Updated July 29, 2026. Quick answer: Not automatically, and the condition is the part that surprises people. IRC §865 sources gain on personal property to the residence of the seller, and a citizen with a foreign tax home can be outside the definition of “United States resident.” But §865(g)(2) adds a condition: a citizen is not treated as a nonresident unless foreign income tax of at least 10 percent of the gain is actually paid. Move somewhere that does not tax the gain and it stays US-source.
The two provisions, in order
IRC §865(g)(1)(A) defines the term: “United States resident” means any individual who “is a United States citizen or a resident alien and does not have a tax home (as defined in section 911…)” in a foreign country. So having a foreign tax home is what takes you out of US-resident status for sourcing.
And then the condition that undoes it. IRC §865(g)(2): “a United States citizen or resident alien shall not be treated as a nonresident with respect to any sale of personal property unless an income tax equal to at least 10 percent of the gain derived from such sale is a[ctually paid]” to a foreign country. Read the two together: the tax home gets you out, and the 10 percent requirement pulls you back in unless the new country genuinely taxes the gain.
| Where you move | Foreign tax on the gain | Sourcing outcome |
|---|---|---|
| A country taxing capital gains at a real rate | At least 10% of the gain | Can be foreign source |
| A country with no capital gains tax | None | Stays US source |
| A country taxing it lightly | Below 10% of the gain | Stays US source |
| Anywhere, but you keep a US tax home | Irrelevant | US source — you are a US resident for §865 |
Why this matters more than the sourcing label suggests. Source determines which basket a foreign tax credit falls into and whether there is foreign income for a credit to apply against at all. The low-tax-jurisdiction move that looks optimal on its face — go somewhere that does not tax gains — is the exact case where §865(g)(2) keeps the gain US-source, so there is no foreign tax and no credit. You are taxed at home either way.
Note that the tax-home test is borrowed from §911, the foreign earned income provision — which is a chain worth following, because §911 itself does not do what people expect for investment income. And the 3.8% surtax runs on its own rules, where credits do not reach.
Sources
IRC §865(a), §865(g)(1)(A)(i) and §865(g)(2); IRC §911(d)(1) and §911(d)(3) for the tax-home definition §865 borrows. Fetched July 2026.
This states what the cited authority says. It is not tax, legal or investment advice. Cross-border tax turns on your citizenship, your tax home, the country you move to and any treaty between it and the United States — none of which a page can see. No filing deadline is stated here; deadlines change and the current instructions govern.