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DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 727
Experience:  Years of Experience in Business & Personal Taxes
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Hi, I am an immigrant, I got my green card in 2008. I came

Customer Question

Hi, I am an immigrant, I got my green card in 2008. I came in US with an F1 visa in 2005. I have sold my home in my native country"Egypt" and I am transfering it to my account in united states, the value is in the range of $80,000-100,000. My parents bought me this home far before I come to united states since I was a kid. Do I have to pay taxes on that money?
Submitted: 3 years ago.
Category: Tax
Expert:  DanielleCPA replied 3 years ago.

DMC : Hi and welcome to Just Answer! I'm happy to help with your tax questions. Feel free to interject at any time if you need clarification.
Customer:

Hi, did you get a chance to go through my question

DMC : You would have to pay tax on the capital gain--the amount by which th selling price exceeds your basis in the property which is typically the cost of the property plus Any significant improvements you made on the property. Good news is that long term capital gains are taxed at a maximum of 15%.
Customer:

how to determine the basis, and how I can prove it,

DMC : If you are required to pay tax on the gain on Egypt, you would be eligible for a foreign tax credit on your u.s. Return to help offset your tax.
Customer:

when you are saying the gain, how to determine it, my parents bought it way back almost 25 years ago?

DMC : The cost of the property would be the basis. Your parents don't have a bill of sale or something like that to use in determining cost?
Customer:

Well, they use to pay it in equities through an investment organization over these 25 years. I am also going to put this money as a deposite for a home here in USA. does that help my tax situation by anyway?

DMC : Are you selling the equities or you are just going to be transferring them to a u.s. Account?
Customer:

Well, the home is sold in Egypt, my father deposited the money in my account in Egypt and wire transfered it to my account in USA.

Customer:

Hi are you still there?

DMC :

I apologize for the dealy, but I'm back.

DMC :

The transfer of money to the U.S. Account will have no effect on your tax situation. However, I want to make sure that you are aware of the TDF 90-22.1 filing requirement since you have an Egyptian bank account and are a U.S. resident. This form is required to be filed in June 30th of each year to report foreign bank accounts with balances of over $10,000. Here's a link to the form on the IRS website: http://www.irs.gov/businesses/small/article/0,,id=210244,00.html

DMC :

Please let me know if you have any more questions. If not, please hit the green accept button.

Customer:

I am sorry, I just want to make sure I understand you right when you say "The transfer of money to the U.S. Account will have no effect on your tax situation" does that mean I don 't have to pay extra taxes due to selling the home in Egypt or transferring the money to US.

DMC :

You don't have to pay extra taxes because you transferrd the money to the U.S. You will have to pay tax in the U.S. on the gain on the sale of the home.

Customer:

I read in article 533 on the irs website that I will be exempt if I have lived in the home for two years in the last five years before the selling date, did you hear about that?

DMC :

You can exclude the gain on your principal residence if you lived there two out of the five years before the selling date. However, if you have lived in the United States since 2005, then you would not qualify for that exclusion. If you are living in the United States, your principal residence would have been here.

DMC :

This is assuming the home was sold in the current year.

Customer:

Yes it was just sold, my final question is that I came in 2005 with F1 Visa student, I filed my taxes in 2005 , 2006 , 2007 as non resident allien. do you think that doesn't qualify me to claim this exemption? since I became resident only in 2008 .

Customer:

Hi , r u still there?

DMC :

Still here...I am just verifying one point in the IRS code surrounding this to make sure I advise you correctly.

Customer:

Sure, take your time. I am sorry. Also, if I calculate the cost of the home in Egypt, can I include the inflation rate. for instance of my parent paid 1000 egyptian pounds 25 years ago, this will have value much more than that now, or should I just take it as is without considering the inflation rate?

DMC :

No problem.

DMC :

I apologize. I believe you would qualify for the exclusion, as you filed a non-resident alien return and being away at college qualifies as a temporary absence from your prinicpal residence. I apologize for failing to consider that fact earlier.

DMC :

Unfortunately, you cannot take inflation into account when calculating gain. The cost would be non-adjusted dollars. So, if cost $1,000 25 years ago, you still use 1,000 in your gain calculation.

Customer:

No problem, so you think I may qualify for this exclusion based on the fact I was F1 student in 2005,2006,2007 filling non resident allien taxes? do you have any article that can support that, this case is not mentioned in 533 instuctions on the IRS website that is why I am confused, do you have any IRS article that can support my case. This will be fantastic!

DMC :

Here is an excerpt from the Internal Revenue Code discussing the principal residence exclusion:


(III) any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the Secretary.
DMC :

There is nothing that specifically mentions your case, so this is just my intrepretation of your situation.

DMC :

Remember that the law is that the home had to qualify as a principal residence for 2 full calendar years, not just parts of 2 separate years in the past 5 years.

Customer:

Thanks, XXXXX XXXXX says "(not to exceed an aggregate period of 2 years)" my case is three years , do you think that this may contradict with my case?

DMC :

But within the past 5 years, you were only absent for 2 years (2006 & 2007), correct? Also remember times you went back to Egypt would not be part of the temporary absence.

Customer:

So, in conclusion based on all facts we discussed, you think I qualify for this exemption? if yes, should I report it to IRS and claim exemption or not report it at all?

DMC :

It sounds like you qualify for the exemption. If you do qualify, you still report the sale on Schedule D of your tax return but notate that it qualifies for the principal residence conclusion. Remember that in tax law can often be gray and is sometimes open to intrepretation. I strongly suggest seeking the assistance of an accountant in your area when you prepare your 2011 taxes.

Customer:

Sure, I will do that. you also was a great help to me. Thanks very much

DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 727
Experience: Years of Experience in Business & Personal Taxes
DanielleCPA and 2 other Tax Specialists are ready to help you
Customer: replied 3 years ago.
Hi, I was just reviewing our discussion today. I would appreciate it if you can clearify something for me. I sold the home in 06/2011 , if we go five years back it will be 06/2006 , that means that during 2006 & 2007 , it was my principle home for only year and half not 2 years . Is that right ? I am afraid that may affect my qualification for the tax exemption , what do you think?
Expert:  DanielleCPA replied 3 years ago.

Yes, it is correct, you would go back to 06/2006. If it was your principal home for only a year and a half, then you would not qualify for the exemption.

Customer: replied 3 years ago.
Ok, sorry for bothering you again, that makes me ask another question, does the currency rate of exchange can be included. I know I asked you regarding the inflation and it doesn't, but way back when my parents were paying for the house One dollar was equal to 3 egyptian pounds, now one dollar is equal to 6 egyptian pound , so egyptian pound lost almost 50% of it is value with respect to dollar . Should that be included in the calculation of the capital gain?
Expert:  DanielleCPA replied 3 years ago.

Use the currency exchange rate at the time of the purchase. So, 3 Egyptian pounds per dollar at time of purchase and 6 Egyptian pounds at time of sale.

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