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Author: Anderoni One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121598  
Subject: Can you avoid taxes by living abroad? Date: 4/10/1998 4:57 PM
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My dad lives abroad. I was talking to him the other day about how I had recently started buying stocks for the first time (he has been investing for quite some time). After a while, the subject of capital gains tax was brought up. This is what he told me:

"Nah... I don't pay those because I don't live there. I only pay taxes on dividends".

Is that the way it is? Do you just don't pay capital gains tax if you live abroad? Would it make sense to open a brokerage account from an address abroad and avoid paying C.G. taxes?

Ander
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3434 of 121598
Subject: Re: Can you avoid taxes by living abroad? Date: 4/11/1998 10:38 PM
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[[My dad lives abroad. I was talking to him the other day about how I had recently started buying
stocks for the first time (he has been investing for quite some time). After a while, the subject of
capital gains tax was brought up. This is what he told me:

"Nah... I don't pay those because I don't live there. I only pay taxes on dividends".

Is that the way it is? Do you just don't pay capital gains tax if you live abroad? Would it make sense
to open a brokerage account from an address abroad and avoid paying C.G. taxes?]]

Nope. That is NOT the way it is. If dad is a US citizen, he is required to file and pay taxes on worldwide income from all sources. If he is a NON US citizen, the rules change. But from the sound of your post, he sounds like a citizen.

Looks like dad is a tax cheat, making me pay more than my "fair share". I'll forward this post to the IRS CID division so they can track down your entire famly (just kidding...don't panic).

TMF Taxes
Roy

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Author: Anderoni One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3444 of 121598
Subject: Re: Can you avoid taxes by living abroad? Date: 4/12/1998 1:30 PM
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<<Nope. That is NOT the way it is. If dad is a US citizen, he is required to file and pay taxes on worldwide income from all sources. If he is a NON US citizen, the rules change. But from the sound of your post, he sounds like a citizen.

Looks like dad is a tax cheat, making me pay more than my "fair share". I'll forward this post to the IRS CID division so they can track down your entire famly (just kidding...don't panic).>>

Nope. My dad is NOT a US citizen, he is a Spanish citizen living in Colombia. How does it work for him in this case?

I'm not a US citizen either, but I do work and reside in the US.

Thanks in advance for your help,

Ander

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3490 of 121598
Subject: Re: Can you avoid taxes by living abroad? Date: 4/14/1998 12:41 AM
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[[Nope. My dad is NOT a US citizen, he is a Spanish citizen living in Colombia. How does it work
for him in this case?

I'm not a US citizen either, but I do work and reside in the US.]]

Generally, for non-citizens and non-residents, they will pay a flat 30% tax (or lower treaty rate...withheld at the source) on interest and dividends. But, generally, capital gains will not be subject to US taxes.

His situation may be different from yours, since you may be a resident. As a resident alien, you are generally required to pay taxes on all worldwide income in the same manner and fashion as a US citizen.

For additional information on these issues, check out IRS Publications 519 and 901.

TMF Taxes
Roy

SPECIAL NOTE: I try to answer as many questions as I can each week, and I generally select those that have not been asked before. If you don't get a detailed answer to your question, it is probably because my time is so limited during tax season, or because it has already been asked and answered in this folder in the past, or because it has been discussed in the Taxes Frequently Asked Questions area. In order to visit the Taxes FAQ area, go to the Fool's School area (http://www.fool.com/school.htm) and check out "Other Features" in the list box, OR you can jump directly to the Taxes FAQ area (http://www.fool.com/school/taxes/taxes.htm). Additionally, if any references were made to the IRS Web Site, you can get there by pointing your web browser to (http://www.irs.ustreas.gov)


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