From the perspective of the Internal Revenue Service, a foreign stock is just like any other capital asset you may buy or sell. If you sell your foreign stock at a gain, you will have to pay tax in the same manner as if you had taken a profit on an American stock. This holds true whether you sell actual shares of the foreign stock or if you sell American depository receipts.

If you hold your foreign stocks for longer than one year, you must pay long-term capital gains tax on your gains. Your brokerage firm will send you a Form B at the end of the year listing your stock transactions, which you must report to the IRS when you file your taxes. As ofForm B must include information on the cost basis of the stocks you sell, which makes tax reporting simpler.

Transfer the information on your Form B to Schedule D of your Form when you file your taxes. If you sell your foreign stock one year or less after you buy it, you will owe ordinary income tax on your sale, not capital gains tax.

If you are in a low tax bracket, this won't make any difference to you, but if you are in a higher tax bracket, you will end up paying more on a short-term sale than a long-term sale.

Typically, long-term capital gains are taxed at no more than 15 percent, and possibly as low as zero percent, whereas short-term gains can be taxed as much as 35 percent as of In some instances, you may be liable for tax to a foreign short sale stock tax implications if you sell a foreign stock. Even if you pay tax to a foreign nation, you are still responsible for paying your taxes back in America as well.

However, to avoid double taxation the IRS provides for a foreign tax credit equal to the amount of foreign tax you paid. To claim the credit, you can file Form or claim the credit directly on your Form Tax issues regarding the foreign tax credit can be complex, and you may consider working with binary options ipad tax professional if you plan on claiming it.

American depositary receipts are a convenient and indirect way to own foreign stocks. ADRs are issued by banks and trade on the major stock exchanges just like actual stocks do. Each ADR share represents ownership in actual shares of foreign stock that are on deposit at remington model 770 stock for sale bank.

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While you can exchange an ADR for the physical shares of the foreign stock, it is generally more convenient to buy and sell the ADRs on the short sale stock tax implications market.

The taxation rules for ADRs are identical to those for foreign and domestic stocks. Foreign stocks are capital assets just like American stocks. Capital Gains Tax If you hold your foreign stocks for longer than one year, you must pay long-term capital gains tax on your gains. Ordinary Income Tax If you sell your foreign stock one year or less after you buy it, you will owe ordinary income tax on your sale, not capital gains tax. Foreign Tax Credit In some instances, you may be liable for tax to a foreign nation if you sell a foreign stock.

American Depositary Receipts American depositary receipts are a convenient and indirect way to own foreign stocks.

Topic -- Capital Gains and Losses IRS: Topic -- Foreign Tax Credit Bankrate. Form B Now Has Cost Basis Information U. Securities and Exchange Commission: American Depositary Receipts Forbes: What Type of Companies Are on the Stock Exchange Market?

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