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Sale of home

shachar183
Level 3

Hello,

US citizen who leaves abroad sold his property and would like to qualify under topic 523 'Selling your home'.

More details:

- The individual did not reside in this property since according to him 'it was too small for his 7 person family'.

- That's the only property this individual had prior to the sale. He rented another house for his family.

- The individual used the consideration to buy another house which he currently resides in.

- There is no taxes in the country which the property is located. The sale is fully exempt. 

My first reaction would be that this transaction does not qualify for gain exclusion from home selling. 

I would like to hear from you what do you think.

Thanks,

  

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Accepted Solutions
sjrcpa
Level 15

Correct. No exclusion.


ex-AllStar

View solution in original post

10 Replies 10
sjrcpa
Level 15

Correct. No exclusion.


ex-AllStar

View solution in original post

abctax55
Level 15

Unless s/he - he - they had quintuplets that "made the house too small" ...  I vote with no exclusion.

Former Chump..umm... AllStar...This message was typed from 6 feet away so you can safely read it immediately.

If a post answers your question, click on *Accept as solution* for future searches
IRonMaN
Level 15

Sometimes my curiosity gets the best of me.  If he didn't reside in the house, what was the house used for while he owned it?

Barber! Why didn't I think of this before? Getting paid to give out bad tax advice - need I say more? I've run with scissors for years so it is a natural fit.
shachar183
Level 3

It was part of the time under construction/renovation, remained empty or was leased to others.

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itonewbie
Level 15

Did he have a mortgage?  If so, did you determine whether he had any §988 gain with each repayment?

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Still an AllStar
shachar183
Level 3

Valid point. Haven't gotten there. I know that part of the property was paid by taking a loan from the wife's brother but I do need to verify that there was no mortgage/other loan from the bank.

Honestly, I don't think he will remain my client after he will find out that he needs to pay taxes in the US. I believe I prefer that.

Thanks all for the inputs.

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sjrcpa
Level 15

The rental income is reportable on  the US return, too.


ex-AllStar
shachar183
Level 3

Absolutely, that was reported in PY. That's less harsh since it is taxable in the origin country and from 1116 is applicable. Since the sale of home in the origin country is exempted income it would be fully taxed (LT capital gain) in the US.

Thanks for the heads up   

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itonewbie
Level 15

@shachar183 wrote:

...That's less harsh since it is taxable in the origin country and from 2555/1116 is applicable...


You probably didn't mean it but this has nothing to do with F.2555.

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Still an AllStar
shachar183
Level 3

Edited. As always, you're right.