 Taxing
a nonresident's property sale
|  Dear
Tax Talk,
My brother-in-law had been living in the
United States for the past 10 years but went back to his home country. I sold
some property he owned. He is a nonresident, but was filing a regular 1040 since
he lived in the United States for more than 10 years. He lived in the just-sold
house for all that time. At the sale, the settlement agent withheld 10 percent
of the gross sales amount. Will my brother-in-law be able to get this money back
from the Internal Revenue Service? Thanks -- Mustafa
 Dear
Mustafal,
Although your brother may have been a nonresident for immigration
purposes, he was considered a resident for tax purposes.
For
tax purposes, an alien individual is considered a U.S. resident if he is substantially
present in the United States or has a green card. As a resident, he enjoys the
same tax breaks as citizens or permanent resident aliens. Therefore, if he lived
in the house as his principal residence for two years in the last five, he would
qualify to exclude up to $250,000 in gain. Depending on when
your brother left, he should file a Form 1040 or Form
1040NR (or combination of both, referred to as a dual status return) to claim
credit for the taxes withheld on the sale. The rules
for departing aliens are complex and assuming that 10 percent of the sale price
is a large amount, you should consult a CPA to get the best tax advantage when
filing for the refund.
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