Seling apartment in Europe

[hightoweradana]

One more question regarding selling my apartment in Europe. I have been there for 10 months with my husband. Will we be entiled to personal exeption as couple this year? Returning to US as writing this post ... Thank you.

[tagteam]

See https://www.irs.gov/publications/p523#en_US_2022_publink10008938

Unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion.

[Opus 17]

Marriage imparts ownership but not residency.  If you have owned and lived in the apartment for at least 2 years, you qualify for the full exclusion.  Your spouse adopts your ownership but not your residency.  Did your spouse use the apartment as their main home before you got married?  If not, then the spouse does not qualify for the exclusion (you would get a $250,000 exclusion if you file a joint tax return but not a $500,000 exclusion.)

Or, if you are moving for a job change or one of the other reasons listed in publication 523 under "Do I qualify for a partial exclusion?" your spouse might qualify for a partial exclusion. 

https://www.irs.gov/forms-pubs/about-publication-523

[hightoweradana]

Also, can I substract money  (if I have to), I gave to my sister to buy my apartment? Place was bouht in here name, and then she gifted to me. Thank you.

[hightoweradana]

Ok, I think it is getting a little bit complicated here. I completely understand the Europe ownership question. Now, I am talking about California. For this year, we'll be here just for about 6 weeks. Are we entiled to full personal exemption on our 2023 taxes? Thank you.

[Opus 17]

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@hightoweradana wrote:

Also, can I substract money  (if I have to), I gave to my sister to buy my apartment? Place was bouht in here name, and then she gifted to me. Thank you.

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If you are the legal owner of the apartment in full, then you are the only person (under the law) who gets the sales proceeds, realizes the gain, and pays the tax.  Whatever you do with the money afterward is separate.  If you give your sister money, that's a gift.  It is not tax deductible, and if it is more than $17,000, you must file a form 709 gift tax return to report the gift.  Payment of gift tax is not required unless your total lifetime gifts are more than $13 million, but the form must be filed so the IRS can keep track of large gifts against your lifetime total.

Similarly, if your sister was considered a US person at the time of the gift (covered by US tax law) then she was also required to file a gift tax return.  

[Opus 17]

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@hightoweradana wrote:

Ok, I think it is getting a little bit complicated here. I completely understand the Europe ownership question. Now, I am talking about California. For this year, we'll be here just for about 6 weeks. Are we entiled to full personal exemption on our 2023 taxes? Thank you.

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If you are a US citizen or green card holder, you are required to file a US tax return and report and pay US tax on all your world-wide income, no matter where in the world you live.  If you have been living overseas and you moved back to the US, that won't change your US tax return.

(If you are not a citizen or green card holder, your tax situation is much more complicated and follows different rules, and we need to get clarification and go back to square one and start over.)

If you moved into the state of California, you will be considered a part-year resident and you will file a part-year resident tax return.  California will only tax income that was paid to you or earned by you while you were living in California.  (If you are an independent contractor, California also gets to tax you if your customers/clients live in California.) Unfortunately, if you sell the apartment after establishing your new permanent residence in California, California gets to include that as part of your California taxable income.  So if there is a way to close on the sale of the apartment before you move, that will save you about 10% of the gain in state taxes.  

I am not familiar with how California state income tax might differ between full year and part year residents, in terms of exemptions, deductions, credits and so on.  You can start with this page to look for information on the topic.

https://www.ftb.ca.gov/file/personal/residency-status/part-year-and-nonresident.html

[hightoweradana]

I think, there is some misunderstanding here. I am not talking giving my sister money. I am talking about money I gave my sister to by apartment for me. Can I substract that payment from proceeds from an apartment? Thank you.

[Opus 17]

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@hightoweradana wrote:

I think, there is some misunderstanding here. I am not talking giving my sister money. I am talking about money I gave my sister to by apartment for me. Can I substract that payment from proceeds from an apartment? Thank you.

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Read publication 523.  We have given you the link a couple of times.

Your capital gain is the difference between your cost basis and the selling proceeds.  Cost basis is what you originally paid, plus certain adjustments, plus the cost of permanent improvements or renovations that increased the property value.  You can also reduce your proceeds by certain selling expenses such as a commission.

For example, if you paid $100,000 and the selling price is $300,000, the gain is $200,000.  If you had previously renovated the kitchen for an additional $20,000, then your adjusted cost basis is $120,000 and your gain is $180,000.

I should also mention at some point, that when you file your US tax return, you report the purchase price in US$ using the conversion rate at the time of purchase, and you report the selling price in US$ using the conversion rate on the day of the sale.

And of course, the foreign country where the apartment is located may use different rules to tax the sale.  That's up to them.  Your US tax return uses US rules.   

[hightoweradana]

Thank you.

[pk]

@hightoweradana , having gone through this thread and generally agreeing with my colleague @Opus 17  and  @tagteam  , I am still confused as to what you are trying to do.    I understand that you gave  some monies to your sister to buy  real-estate in  Europe and having achieved that , your sister gifted  ( officially  for transfer purposes ) the asset to you.  Beyond that  am confused  -- are you a US person  ( citizen / GreenCard/ Resident for Tax purposes ),  what about your sister whom helped you in  the transaction,  was  legal reason for this roundabout way to get the asset, is the asset in your name now,  why is there reference to California, are you a resident/ non-resident of CA ,  are you trying to establish a basis  for your asset in Europe  and is it still in your possession ,  what  country is the asset in and are you a  citizen/ resident of that country etc. etc.

I will circle back once I hear from you 

pk

[Opus 17]

@pk 

Part of the discussion/background is here.

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/selling-apartment-in-europe/00/3...

[pk]

@Opus 17  ich bedanke mich.

[hightoweradana]

Ok, I think I got my questions answer here. Just to be clear, I am US citizen, but my sister is not and she doesn't live in US. She bought my apartment for me in her name because I could not get to Europe at that moment. Yes, then she gifted to me for tax purposes. I was just trying figure it out what will, if any,  be my tax implication for this year, and If I can also deduct $$$ I gave her, even thougt she bougt an apartment in her name first. Thank you everyone for help. I know, it was confusing, but I think I came to conclusion. Thank you again.

[Mike9241]

There may be another issue that has not been addressed. to qualify for the home sale exclusion, the property must have been your principal residence for at least any 2 years for any of the 5 years before sale.