Capital Gains Tax For U S Taxpayer For Sale Of Property

GS_Dirtboy

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John, a US citizen has lived, and rented in Argentina for the past 5 years. He has no US residence so therefore his primary residence is his apartment. He marries an Argentine citizen. They pay US taxes as married, filling jointly. She owns her home outright and has for the past 5 years. They sell her house. Do they owe US tax on the capital gains?

My understanding of the US capital gains tax law is that if the home is not a primary residence - it is vacation, rental, etc then they owe capital gains tax. If the home is a primary residence an individual has an exclusion of $250,000 dollars, married taxpayers have $500,000. Is this what you guys understand as well?

Thanks,

GS
 

steveinbsas

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The last time I checked, you have to own the house for five years and have lived in it for two of those years to qualify for the $250,000/$5000,000 exemption, and as far as I know that is based on the gain, not the gross selling price.

I sold a house under these rules. I had "proof" (electric bills) showing when I took occupancy and how long I was there. I filed my tax return using Tax Act Onine and answered all of the "federal" questions. The sale did not even show up on my final return since there was no taxable gain.

Obviously, this meant that no one ever asked how much time I actually lived in the house.
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clooz

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GS: yes, i think your summary is correct. She can choose to file as married-filing-separately in the year of the sale and take the capital gain exclusion, or if he has never taken it they can file jointly and share the exclusion. it's a once in a person's life time exclusion.
 

el_expatriado

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As long as they were living there for 2 of the last 5 years and were not renting it out, they should be good to go.
 
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