UK: Mayor of London exempt from US taxes?

Moderator: ArthurWankspittle

The Dog
First Mate
First Mate
Posts: 140
Joined: Fri Jul 07, 2006 9:11 pm
Location: England

UK: Mayor of London exempt from US taxes?

Post by The Dog »

I'm not sure whether this classifies as US or "Other Countries".

Bosis Johnson, who is the Mayor of London (not to be confused with the Lord Mayor of Dick Whittington fame), is a dual national holding a US passport.

Accordingly, the US authorities are pursuing him for taxes.

Boris refuses to pay US tax bill: London Mayor say demand for unpaid capital gains over his home is 'outrageous'
http://www.dailymail.co.uk/news/article ... z3JiJOdIda
Famspear
Knight Templar of the Sacred Tax
Posts: 7668
Joined: Sat May 19, 2007 12:59 pm
Location: Texas

Re: UK: Mayor of London exempt from US taxes?

Post by Famspear »

So, he bought a house for 470,000 pounds (say, about $740,000) and sold it for 1.2 million pounds (about $1,888,000), for a capital gain of about $1,148,000.

Poor fellow. With what appears to be an annual gross income in excess of 394,000 pounds (about 620,000 United States dollars?), why should people expect him, as a U.S. citizen, to comply with the laws of the United States of America?

:roll:

Jerk.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
fortinbras
Princeps Wooloosia
Posts: 3144
Joined: Sat May 24, 2008 4:50 pm

Re: UK: Mayor of London exempt from US taxes?

Post by fortinbras »

Well, the Mayor is not the only US citizen with dual citizenship. Does the fact that he retains his US citizen on the side make him susceptible to US taxes even if his entire career and the source of all his income is in the UK?
Famspear
Knight Templar of the Sacred Tax
Posts: 7668
Joined: Sat May 19, 2007 12:59 pm
Location: Texas

Re: UK: Mayor of London exempt from US taxes?

Post by Famspear »

Based on the news report, it appears that his argument that, as a U.S. citizen, he should not have to pay U.S. federal income tax on the sale of his British residence, goes roughly as follows:
yes I know I’m an American citizen and I haven’t renounced my American citizenship so naturally I still enjoy the benefits of being an American but why should I have to comply with American tax law because after all I left America when I was five years old and British law does not impose a tax on this sale so it’s unfair for American law to impose the tax on the sale and it’s just not faaaaaaaaaiiiiiiiiiiiirrr!
He is a Special Snowflake.

:|
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Famspear
Knight Templar of the Sacred Tax
Posts: 7668
Joined: Sat May 19, 2007 12:59 pm
Location: Texas

Re: UK: Mayor of London exempt from US taxes?

Post by Famspear »

fortinbras wrote:Well, the Mayor is not the only US citizen with dual citizenship. Does the fact that he retains his US citizen on the side make him susceptible to US taxes even if his entire career and the source of all his income is in the UK?
Basically, yes.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Famspear
Knight Templar of the Sacred Tax
Posts: 7668
Joined: Sat May 19, 2007 12:59 pm
Location: Texas

Re: UK: Mayor of London exempt from US taxes?

Post by Famspear »

A U.S. citizen, regardless of the place of residence, is generally taxed (under the U.S. federal income tax) on world wide income. There are many specific exclusions available, though.

For example, Internal Revenue Code section 911, relating to certain foreign earned income of U.S. citizens or U.S. residents living abroad. See Form 2555. For year 2014, the maximum amount of foreign earned income that can be excluded is $99,200. It's adjusted for inflation annually.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Famspear
Knight Templar of the Sacred Tax
Posts: 7668
Joined: Sat May 19, 2007 12:59 pm
Location: Texas

Re: UK: Mayor of London exempt from US taxes?

Post by Famspear »

From the news report:
Presenter Susan Page then pressed him whether he would pay the bill, to which he said: 'I think it's outrageous.

'Well, I'm - no is the answer. Why should I? I haven't lived in the United States for, you know, well, since I was five years old.

'I could but I pay - I pay the lion's share of my tax, I pay my taxes to the full in the United Kingdom where I live and work.
In his support, I would say that the article does not claim that he is engaging in any sort of scam or dishonesty. He is simply saying that the American tax is unfair. Of course, what he is specifically saying in his communications with the U.S. Internal Revenue Service is unknown.

The fact that he has not lived in the United States since he was five years old might be relevant to the fairness of the U.S. tax, but it's not generally relevant to the legal validity of the tax.

