Mula
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Capital Gains
Say you bought a shack in Baja for $30,000 USD, put $80,000 in to it. . .
And sell it for $110,000, how would you document the upgrading - or would it even matter - to avoid Capital Gains in Mexico?
And if you sold it for $150,000 for a profit . . .
Or died and passed it on to an heir - how is this affected in a will?
[Edited on 4-8-2012 by Mula]
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surfer jim
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Nobody can answer this question......this would be the first R.E. transaction that accually went up in value.
Wait...there is a lawyer who does R.E. here on NOMADS......now what was that name again......?
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Barry A.
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The way I understand it:
Hopefully you dutifly filed all the receipts in a "house file" for the "upgrades". It that is so you have NO capitol gains, and can prove it.
If you sell it for $150K you have 40K cap gains, but have no idea about the Mexico angle.
If you leave it to an heir, there are no cap gains to them-------the price of the property is whatever the appraised value is, and that value is now
the basis for your heirs taxes from then on.
Barry
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Mula
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O.K., yeah, Jim, got it.
And thanks Barry A.
A neighbor posed this question to me, so hopefully he will take it from there.
Thanks!
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Mula
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FM3 holders from Canada.
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Osprey
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Not so fast. I paid 90,000 pesos ($25,000) at that time, for my house/lot. Did about $18,000 U.S. remodel cost over the next 10 years.
Now my house and lot are valued at about the current rate of the peso, by the village appraiser, at $23,000 U.S.
Even if I qualify as a Mexican Taxpayer at the time of sale, what do you suppose I will pay against a sales price of $200,000 U.S. dollars, (now about
2.6 million pesos)?
No answers for you yet on the bigger question >> we have a bank trust. When we die and the beneficiary presents all the paperwork we went
through to become Legal Taxpayers to exempt our place/bank/lot/house from the Gana, what will stay in place for our appointees? Is the exemption
transferable? What, if anything, has that to do with the trust?
[Edited on 4-9-2012 by Osprey]
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thebajarunner
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U2U me and I will give you a thorough answer
If they really want some advice then send me a private message and I will try to help them sort through the US side of the issue. Sorry, I never
took, taught or practiced Mexican tax law so cannot be much help on that side of the question.
General answers on the US tax side:
You do not ever submit your documents to prove basis- only in case of IRS audit would you provide them to the auditor.
If you receive it through inheritance the tax basis is the value on the date of death/ if you receive it by gift the tax basis is the same basis as
in the hands of the donor.
And generally, if you do have to pay Mexican income tax on this then you would receive a foreign tax credit for those taxes paid against any US tax
liability so that you are not "double taxed" This is, as usual, subject to some limitations
hope that helps
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Osprey
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Thanks Kate and Bajarunner. All good stuff. Does not answer my burning questions on a very simple situation, nothing to cloud the questions.
If I qualify as a Mexican taxpayer do I dodge all Hacienda gana? And what about my bank trust beneficiary if I prequalified? Does he/she get the
exemption like I would have had I sold when I was still the owner of record?
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oxxo
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| Quote: | | Originally posted by MulaAnd sell it for $110,000, how would you document the upgrading |
Facturas! and you currently pay 11% of the upgrade price in taxes to get those facturas. However, that 11% tax up front could be less than a captal
gains tax later on.
| Quote: | | - or would it even matter - to avoid Capital Gains in Mexico? |
US capital gains tax on a Mexican property or Mexican capital gains tax on a Mexican property?
If a US citizen you may be, (perhaps) obligated to pay capital gains tax on Mexican property in both countries - both you or heirs.
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Osprey
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A notario can qualify one as a taxpayer by verifying those things (without the FM2) if you can prove you have no other residence. What about being
able to pass that prequalification on to the bank trust beneficiary? Anyone?
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rob
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My accountant keeps telling me - there are NO capital gains in Mexico. There are income taxes on real estate profits, however.
If you wish to avoid income taxes on a real estate profit, you need to record not only the starting cost (which will be in the sales document
certified by the notario) AND state to him/her that this will be your principal residence - only the notario can certify this to Hacienda (and some
don't try very hard).
Gnukid (for whose wisdom I have great respect) I believe is incorrect when he states that mere residency will allow you to avoid income tax on resale
- it is PRINCIPAL RESIDENCE that is key here.
Osprey - GREAT question about trust beneficiary. Logic would indicate that if the trust is merely transferred without cash, what would you tax
(certainly not a municipal appraisal)? But I suspect logic has little to do with it. Will pursue.
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BFS
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Mula,
When you are ready to sell the house you can get a re-manifestacion done on the value of the house and ask the ingeniero involved for it to be close
to your selling price.
This will minimize the capital gains tax.
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Osprey
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You got em right. 5 years, bills, letters, tax receipts, passport, anything that's credible to make the Hacienda know your one and only res. is in
Mexico.
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