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Old 06-02-2013, 09:26 PM
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Selling a brand new constructed house after relocation

Hi,
I kindly ask for your advice on this interesting case, where I already got 2 contradicting views from 2 different tax experts I consulted with.
Here are the details:
- I am not an American Citizen.
- During 2012 I relocated from my country to live and work in Massachusetts USA.
- The relocation was done via my employer, and now I am working in the US office of the company (Intra-company transfer).
- Last month I received a green card, i.e. I am a permanent resident now.
- During 2010, way before I knew about the relocation, I started constructing a house in my country.
- The construction will be completed this month (June 2013), therefore I never lived in the house.
- As I now live in the USA, I wish to sell the house.
- The ask price will produce a profit of about $100,000 from the cost of construction.

My question is:
Do I need to pay tax to the American IRS on selling the house?

One tax expert says that yes, as this is a capital gain and I am a US resident.
The other expert says this is not a standard case of an American citizen investing in real estate and making a profit. He looks at the relocation circumstances.

Independently, I found IRS "Publication 523, Selling Your Home" on the net, that talks about "Excluding the Gain".
However one of the tests (conditions) there for full exclusion, is to live in the house for at least 2 years in the past 5. I could not find guidance for a case where the house was under construction.

I will appreciate any advice and guidance on this case.

Thank you in advance,
Tom.



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Old 06-02-2013, 10:35 PM
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Quote:
Originally Posted by Aerodyne View Post


#1;Do I need to pay tax to the American IRS on selling the house?

#2;One tax expert says that yes, as this is a capital gain and I am a US resident.


#3;The other expert says this is not a standard case of an American citizen investing in real estate and making a profit. He looks at the relocation circumstances.


#4;However one of the tests (conditions) there for full exclusion, is to live in the house for at least 2 years in the past 5. I could not find guidance for a case where the house was under construction.



Thank you in advance,
Tom.
#1;Yes; Short-term capital gains are taxed like ordinary income at tax rates up to 35% for 2012 (and 39,6% in 2013). For example if you bought a house in February 2012 and sold them in November 2012, your gain or loss on the investment will be classified as short-term. Long-term capital gains (assets held for more than one year) are taxed at 0% for taxpayers in the 10% and 15% tax brackets and 15% for taxpayers in the 25%, 28%, 33%, and 35% tax brackets. The 0% tax rates for those in the 10% and 15% federal income tax brackets was a special provision in the bush-era tax cuts which were extended to 2013. please read below.

#2; The tax expert is true; as a US person, a green card holder, as you can see, you are subject to US taxers on your US source and world wide income that you earn overseas; however, as long as you pay capital gain tax(either STCG or LTCG) t the foreign taxing authority (ies) , then you can claim the CG tax paid to the foreign taxing authority(ies) on your federal/ state returns(UNLES you liec in CA state) by filing form 1116 on line 47 of 1040 or on Sch A of 1040 line 8.


#3;As mentioned above, you , as a US resident , a green card holder, are subject to US taxes on your world wide income and US source income to the IRS/ your state.


#4;Correct;UNLESS you lived in the house overseas for at least 2 years in the past 5 as your main home, NOT aas your second home, you could not qualify for the exclusion up to $500K for joint filers, $250K for a MFS/single filer.



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Old 06-02-2013, 11:41 PM
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Thank you for your super fast response.



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Old 06-02-2013, 11:48 PM
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Yu are very welcome; good luck to you~~~~~~~~



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