[an error occurred while processing this directive] [an error occurred while processing this directive] August 2002   [an error occurred while processing this directive] [an error occurred while processing this directive]   Stock Trading by Foreigner
  Part-Gift, Part-Sale of Principal Residence
  Tax Liability of Surviving Joint-Tenant
  Deductions for Foreign Dependents
[an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] I am a non resident alien and a citizen of Bangladesh. I have an on-line trading account. Am I subject to capital gains tax and if so, may I claim capital losses as an offset against my gains? [an error occurred while processing this directive] No. you do not pay capital gains, but you cannot deduct capital losses. You are taxed at a flat 30%, or the lower treaty rate if applicable, on your dividends, rents, royalties and interest. Taxes are collected by requiring the person paying you to withhold 30% and pay it directly to the U.S. Treasury. [an error occurred while processing this directive] The Tax Prophet's Section on Foreign Taxpayers [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] If we decide to sell our principle residence to our son at a below market price, are we subject to any gift taxes and would our son be subject to any additional tax? [an error occurred while processing this directive] Yes. You could be subject to gift tax and in addition, your son could pay income tax when the property is sold. Assume you sell a $1,000,0000 home for $600,000 to your son. You will have made a $400,000 gift which is subject to gift-tax rules. Your son will have a $600,000 basis in the property. Assume he sells the property for $900,000 - he will have a $300,000 gain even though he sold the property for less than it was worth when he acquired it. Note: If your son lived in the property after purchase as his principal residence and qualified under the residence exclusion rules, he could exclude up to $250,000 of the gain ($500,000 if he were married and filed a joint return with his wife). [an error occurred while processing this directive] The Tax Prophet's Section on Estate Planning [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] Question My name was added to my parents' CDs, checking account and mutual fund accounts. After my father passed away, I received "Notice of Inheritance Tax Appraisement" forms for each of the accounts, although none of the money was distributed to me Can I be taxed on money just because my name was on the account? [an error occurred while processing this directive] Evidently, the state in which the decedent lived believes it can tax you. Your case illustrates the perils of "do-it-yourself" estate planning. First, this is some type of state inheritance-tax issue, not a federal estate tax issue and you'll need the assistance of a tax professional in your state to assist you. Presumably, you received 1/3 of your father's inheritance, whether you chose to accept it or not. There could be exemptions that apply to your inheritance. Also, usually it is the estate which is liable for tax owing, not the beneficiary of an inheritance. Check your state law regarding this issue. There could be a misunderstanding regarding title to the account and a tax professional can determine how the account was titled, or supposed to be titled, and the tax consequences flowing from the proper characterization of the account. [an error occurred while processing this directive] The Tax Prophet's Section on the Gift-Tax Planning Subsection or search for the term "joint tenancy". [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] My wife has 4 dependent minor children living in Honduras and we support them. Evidently we cannot claim them as dependent exemptions on our tax forms although, if the dependents lived in Canada or Mexico, they could be claimed. This is discrimination based on national origin. Do I have a case? [an error occurred while processing this directive] Unfortunately, the courts have consistently upheld the right of Congress to limit deductions in the tax code as Congress see fit. There is no constitutional privilege to complain about the limitations of deductions granted by Congress, since the 16th Amendment gave Congress the right to impose an income tax; deductions, according to the courts, "are a matter of legislative grace." In other words, Congress may choose to grant a deduction for the support of dependents living in the U.S., Canada and Mexico, but not in other countries. [an error occurred while processing this directive] SEE ALSO IRS Publication 17 for details on claiming the dependency exemption. [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive]