Taxes Paid to Foreign Country Gift by Foreigner of U.S. real property Deducting Accrued Interest on Home U.S. Taxpayer working in London[an error occurred while processing this directive][an error occurred while processing this directive] [an error occurred while processing this directive] I am an American citizen working in Romania. My U.S. based company says I must be responsible for all Romanian tax (40%). Their justification is that I will recover the difference in applying the Foreign Tax Credit. [an error occurred while processing this directive] Unless you are in the 40% tax bracket in the U.S., you will not recover the tax. The maximum foreign tax credit allowed is the maximum tax owed under U.S. law. In fact, you will probably lose 40% of your income since the U.S. earned income credit will not shield you from the payment of foreign taxes. In short, depending on your level of compensation, you could lose a large part of your compensation to taxes paid in Romania. However, you will probably not owe any additional tax to the U.S. [an error occurred while processing this directive] Tax Prophet's Section on Foreign Taxes [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] What are the tax consequences if foreign parents gift their child, who is a U.S. citizen, real property worth $1 million? [an error occurred while processing this directive] It depends whether the property is located in the U.S. If it is, then there is a gift and gift taxes will be owing. If it is foreign property, there is no U.S. gift tax, but the minor must report all the income earned from the property and will pay a capital gains tax if the property is sold for a profit. Also, the minor must report the gift on Form 3520 or face penalties which could reach as high as 25% of the amount of the gift. [an error occurred while processing this directive] Tax Prophet's Tax Class on Foreign Gifts [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] The lender on my residence granted me a forbearance of interest for 6 months, then added this amount to the principal of my mortgage. When can we deduct the interest on the loan. Does the amount added to the principal balance reduce our gain upon sale of our home? [an error occurred while processing this directive] You can deduct the interest (provided you otherwise qualify for the personal interest deduction) when you pay the interest. This will occur when your sell the house. The deferred interest is not added to the basis of your house for capital gains calculations and does not reduce the gain on sale of your house. [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] I am planning to take a position for 18 months with my current employer - a public University - in their London office. Will I be taxed by the U.S. or Britain? [an error occurred while processing this directive] Not during the first year. You should meet the requirements for the earned income exclusion under IRC Sec. 911 since you will spend at least 330 days of a 12-month period overseas. For the second year, since you will only spend six months in Britain, the earned income exclusion will not apply and you will be subject to U.S. taxes. During your 18-month stay, you should be exempt from British taxes. According to Article 20 of the United States- United Kingdom Income Tax treaty, if you are invited to teach or conduct research by the government, university or other recognized educational institution and are present in the U.K. for no more than two years, your income will be exempt from British taxes. These provision apply equally to a U.K. taxpayer residing in the U.S. [an error occurred while processing this directive] Tax Prophet's Section on Foreign Taxes [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive]