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Subject:  Re: Capital gains tax for non-US citizen Date:  6/11/1997  10:54 AM
Author:  TMFTaxes Number:  53 of 127540

<<I'm a new Fool starting with a UV2 portfolio soon, and would like to ask a few questions about capital gains taxes concerning non-US residents. My situation is that I'm a foreign student doing a Ph.D program in the US. My country of citizenship, Singapore, offers a lower capital gains tax structure than the US. I return to Singapore once a year, and can easily execute online orders from there. In such a situation can I legally claim potential capital gains to be subject to Singapore taxes rather than US tax
Conversely, if I execute orders from the US, are the capital gains then subject to the US taxes? >>

In generaly, your tax consequences will be based on your residency status. If you are considered a resident alien, you'll be taxed on worldwide income following the same rules as a US citizen. You'll file Form 1040.

If you are a non-resident alien, you'll generally be taxed only on income from sources within the US. Income that IS effectively connected with a trade or business in the US will be taxed at the same graduated rates that apply to all citizens or residents. But income that is NOT effectively connected with a trade or business in the US is taxed at a flat rate of 30% (or a lower tax treaty rate if such a treaty exists). You may be required to file Form 1040NR.

And you have to be careful of the physical presence test. If you are physically present in the US for at least 31 days in the current tax year (1997), AND were physically present in the US on at least 183 days during the 3 year period (1997, 1996 and 1995), counting all days of presence in 1997, 1/3 of the days of presence in 1996, and 1/6 days of presence in 1995, you could be considered a resident and required to file Form 1040.

Since I am unfamilar with the taxe structure and rates in your home country, I'm not sure what the best way might be for you to deal with these issues. But I would certainly suggest that you get some US tax knowledge before you find yourself with problems. Check out IRS Publication 519 "Tax guide for Aliens" for additional information. You can read publication 519 on the IRS web site at...


Good luck with your investing.

TMF Taxes
Roy Lewis
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