How did the IRS know that Boris Johnson sold his house?
According to several articles, Boris Johnson, the British foreign minister who was born in the U.S., was hounded by the IRS for taxes on the sale of his house in the U.K.
For example here: www.nytimes.com/2017/02/08/world/europe/britain-boris-johnson-renounces-american-citizenship.html
However, what is never explained is how the IRS may have known about this in the first place. Sale of a primary residence is not taxed in the U.K. and thus it should not have appeared on his U.K. tax filings.
How could the IRS have known about this?
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I would guess that a large deposit appeared in his bank account and that information was shared with the IRS.
Such sharing of information deemed relevant is now automatic.
As for who is applicable, the FATCA reporting start date applies to all accounts and investments in existence at 30/06/2014, and all of these relevant accounts are to be reported to HMRC annually by 31/5 following and exchanged with the IRS by 30/9 following. The first reporting calendar year is 2016, so the information will be received by the IRS for the first time in 2017.
The word ‘information’ could be considered a vague term, so to clarify, the information being reported on will include the following:
Name/address/residence/tax number
Date of birth & place of birth
Account numbers
Account balance or investment value
Gross interest
Dividends
Sales proceeds of investments
Name of reporting entity
For those concerned about the use of their data, the Automatic Exchange of Information Programme includes terms that ensure the data is securely held and exchanged, is completely confidential and is only used to offset the problem of tax evasion.
The linked article mentions that Boris Johnson has renounced his American citizenship.
This is the usual way of saying, "Boris Johnson has persuaded the US Government to stop considering him to be a US citizen".
In order to have the US government take this step, one must file and pay US income tax for a number of years before the date of renouncement. All income must be declared: income as defined by the American IRS. This includes capital gains on all property, including real estate, with any exemptions set by the IRS.
Mr. Johnson would want to avoid a charge of tax fraud in these filings, so presumably he was thorough and honest in declaring all income...
Buying and selling property in the UK is a matter of public record. The Land Registry keeps records of the owners of all property that has been bought and sold since the Land Registry has been set up.
Information on the sale dates and prices for houses is available for free on a number of UK web sites. Further information about ownership is available by paying a small fee to the Land Registry.
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