Contact UsAm I liable for long-term capital gains tax for foreign capital gains, even though the money didn't originate from U.S. and was never in USD?
I purchased four Universal Whole Life Insurance Policies 6-8 years ago in Korea, using the money I inherited from my Korean grandfather. Since then I became a U.S. citizen 4 years ago, and finally last year I canceled one of the policies, cashed out and convert & transferred to my bank in stateside.
Purchase Cost on 02/27/2009: 1,000,000,000 KRW
Cash Value at withdrawal on 07/31/2017: 1,385,823,908 KRW
Transfer from Korea to USAA Federal Savings Bank: 273,000.00 USD (Equivalent of 308,878,246 KRW. The rest is still in Korea.)
What's the tax implication on this situation? If the capital gains is realized when fund is converted from/ to USD, am I liable for capital gains tax on funds that were never in USD at all? If so, what exchange rate should I apply to calculate the capital gains?
Thank you!
Purchase Cost on 02/27/2009: 1,000,000,000 KRW
Cash Value at withdrawal on 07/31/2017: 1,385,823,908 KRW
Transfer from Korea to USAA Federal Savings Bank: 273,000.00 USD (Equivalent of 308,878,246 KRW. The rest is still in Korea.)
What's the tax implication on this situation? If the capital gains is realized when fund is converted from/ to USD, am I liable for capital gains tax on funds that were never in USD at all? If so, what exchange rate should I apply to calculate the capital gains?
Thank you!
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Tax Professional Answers
John Stancil
As a US citizen or resident, you owe taxes on your world wide income, regardless of source. The exchange rate that should be used is the prevailing rate in effect at the time the funds were received, paid, or accrued. Under some circumstances you may need to recognize a currency exchange gain or loss.
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337 weeks ago