Tie-breaker and Closer connections tests

First time posting. Thank you for all the relevant advice I've already found here.

I am a UK citizen. I spent 80% of 2016 in the US after moving there with my spouse and kids. In 2017 (and hopefully 2018+) I will have large capital gain from a UK asset sale. The UK tax rate is more favourable than the US in my situation.

I am making plans for 2017 and believe there are three regulations relating to whether the US will claim CGT from me in addition to anything paid to HMRC. My sense is any IRS decision about where I should be taxed is likely open to interpretation by someone at the IRS on the day they happen to receive my form (i.e. the regulations provide guidance not black and white lines). I am hoping one of you might have real-world experience of either:

- The closer connection exception to the 'substantial presence' test (Form 8840)
- Tie-breaker test under UK/US TDC (Form 8833)

here are a few of my details as requested 8840:
- two perm homes, one in each country (neither owned by me)
- spouse and kids in USA, parents and siblings in UK
- car in UK
- belongings in both UK&US
- banks - UK & US (income will be into UK account)
- I work for a UK biz with a US wholly-owned sub. Income will be from the UK biz. I work from both offices
- UK driver's licence
- UK voter
- all shareholdings/assets are in the UK
- I have health insurance in the US and NHS in the UK

and finally, I think I need US-based accounting assistance, if one of you are (or know) someone who has filed these forms lots before, please let me know.
Thank you!

I would like to comment on some limited aspects of jojo’s questions.

As regards the UK, jojo should start with the question as to whether he (or she) is resident in the UK under the Statutory Residence Test, including whether relevant the split year rules. From the limited information given, it is not obvious that jojo could be UK resident.

If under the SRT, jojo is not resident, then the next questions relate to the nature of the asset which will give rise the gain. Is the asset residential property? If not, the gain will not be taxable in the UK.

 

Sorry for the lack of clarity. I will pass the SRT for the UK. The asset is shares in a UK company.

Are the shares in a UK entity a shareholding in a CFC or a PFIC? If so, is jojo considering the correct US tax treatment?

Thanks. Shares are in U.K. Ltd company and qualify for entrepreneurs relief (10%CGT).

Thanks. Shares are in U.K. Ltd company and qualify for entrepreneurs relief (10%CGT).

Great -  so is it a CFC or a PFIC? Has the entity made a valid check the box election?

It is neither a CFC nor PFIC. I know very little about either, but those appear to be relevant to companies with passive income and with larger US shareholdings than this UK business has. My situation regards a standard UK Ltd. company with mostly UK shareholders.

I am afraid I don't understand the impact of CFC/PFIC are on a CGT tie-breaker decision. If they are relevant can you help me understand or point me to something to read about this?

many thanks