Can I be taxed on property I have not actually sold?
Yes, and that is precisely what a deemed disposition does. The rule treats property as though it had been sold at market value on a particular day, even though no sale took place and no money changed hands. Tax is then computed on the resulting gain in the ordinary way. The recurring triggers are a change of residence, death, and a change in the use to which an asset is put. Because there are no proceeds, two problems arrive together: you need a defensible market value for a day on which nothing happened, and you need to fund a liability out of something other than a sale.
What events trigger a deemed disposition?
The recurring ones are the end of residence, death, and a change in the use to which an asset is put, such as a home that becomes a let property or business premises that become personal. Transfers that are not sales can also fall inside the idea, including a gift or a transfer into or out of a trust, depending on the system in question. What they share is that the tax point is created by the event rather than by a sale. So the practical question on any such event is never whether money moved, but whether the rule has been engaged and for which assets.
What value do I use if nothing was actually sold?
Market value on the day the rule treats the disposition as happening, evidenced as though a real sale had occurred. Quoted holdings take the published price for that date. Land normally needs a written valuation setting out its basis and the comparables used. Private company shares need the accounts, the terms of any recent transaction in the same class and a valuation that explains what it relied upon. Do this at the time. A valuation obtained years later for a date long past is admissible but weak, and the burden of showing the figure was reasonable sits with the taxpayer rather than with the authority.
How do I pay the tax when nothing has been sold?
That is the planning question, and it is far better answered before the event than after it. In practice the options are to sell something, to borrow against the asset, or to establish whether the system offers any way to defer payment until a real disposal, which varies, may require security to be provided, and is usually conditional on being arranged at the right time. What consistently causes damage is discovering the liability afterwards, when the choices have narrowed to whatever happens to be liquid. Identify which assets the rule reaches, and what the charge on each would be, while the event is still ahead of you.
What happens if I later sell the asset for less than that value?
The deemed value normally becomes the asset's cost for the later sale, so a fall afterwards produces a loss on the real disposal rather than an adjustment to the earlier charge. Two cautions. That loss arises in whichever system taxes the later sale, which may not be the system that charged the deemed gain, so the two do not necessarily offset each other. And relief for a loss is often restricted in what it may be set against. The practical requirement is to keep the deemed value and its evidence with the asset's records, because it is the figure the later computation depends on.
Does a change of use of my home trigger this?
It can. Where a property stops being used as a residence and starts being used to produce income, or the reverse, several systems treat that as a disposition at market value on the date the use changed, even though the same person still owns it throughout. The consequences are not only the immediate charge. The value at the change becomes the starting point for the period that follows, and the character of a later gain may be divided between the two periods of use. Record the date the use actually changed and obtain a valuation for that date then, not when the property is eventually sold.
What is a "dual-status alien spouse", and why is my software asking?
The question comes from the filing-status screens, and it is asking whether your spouse was a non-resident or part-year resident for the year — because if they were, a joint return is not available by default. An election exists to treat a non-resident spouse as a resident for the whole year, which unlocks joint filing at the price of bringing their worldwide income into the US return and their accounts into its reporting. See a US person with a non-resident spouse.
How does a remittance actually work, and is it taxed?
A remittance is a transfer of money, not a category of income, and moving your own funds between your own accounts is not what creates tax. What can create tax is the income behind the money and the rules of the country it leaves. India, for instance, collects tax at source when a resident individual remits abroad under the Liberalised Remittance Scheme, and requires certification before certain payments leave. The transfer is the trigger for paperwork rather than for tax. See the LRS and tax collected at source.
