Join Early Retirement Today
Thread Tools Search this Thread Display Modes
International Catch 22 investment situation
Old 08-10-2009, 11:13 AM   #1
Thinks s/he gets paid by the post
nun's Avatar
Join Date: Feb 2006
Posts: 4,867
International Catch 22 investment situation

I'd like to get the board's opinion about a nasty Catch 22 situation that I may have to deal with. Firstly I'm a dual UK/US citizen so I have to conform to 2 sets of tax laws. While in the US the UK system doesn't apply as the UK taxes on residency so I just invest as any American would. However, if I return to the UK I'll have to comply with both the UK and US tax laws as the US will still tax me as they tax on citizenship.

The nasty Catch 22 part of this relates to "foreign" mutual funds in after tax accounts. The UK will consider any US funds as offshore non-reporting funds and will tax captial gains from them as income while the US considers UK funds as PFIC and you have to "mark to market" each year to avoid a 35% tax. These regulations are to get around the common practice of foreign funds rolling over income and re-characterizing it as capital gains. Obviously most funds don't do this, but governments have no way of knowing that about foreign funds so the just "throw the baby out with the dish water"

So as a UK/US dual citizen resident in the UK all mutual funds are out of bounds. This does not apply to stocks and individual bonds.....looks like I'm buying Berkshire Hathaway or just going the I-Bond/Gilts route or putting my money into US bond investments that throw off income rather than capital gains. Or maybe this is a situation where I have all my after tax money in a CD ladder and adjust my allocation in tax deferred accounts
nun is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-10-2009, 12:17 PM   #2
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 1,183
You might ask this at the Fairtmark Forum which is staffed by CPA's.
crazy connie is offline   Reply With Quote
Old 08-10-2009, 02:08 PM   #3
Full time employment: Posting here.
Lusitan's Avatar
Join Date: Jan 2006
Location: Boston
Posts: 620
Oy vey. This sounds like a mess. Makes me thankful for the tax-favored plans out there; even non-deductible IRAs have the benefit of avoiding this morass ...
Lusitan is offline   Reply With Quote
Old 08-10-2009, 04:14 PM   #4
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,329
Does using ETF's instead of mutual funds help?
Animorph is offline   Reply With Quote
Old 08-10-2009, 04:37 PM   #5
Join Date: May 2007
Posts: 12,876
I could potentially find myself in a similar bind one day (US/EU dual). After thinking about it, I think that I would keep stock mutual funds in my 401Ks/IRAs because then I would only have to meet income reporting requirements on the withdrawals. In my case, taxable savings would then probably be invested in CDs and/or an immediate annuity.
47 years old, single, no kids. Exited the job market in 2010 (age 36). Have lived solely off my investments since 2015 (age 41). No pensions.
Current AA: real estate 64% / equities 10% / fixed income 16% / cash 10%
FIREd is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Anybody catch this last night on CNBC ? frayne Other topics 2 05-16-2009 05:43 AM
Medicare Catch 22 SteveL Health and Early Retirement 30 12-19-2008 06:10 PM
How do you catch the Dips modhatter FIRE and Money 16 10-25-2006 02:23 PM
Catch 22 Should Be My Name Lovely Rita FIRECalc support 1 10-17-2006 09:17 PM
Only 13% catch-up rate seems low mickeyd FIRE and Money 9 07-10-2006 10:27 AM

» Quick Links

All times are GMT -6. The time now is 01:05 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.