Will I be Taxed in U.S

[stock]

I live in Michigan and i'm in US on a work Visa (H-1B). I have been granted stock options by my parent company in India based on the prevailing price during the years 2000 - 2004.
I exercised the options this month and am ready to sell them.

My Questions
=========
1. When i sell them would i be taxed in US ?

2. Assuming that the answer for above question is YES, i want to avoid higher rate of capital gains taxation in US (compared to what it is in India - 10% for short term and 0% for long term) by transferring the options to my father who is an Indian resident. When i do this would this transfer be considered as a GIFT. If Yes what percentage would i be taxed at for this gift ?

Thanks in advance.

[LdiJ]

Originally Posted by stock

I live in Michigan and i'm in US on a work Visa (H-1B). I have been granted stock options by my parent company in India based on the prevailing price during the years 2000 - 2004.
I exercised the options this month and am ready to sell them.

My Questions
=========
1. When i sell them would i be taxed in US ?

2. Assuming that the answer for above question is YES, i want to avoid higher rate of capital gains taxation in US (compared to what it is in India - 10% for short term and 0% for long term) by transferring the options to my father who is an Indian resident. When i do this would this transfer be considered as a GIFT. If Yes what percentage would i be taxed at for this gift ?

Thanks in advance.

You are not a US "legal resident" (you don't have a green card) therefore you can't be taxed on your worldwide income....only on your US income.

[Snipes5]

If the OP has spent more than 183 days in the US, including at least 30 days in the current year, 1/3 of the days in the previous year and 1/6 of the days in the year before that, he IS considered a legal resident for tax purposes.

If he has an H1B and is from India, I doubt he's commuting.

Snipes

[LdiJ]

Originally Posted by Snipes5

If the OP has spent more than 183 days in the US, including at least 30 days in the current year, 1/3 of the days in the previous year and 1/6 of the days in the year before that, he IS considered a legal resident for tax purposes.

If he has an H1B and is from India, I doubt he's commuting.

Snipes

Sorry Snipes, but the substantial presence test still doesn't cause him to have to pay taxes on his world wide income.

One must be an actual LEGAL resident (green card holder) before being required to file taxes based on world wide income. The substantial presence test doesn't make someone a legal resident. One must be entitled to the benefits of legal residency (including the full tax benefits, which he is not) before being required to file on world wide income.

[Snipes5]

Do you have a code section for that interpretation?

As far as I and anyone in my office is concerned, substantial presence means taxes are filed identically to a green card holder or US Citizen, beginning on the first day of the period during which substantial presence is met. The only exception to that is if the person who is meeting substantial presence can claim closer ties to another country, but in order to do that, an election must be made, and a special form filed.

If required to file a 1040 rather than a 1040NR, the person must declare worldwide income.

What tax benefits of legal residency are afforded a green card holder that are not afforded someone who carries an H1B?

Snipes

[LdiJ]

Originally Posted by Snipes5

Do you have a code section for that interpretation?

As far as I and anyone in my office is concerned, substantial presence means taxes are filed identically to a green card holder or US Citizen, beginning on the first day of the period during which substantial presence is met. The only exception to that is if the person who is meeting substantial presence can claim closer ties to another country, but in order to do that, an election must be made, and a special form filed.

If required to file a 1040 rather than a 1040NR, the person must declare worldwide income.

What tax benefits of legal residency are afforded a green card holder that are not afforded someone who carries an H1B?

Snipes

If the H1B visa entitles him to a social security number rather than an ITIN, then perhaps I will agree with you. However most people that I deal with who are on work visas have an ITIN. People with ITINs are not entitled to many tax credits, including EIC.

There is also the issue of dependents. They may or may not have permission to bring their dependents with them, while a green card holder has greater latitude in that area.

[Snipes5]

If a person has an ITIN and an H1B, you will find that they in fact have an SSN. As you know, someone with only an ITIN is not legal to work here, and someone with an SSN (or who is so eligible) may not obtain an ITIN.

ITINs are issued out of a different set of numbers than SSNs. An ITIN will usually be in the 9XX series. If the number starts with something different, and the person has an H1B, it's an SSN.

If given an ITIN in the 9XX series, and then issued an H1B, an SSN will be issued to the person.

Snipes

[LdiJ]

Originally Posted by Snipes5

If a person has an ITIN and an H1B, you will find that they in fact have an SSN. As you know, someone with only an ITIN is not legal to work here, and someone with an SSN (or who is so eligible) may not obtain an ITIN.

ITINs are issued out of a different set of numbers than SSNs. An ITIN will usually be in the 9XX series. If the number starts with something different, and the person has an H1B, it's an SSN.

If given an ITIN in the 9XX series, and then issued an H1B, an SSN will be issued to the person.

Snipes

I think that perhaps we should advise this person to consult a local tax professionial that has some experience in this area....and yes, I am well aware of the numbering sequence for ITINs. Our firm is an acceptance agent.

Our debate isn't going to help them. We aren't going to agree so the OP needs to get answers from another source....a tiebreaker so to speak...LOL.

However, I will point out that someone on a H1B visa is not entitled to the full tax or government benefits that a legal resident is entitled to recieve....even if they are issue a "for work purposes only" SSN.