I held some stock in Australia for 14 years and 4 months that has enjoyed some healthy long term capital gains in that time.

Recently I became a US Resident for Tax Purposes under the Substantial Presence Test (before this I have never been a US resident for tax purposes).

I sold the above stock 10 days after becoming a US Resident for Tax Purposes.

Can the cost-base be calculated using the market value at the time I became a US Resident for tax purposes? Or is it the original cost basis from 14 years ago?

Do you know of any public documentation that refers to this situation of a capital gain where most of the gain happened before becoming a US Resident? In my case, I was not a US Resident for 99.8% of the ownership time of this asset.


1 Answer 1


Sorry, you're not going to like the answer. You owe capital gains tax on the original cost basis. You had an opportunity 10 days earlier to avoid this situation, but it looks like you missed that window.

The article Tax planning for the non-resident alien immigrating to the United States is about resident aliens, taxes, and immigration planning:

Key quote:

Pre Immigration tax planning generally cannot be accomplished after the Residency Starting Date.

To have avoided this situation, you should have sold the shares prior to becoming a tax resident. You could have immediately repurchased the shares, too, to establish a new cost basis for U.S. tax purposes.

Another legal article titled Pre-Immigration Tax Planning has an example applicable to your situation:

For example, Mr. X purchased a property many years ago and paid $100,000 for it. On the date he plans to become a U.S. tax resident, the property is worth $1,000,000. If Mr. X does not step up the cost basis of the property before relocating to the U.S. and sell the property thereafter, his gain on the sale will be $900,000. This gain will be subject to the highest U.S. income tax rate (almost 40%). However, with proper planning, Mr. X could have paid $0 in U.S. income taxes on the gain realized from the sale of the property.

  • Edited to put titles of these great articles in the answer. I think it reads better than linking "this article", etc. May 13, 2015 at 15:12
  • What if he had received those stocks as a form of payment? I assume the cost basis in this case would be their value at the time of receipt? Apr 28, 2022 at 5:13

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