Previous to Moving to Puerto Rico Appreciation/Loss Capital Gains

 

Moving to Puerto Rico does nothing to shelter previous appreciation/loss capital gains/loss

 

Determining how to split a capital gain between appreciation/loss that happened before you moved to Puerto Rico and appreciation/loss that occurred while you were there depends on the type of property. No taxable event is trigger by moving to Puerto Rico, however you need to determine appreciation/loss on the investment pre moving to Puerto Rico from USA. Total gains/loss are determine base on cost less actual proceeds at selling or trading.

 

Appreciation/Loss on Pre moved to Puerto Rico investments that are trading in a public market, such as listed stocks and precious metals

 

You start by establishing the investment’s price on the day of your move to the island or at the first day of the year you move in. All profit up to that price is considered to have been earned before your move (and is taxable by Puerto Rico and the US). The rest of the profit is deemed to have accrued while you were in Puerto Rico (and is taxed by no one).

For example, a mainland US investor purchased stock for $100 on January 1, 2017. Then he moves to Puerto Rico on January 1, 2018, on which day the stock is worth $200. On December 1, 2018, sells the stock for $400, for a capital gain of $300 ($100 of which accrued before moving to Puerto Rico and $200 of which accumulated after moving).

Puerto Rico will tax the $100 accrued before moving at 15% and by the US (under current rules, at 20%). The US will allow a credit for the Puerto Rican tax; the effective total tax rate is still 20%, just if you had stayed on the mainland. The $200 accrued after moving will be exempt from US tax since you are a Puerto Rican resident for all of that period, also will be exempt from Puerto Rican taxes under Act 22.

 

Appreciation/loss on pre moved to Puerto Rico Crypto

 

Determining how to split a capital gain between appreciation/loss that happened before you moved to Puerto Rico and appreciation/loss that occurred while you were there depends on the type of property.

For Crypto investments you start by establishing the investment’s price on the day of your move to the island and or the first day of year you move in to Puerto Rico.

All profit up to that price is considered to have been earned before your move (and is taxable by Puerto Rico and the US). The rest of the profit is deemed to have accrued while you were in Puerto Rico (and is taxed by no one). Taxable when trade any form, holding on it would not trigger a tax event.

For example, a mainland US investor purchased for $100 on January 1, 2017. Then he moves to Puerto Rico on January 1, 2018, on which day the crypto is worth $200. On December 1, 2018, sells for $400, for a capital gain of $300 ($100 of which accrued before moving to Puerto Rico and $200 of which accumulated after moving).

Puerto Rico will tax the $100 accrued before moving at 15% and by the US (under current rules, at 20%). The US will allow a credit for the Puerto Rican tax; the effective total tax rate is still 20%, just if you had stayed on the mainland. The $200 accrued after moving will be exempt from US tax since you are a Puerto Rican resident for all of that period, also will be exempt from Puerto Rican taxes under Act 22.

There is no wash sale rules for Crypto for USA purpose, tax plan your appreciation loss to set up new future values.

 

For non-marketable stocks and other interests in private companies

 

There is no clear and straightforward way to establish the value as of the day you become a Puerto Rican resident. The rules pretend that appreciation/loss in private security you took with you to Puerto Rico happened evenly day by day from the time you bought it while living on the mainland to the time you sold it while living in Puerto Rico.

If you bought stock in a corporation for $100, 100 days before you moved and sold it for $400, 200 days after you arrived in Puerto Rico, one-­third ($100) of the gain would treat as having accrued while you were still on the mainland (fully taxable), and two-­thirds ($200) would treat as having accumulated while you were a Puerto Rican resident (tax free).

Puerto Rico will tax the $100 accrued before moving at 15% and by the US (under current rules, at 20%). The US will allow a credit for the Puerto Rican tax; the effective total tax rate is still 20%, just had stayed on the mainland.

The $200 accrued after moving will be exempt from US tax since you are a Puerto Rican resident for all of that period, also will be exempt from Puerto Rican taxes under Act 22.

There is no ruling as to the date to be used in the year of move.  There two alternative, the first day of the year or the date you moved in.

 

 

Facebook
Twitter
LinkedIn
Tumblr
Reddit

Schedule a Free Consultation

Leave a Reply

Your email address will not be published. Required fields are marked *

More Posts

EARNED INCOME CREDIT

Law 257 of December 10, 2018 (Law 257-2018) established a new Earned Income Credit (EIC) for individuals that have lived in Puerto Rico for the

Read More »