Dual US/Pakistani citizen acquiring property in Pakistan, advice?

J

jefkorn

Registered Users (C)
Parents own piece of land, they want to transfer the ownership to their USC(US Citizen) son. What are the tax consequences for USC son? Is there an advantage to transfer the ownership before vs after becoming USC? Son is already a legal permanent resident and is in the process of applying for Naturalization in US.

What happens if USC person (dual citizen of Pakistan) sells the property abroad, makes profit, will that be considered capital gains and will it be taxed by US? I'm not sure how it's taxed by Pakistani Govt and if it is, is there a tax treaty between the two countries?

IRS Publication on Tax Treaty: http://www.irs.gov/pub/irs-trty/pakistan.pdf‎

I will also give that a read and see if it answers some of these questions!
 
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FInd yourself a good accountant of Pakistani origin to advise you but in general, here is my understanding:

It does not matter from a US perspective if you are a PR or USC, you are liable for world wide taxes. The transfer of property will have to be done locally and a cost basis will have to established. YOu will have to declare the property to the IRS. The cost basis used in the local country is generally accepted by the IRS, and any gains you have from the sale of such property in the future will be taxable by the IRS, however, the tax will be net of local taxes paid on capital gains (you will need to file a Pakistani return to show). So if the capital gains is taxed at 20% and paid fully in Pak, and the tax rate is also 20% by the feds, you do not owe anything to the feds here. If the rate paid is lower in Pak, then you will owe the difference to the IRS. Here is the kicker…You will have to pay capital gains tax to your state or residence depending on where you live (e.x. FL does not do this), even though the property is in Pakistan. Tax treaties between countries will also guide this, but right now there is no way to run from Uncle Sam's grip
 
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