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121 exclusion on sale of home in foreign country

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    121 exclusion on sale of home in foreign country

    TP sold home in Japan & moved back to US. Meets all requirements for exclusion. But I remember reading somewhere that foreign property does not qualify. Anybody have a cite?

    Foreign Property

    I don't see anything in IRC 121 or in Publication 523 that disallows the exclusion if the taxpayer's principal residence was outside the US.

    The First Time Homebuyer Credit, in each of its three flavors, certainly had this restriction.

    But the 121 exclusion does not appear to require that the taxpayer's principal residence be within the US. It has to be the taxpayer's main home.

    Section 121 does disallow the credit for expatriates. That means someone who renounced their US citizenship to avoid US taxation.

    Expatriation is not the same as the Foreign Earned Income Exclusion or the Foreign Housing Exclusion. It appears that your client qualifies for the exclusion of gain on the home, even if he excluded income on Form 2555 while he was living abroad.

    Ummm... your client is a US citizen or resident alien, right?

    Burton M. Koss

    The map is not the territory...
    and the instruction book is not the process.


      Thanx for the reply Koss.
      TP is US citizen, not expat.
      SP is Japanese national & now US resident alien.
      I too read pub 523 & sec 121 & found nothing specific to geographic location.
      8 weeks to go and I am already losing my mind. Maybe I am confusing this with the FTHB.