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Hello- I am giving you the situation as I understand it. My

Customer Question
Hello- I am giving you the...
Hello-
I am giving you the situation as I understand it.
My brother, who lives overseas, is in a position to help my sister buy a house here in Colorado. My sister would occupy the house with her husband and my aging father, who needs care.
My brother lives in Hong Kong and does not file Federal taxes, as he is not in the US more than 28 days yearly.
My sister currently owns a house in Idaho and would sell it, but could not qualify for the house here on her own. My brother could get a loan on his income. The idea is t hat they would both be on the title.
So, beyond property taxes, which my sister would pay, would my brother be liable for any Colorado taxes?
Submitted: 8 years ago.Category: Tax
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Answered in 3 minutes by:
6/3/2009
Tax Professional: Merlo, Accountant replied 8 years ago
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Hello chris,

Is your brother who lives overseas a US citizen?
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Customer reply replied 8 years ago

yes-

this may or may not be relevant. He and his wife are divorcing. She lives in Texas, which is the last stateside place he lived (Austin)..about five years ago.

Tax Professional: Merlo, Accountant replied 8 years ago
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.

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified
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