the effect of which is almost certainly mean that he would have no additional US tax to pay if he has paid at UK rates. However, if there are income and gains that are subject to US tax on which no domestic tax has been levied, he could have an additional liability. For example, if he has income earned and paid through a jurisdiction other than the UK. Or, capital gains on a personal residence in excess of the exempt amount - which is $250k.

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The rates of tax in the US are considerably lower than in the UK - and 'double taxation relief' is available, the effect of which is almost certainly mean that he would have no additional US tax to pay if he has paid at UK rates. However, if there are income and gains that are subject to US tax on which no domestic tax has been levied, he could have an additional liability. For example, if he has income earned and paid through a jurisdiction other than the UK. Or, capital gains on a personal residence in excess of the exempt amount - which is $250k.No

Not quite - rates of income tax can be higher in some states (up to 50% income tax for some high earners). Capital Gains Tax can be very low - hence warren buffet paying less tax overall than his cleaner/secretary.

Boris has been a complete complete muppet if he has not completed his returns for the US. You never, ever ever, want to get on the wrong side of the IRS.

This could, in my view, be the thing that sinks his chances of PM.

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Not quite - rates of income tax can be higher in some states (up to 50% income tax for some high earners). Capital Gains Tax can be very low - hence warren buffet paying less tax overall than his cleaner/secretary.

Boris has been a complete complete muppet if he has not completed his returns for the US. You never, ever ever, want to get on the wrong side of the IRS.

This could, in my view, be the thing that sinks his chances of PM.

True that rates of income tax in some states means overall top marginal rates are not very different from UK - especially for residents of New York, New Jersey (up to 9%) , California (up to 13%) on top of federal tax. But since Boris is not resident in any of these states (or indeed any state) they do not apply and he faces potentially only maximum federal rates of income tax. Federal marginal rates do not hit 33% until $200k, and max is 39.6% if over $400k. Therefore, I would be surprised if he faced any additional liability for taxes on income.

Capital gains tax (and rate on dividend income) is 15%, which could apply to the gain on a sale of a private residence that was totally exempt from UK tax but subject to US tax on amount in excess of $250k - if only at 15%.

I agree with your comment about messy US tax issues potentially causing problems in a leadership race.

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Isn't the outrageous part that the UK doesn't have capital gains tax on houses?

No, why should you pay tax on the house you have lived in when you sell it? If you have to move a few times due to your job then it creates issues. If you fall on hard times and try to downsize the government would then come along and push you into bankruptcy with a tax demand. It creates all sorts of unintended consequences to people just trying to live their lives and we have enough already.

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Isn't the outrageous part that the UK doesn't have capital gains tax on houses?

The outrageous part is that UK subjects ( not citizens ) have to pay 60-70% of their income each year in tax.

All the people clamouring for new taxes should be clamouring for less taxes, dismantling of the nanny state and prosecutions for the people who have robbed us all blind. Wealth redistribution is easy when you stop taking all the money from 60 million people and giving it to 100,000 people.

Edited by TheCountOfNowhere

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Although some people say there is not double taxation, it is more complicated. For example, the US does not recognise the tax-free status of an ISA, so if Boris has one, he'll have to pay tax on dividends, interest and gains on these earnings. There are also complications when holding non-US investment funds. I'm not wealthy enough to have any trusts, but I understand that what's advantageous in the UK may not be in the US.

And, one can end up paying capital gains taxes on "phantom" gains -- e.g. you buy shares for 10,000 pounds at fx rate of 1.50 (15,000 dollars) ; you sell them for same price, but fx rate of 2.00 (they are now 20,000 dollars). You owe IRS on gain of 5,000 dollars. Yes, sometimes the fx rate can work in your favour, but the point is one must pay attention to the fx rate.

Separate from the annual income tax forms, an American must submit forms with the details of all bank accounts if the aggregate in a year exceeds the equivalent of 10,000 dollars. There is another form if you have more than 200,000 dollars on December 31st, or more than 300,000 dollars at any time during the year.

There can be very severe financial penalties for not submitting the income tax and bank account forms.

In 2006, when Boris was denied entry to the US, he said he would renounce his citizenship. Instead, he got a passport. Why?

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Any other windfall or transaction for profit is taxed, why should a primary residence be an exception. If the capital gains weren't so disproportionate, the tax bill would be less of an issue. The amount in this case is the equivalent for many of a lottery win. Granted, the proceeds from gambling are not taxed either... if there is no capital gain, nothing to pay, so you can't really complain that you've lost anything. Capital gains tax where you are only taxed on the profits of a transaction makes more sense than the likes of stamp duty.

Edited by Squeeky

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