Question about stocks owned before moving to US

[KM & ST 1]

Hi all. I have what I thought was a fairly straight forward question that I simply cannot find an answer to.

 

I am currently in Denmark but moving to the US in April. I currently own a handful of stocks. With the way the stock market has been behaving lately, these investments are all sitting at net losses.

 

My hope was that they would get near break even before immigrating, so I could just get rid of them and move with a clean slate. However, that is now looking highly unlikely.

 

My question is: Does anyone know (or can link to a resource on) how the US/IRS treats loss-giving stocks that were owned before moving to the country? Would they be treated as having the original cost basis, the current cost basis on the date of immigration, or something else? If anyone has any info to share at all (do’s or don’ts) that would be highly appreciated!

 

[Loren Y 2,755]

If they were NYSE traded stocks, you should get a form 1099-B from your trading company. I just was able to get mine from Charles Schwab a few days ago. They usually automatically generate them, and let you know it is ready. Maybe you don't get one when you are outside the US ( I'm not sure), but once you move to the US with a US address it may trigger one to be produced. When I file my taxes, the software I use allows me to enter the losses/gains from this 1099-B form.  I don't see why you couldn't hold on to them and wait til like you said, you can sell them off without much of a loss. They really aren't even looked at until you cash them out, then any gains my count towards income. I'll have to see if I can find anything to reference.

[KM & ST 1]

Thank you so much for the response!

 

I definitely think I do get access to those forms from the broker.

 

I just am not sure how the IRS calculates gains/losses when the stock was purchased before becoming a US resident. If anyone has been able to find a reference or has experience with this please share :)

[Wuozopo 4,293]

6 hours ago, KM & ST said:

Thank you so much for the response!

 

I definitely think I do get access to those forms from the broker.

 

I just am not sure how the IRS calculates gains/losses when the stock was purchased before becoming a US resident. If anyone has been able to find a reference or has experience with this please share

You have no profile or timeline so hard to answer you specifically. I was avoiding answering you for that reason. Will go with an answer for immigrant visa. 
 

Once you live in the US, your gains/losses, interest/dividends, income etc are reported to the IRS because you are “a US person” by IRS rules and your “worldwide income” goes with you no matter where it sits, is earned, was purchased or inherited. So if you own the stock still after moving, you follow IRS rules and report it’s dividends or sale gain/loss.
 

Gains/losses is a complicated subject but I’ll attempt to cover a few highlights mostly with input from my American wife..The IRS bases the taxes on various things, but not your personal income. They have their own rules. How long have the stocks been owned? Short term gains and long-term gains. Tax brackets can include 0%; 15%, 20% taxable. You can claim a loss that goes toward reducing the tax on a gain the same year. If only losses, you can carry forward to use against a gain the next tax year. I believe it’s indefinite carry forward. If you own foreign stocks and the other country charges you tax on dividends earned or gain from sale, the IRS works in a credit for whatever you had to pay in foreign taxes. Basis comes from what you paid originally vs sale price minus any fees you incurred to complete the sale. There are exceptions for things like inherited portfolios. That basis will become a new basis based on the market value of the stock the day the decedent died. Basis is not inherited going back to a stock purchased originally in say the 1960s. The new owner starts a new basis on the day inherited. As stated before, there’s many little variations to gain/loss rules.
 

The main IRS form and instructions are Schedule D. Wife said it’s been many years since she waded through a schedule D on her own because TurboTax will download all the pertinent transactions straight from many large investment firms, example Edward Jones. It will create and fill out a schedule D in one second, putting every in the right place and calculating the tax or loss to carry forward.  If you don’t get IRS 1099 end of the year reports from a foreign company, you just put in amounts including your basis and Turbo or other tax programs will do the calculations for you. A few stocks owned personally won’t be that difficult. Basically answer purchase price and date, sale price and date, and let software do the hard work. 

[tunuki 0]

Not sure how it is in Denmark, but in Sweden the broker told us they have to close all our trading accounts before we leave for the US due to regulations. I think he said something like it has to be closed before you pass homeland security as from that moment you are a US tax resident, even if you just get your green card and return to Denmark.

 

Happy that you got your visa!

Edited March 8, 2022 by tunuki