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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.'s corrections policy
-- Posted: July 9, 2003
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