Cost basis of stock owned before Green Card

[JAEMM]

If you own stock while a non-resident alien, and then get a green card, what is the cost basis for the stock for capital gains purposes when you sell the stock?

A) The original cost basis of the stock when purchased/acquired (while a non-resident alien).
-or-
B) The fair market value (FMV) of the stock at the date you become resident in the United States and/or acquired your green card (whichever is earlier).
-or-
C) Other ????

 

[JAEMM]

The same question could also apply to the capital gains on foreign real estate purchased while a non-resident alien, if anyone knows the answer to that. Although in the case of real estate it's much harder to determine Fair Market Value (FMV) at date of residence/greencard acquisition.

 

[JAEMM]

I found an (unofficial) answer regarding real estate, the respondent claimed the tax basis of a home is the original purchase price, no matter how many years ago it was purchased prior to gaining green card status.

This means, honestly, you should sell all real estate before acquiring green card status, if your home country has a lower capital gains tax rate. I'd presume you could do a related sell (e.g. from husband to wife, or to a family trust), but you'd need to pay local taxes (if any) on that and then the U.S. tax value of the home is established for any future sale.

I presume the answer is the same with regard to stock and securities, in which case if capital gains tax is lower in your home country, you should liquidate and repurchase your entire portfolio before acquiring your green card.


Your resident-taxable income starts the tax year you got your green card; or the day you got your green card, with income during that tax year previous to that day exempt?

 

[nelsona]

Unless your counrty of residence before you arrived in US has a treaty which deals with this, the IRS always takes the original cost basis for cap gains. There is no adjustment made for changing the basis when becoming tax resident (either by choice, presence, or gren card).
This applies to all investment types.

 

[JAEMM]

Will liquidating and repurchasing the stock establish a new cost basis? Is there any minimum time between liquidation and repurchase?

With regards to stock options -- example option to buy at $0.01/share, stock is $1.00/share FMV -- the cost basis of the shares upon exercise will be $1.00 for CG, and $0.99 per share ordinary income at time of exercise, correct? Even if the ordinary income as non-resident alien is subject to no taxation. Then future sale of the stock at $1 will be tax neutral.

For non-public companies, how would you determine the FMV for Cost Basis upon exercise of options? I ask this, as it seems the best option for options is to exercise them before becoming a tax resident.