American Citizens Abroad Town Hall Meeting May 14, 2013

1. American Citizens AbroadTown Hall MeetingMay 14, 2013 Michael Mettler Certified Public Accountant

2. Agenda What is my US tax liability if I sold my Swiss house? What U.S. taxes do I have to pay on my Swiss retirement funds?

3. What is my US tax liability if I sold my Swiss house? • Calculate gain: • Sales price less sales cost using CHF/USD exchange rate on date of sale • Less: original purchase price less purchase expenses using CHF/USD exchange rate on date of purchase • Less: any improvements made to the property using CHF/USD exchange rate on date of each improvement

4. What is my US tax liability if I sold my Swiss house? • Qualify for Exclusion of gain from sale of Principal Residence? • Owned and used as principal residence for at least 2 out of the last 5 years ending on the date of sale; • $250,000 exclusion per person ($500,000 married filing joint); • Special rules: • Reduced Exclusion; • Surviving Spouse; • “Nonqualified Use”; • Depreciation; • Expatriates subject to Expatriation Taxation

5. What is my US tax liability if I sold my Swiss house? • Did you pay Swiss capital gains tax? • Rate differs between Cantons and usually based on ownership period; • Possibility to defer Swiss tax – roll gain into new purchase; • Swiss tax can be used as a Foreign Tax Credit on U.S. return; • CHF/USD exchange rate on date paid or accrued

6. What is my US tax liability if I sold my Swiss house? Example: S.P. CHF 2 million x 1.0952 = $2,190,400 Less: Imp.: CHF 100k x 0.80437 = <$80,437> Less: P.P: CHF 800k x 0.7242 = <$579,360> Gain: $1,530,603 Less Exclusion: <$500,000> Net C.G.: $1,030,603 C.G.T: $1,030,603 x 20% = $206,121 Less FTC: CHF 110k x 1.0952 = <$120,472> Net Inc. Tax: $85,649 N.I.I. Tax: ($1,030,603 - $250K) x 3.8%: $29,663 Total U.S. Tax: $115,312 Jane and John purchased their principal residence in Geneva on January 1, 2003 for CHF 800,000. They made improvements totaling CHF 100,000 in 2005. They sold the house on January 3, 2013 for CHF 2 Million and paid CHF 110,000 of Swiss capital gains tax.

7. What U.S. taxes do I have to pay on my Swiss retirement funds? • Your Cost Basis (i.e. after tax contributions): • Your annual contributions are non-deductible; • In most cases, the employer’s annual contributions should be included as income; • Technically, any annual interest, dividends, or capital gains added to your account should be included as income on your annual filings; • Key note: Make sure you track your basis!

8. What U.S. taxes do I have to pay on my Swiss retirement funds? • Your Retirement Distributions: • Any amount received in excess of your cost basis is taxed as ordinary income at your marginal rate; • Any Swiss tax paid can be claimed as a Foreign Tax Credit on your U.S. return; • Potentially tax-free if you reside in the U.S. • Swiss AVS should be reported in the same way as U.S. Social Security (i.e. maximum 85% taxable)

9. What U.S. taxes do I have to pay on my Swiss retirement funds? • Typical Problems: • Cost basis can’t be calculated; • Potential double taxation; • Exchange rate risk resulting in either a loss which cannot be recognized or a gain which is taxed;

10. Questions? TaxPro Sàrl Avenue de-Luserna 40 1203 Geneva www.tax-pro.ch Tel. +41.22.304.1690 mmettler@tax-pro.ch