Foreign Mortgage Repayment and Exchange Rate Gain

This is an issue that is very current and which people should pay attention to, with the strength of the dollar against sterling. Americans who have non-US dollar mortgages and change the terms of their mortgage or make capital repayment on their mortgages, such transactions are deemed a taxable event for US tax purposes and may result in a taxable foreign exchange gain.

Remortgage: The US taxpayer has a mortgage moves from lender “A” to lender “B” as the mortgage rates are more beneficial.

Capital Repayment: The US taxpayer decides to pay off a lump sum of the mortgage so that they have little or no debt on their property.

In both circumstances, the following factors need to be considered from a US tax perspective:

• Value of the mortgage, in US dollars, on the date the mortgage commenced and the

• Value of the mortgage, in US dollars, at the time of the remortgage or repayment of capital is made.

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