Hello again chris,
If your brother is a US citizen, then he should be filing
a tax return
every year with the US, regardless of whether or not he ever spends any time at all in this country. As a US citizen, he is subject to tax on his income worldwide, regardless of where he lives. If he resides in a foreign
country for a period of 330 days in a 12 month consecutive period, then he does qualify for the foreign earned income
exclusion, which is currently $91,400. What that means is that he would file a return with the US and report his earnings from overseas, but he could then exclude that amount from his earnings before the rest would be subject to tax.
I realize that is not the questioned that you initially asked, but I did want to point this out to you just in case your brother is not aware of this requirement.
As far as the house that he wishes to buy for your sister, there would be no taxes involved for him doing this, other than the property taxes, which you indicated that your sister would be paying. The only time that a taxable event will occur is if and when the house is ever sold. When the house is sold, if your sister is listed as one of the owners and she actually lives in the home as her main residence, then she will be allowed to exclude part or all of any gain they may have from the sale. However, if there is still excess gain after the allowed exclusion, then both your brother and your sister (assuming both names are XXXXX XXXXX title) would be liable for capital gains
tax to the IRS
and also state
income tax to Colorado.
The only exception to this would be if your brother intends to charge rent to your sister. If your brother receives rental income, then he would be liable to report that income and pay both taxes at both the federal
and state level. However, if your sister will not be paying rent to your brother, then he has no tax liability
here until the home is sold.
If this was helpful please press the Accept button. Positive feedback is also appreciated.
Thank you chris, and please let me know if you need any further clarification on your question.