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Ask Merlo Your Own Question
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Dear Sir I will appreciate if you address us to some reading

Customer Question

Dear Sir:
I will appreciate if you address us to some reading about lowering our tax liability in selling our apartments abroad, which was my primary residence during more then 10 years before coming to the United States in 2004.
Now we owe house (primary residence more then 2 years).
We plan to buy bigger house (primary residence) , so part or all money from selling apartments in Russia will go for this purpose.
Our adjusted gross income for 2009 is $94,000, In 2010- even less. So we can't afford to pay huge taxes for estate selling.

Does it matter ,if we at first buy land lot and sell the russian appartments in 2010, then in 2011 finish new house construction? I mean, does it matter for taxpurposes if both transaction(buying/selling ) are at the same financial period(year)?
Sincerely yours,XXXXX
Submitted: 6 years ago.
Category: Tax
Expert:  Merlo replied 6 years ago.

Hello JA Customer,


Since you have not lived in the apartment in Russia for two out of the last 5 years, there is no way for you to claim a credit for the primary home exclusion. And reinvesting the money from the sale of a personal residence to purchase another personal residence does not qualify for any type of tax reduction or tax deferral.


Taxes will be due on any gain you have from the sale of this property, and the taxes are due in the year the property is sold. You would be better off to sell the apartments this year if you can while the long term capital gains tax rate is only 15%. If the sale does not occur until 2011, that tax rate increases to 20% and you will have additional tax liability.


The IRS will allow you to claim a credit for foreign taxes you may have to pay to Russia on this same transaction, but you do not qualify for any other type of reduction in your US tax liability, regardless of how the funds are used.


If there were other options available to you, I would certainly provide you with that information, but unfortunately you do not qualify for any exclusions or deferrals.


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Thank you



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Customer: replied 6 years ago.

Thank you very much. Unfortunately, it confirms my thoughts.


Expert:  Merlo replied 6 years ago.

Thank you Vera for using JA. I wish I could have provided you with an alternative here.