The fact that he pays the "lion's share" of his tax (meaning, apparently, that he pays all his British taxes), as he puts it, may be relevant to fairness. But, there is nothing in the U.S. tax law that says it's generally OK to pay less than 100% of what you legally owe merely because you've paid "the lion's share" -- whether the "lion's share" be United Kingdom taxes or the United States taxes or the taxes of any other country.

Sounds like he may have on-going U.S. federal tax problems, aside from the gain on the sale of his British residence back in 1999. His annual earned foreign income apparently far exceeds the annual inflation-adjusted limit under section 911.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Famspear
Knight Templar of the Sacred Tax
Posts: 7668
Joined: Sat May 19, 2007 12:59 pm
Location: Texas

Re: UK: Mayor of London exempt from US taxes?

Post by Famspear »

I wonder whether he's been filing U.S. federal income tax returns all these years. He generally would be entitled to a tax credit for certain foreign taxes.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
User avatar
noblepa
Admiral of the Quatloosian Seas
Admiral of the Quatloosian Seas
Posts: 729
Joined: Thu Sep 11, 2014 8:20 pm

Re: UK: Mayor of London exempt from US taxes?

Post by noblepa »

Wouldn't he be eligible for the tax exemption on the sale of his personal residence?

I am not a lawyer or tax expert, but I believe that the tax code allows an individual to claim an exemption on the gain from the sale of a personal residence, as often as every two years. It used to be a once-in-a-lifetime exemption for retirees.

Of course, to claim this exemption, he would have to file a US tax return, which would expose his other income to US taxation.

Also, aren't there any tax treaties with the UK that would at least partially reduce his US tax liability because of the taxes he paid to the UK?

Paul Noble
Famspear
Knight Templar of the Sacred Tax
Posts: 7668
Joined: Sat May 19, 2007 12:59 pm
Location: Texas

Re: UK: Mayor of London exempt from US taxes?

Post by Famspear »

noblepa wrote:Wouldn't he be eligible for the tax exemption on the sale of his personal residence?

I am not a lawyer or tax expert, but I believe that the tax code allows an individual to claim an exemption on the gain from the sale of a personal residence, as often as every two years. It used to be a once-in-a-lifetime exemption for retirees.

Of course, to claim this exemption, he would have to file a US tax return, which would expose his other income to US taxation.

Also, aren't there any tax treaties with the UK that would at least partially reduce his US tax liability because of the taxes he paid to the UK?

Paul Noble
Yes, but his gain was reportedly over a million dollars. The amount of gain excluded from income under Internal Revenue Code section 121 does not exceed $250,000 (or $500,000 on a "married filing joint" return). The income tax would still be incurred on the amount in excess of that.

EDIT: And yes, there is a tax credit for foreign taxes paid.

As far as his other income, it's subject to U.S. federal income tax regardless of whether he files a return or not.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Arthur Rubin
Tupa-O-Quatloosia
Posts: 1753
Joined: Thu May 29, 2003 11:02 pm
Location: Brea, CA

Re: UK: Mayor of London exempt from US taxes?

Post by Arthur Rubin »

Famspear wrote:
noblepa wrote:Wouldn't he be eligible for the tax exemption on the sale of his personal residence?

I am not a lawyer or tax expert, but I believe that the tax code allows an individual to claim an exemption on the gain from the sale of a personal residence, as often as every two years. It used to be a once-in-a-lifetime exemption for retirees.

Of course, to claim this exemption, he would have to file a US tax return, which would expose his other income to US taxation.

Also, aren't there any tax treaties with the UK that would at least partially reduce his US tax liability because of the taxes he paid to the UK?

Paul Noble
Yes, but his gain was reportedly over a million dollars. The amount of gain excluded from income under Internal Revenue Code section 121 does not exceed $250,000 (or $500,000 on a "married filing joint" return). The income tax would still be incurred on the amount in excess of that.

EDIT: And yes, there is a tax credit for foreign taxes paid.

As far as his other income, it's subject to U.S. federal income tax regardless of whether he files a return or not.
The foreign tax credit doesn't help him on the sale of the house. If, as he says, the sale is exempt from UK taxation, the (US) capital gains income doesn't count as "double-taxed" income, so it's not included as "foreign-sourced income" on form 1116.

In other words, he owes a boatload of money to the US for the year of sale, even if UK taxes are normally higher than US taxes. In previous years, although the earned income exclusion (form 2555) doesn't eliminate his US income tax or the penalty for failure to file, form 1116 probably would eliminate his US income tax; and, if so, would eliminate the penalty for failure to file.
Arthur Rubin, unemployed tax preparer and aerospace engineer
ImageJoin the Blue Ribbon Online Free Speech Campaign!

Butterflies are free. T-shirts are $19.95 $24.95 $29.95