Home Sale in Columbia

[Gary]

My son-in-law's mother is a co-owner of a home in Columbia (the country) which they are going to sell. She lives in the US and is a dual US/Columbian citizen. The home has been occupied by the owner's mother for years, but she is now in a retirement home.

What are the tax implications of the capital gains she may receive upon the sale? If she has to pay taxes in Columbia, can she claim the Foreign Tax Credit?

I know, I should know these things, but I don't. I do know that some of my friends on this message board do know the answers, and I thank you in advance. If you need any other details, let me know and I will get the information.

[Bees Knees]

Since the home is not her principal home, the exclusion rules do not apply. US citizens must pay tax on world wide income, which would include the gain on the sale of this home in Columbia. The gain would be taxed as a long term capital gain and receive favorable capital gain tax rate treatment. Assuming Columbia is not on some Terrorist country list or otherwise under some kind of U.S. ban, any Columbia income tax paid on the gain would qualify for the foreign tax credit on the U.S. return.

[Mark Goldberg]

Whoa!

Bees, what makes yuo say that the house was not her principal residence? Maybe it was, for 24 months out of the 60 months prior to the sale. Maybe it wasn't. The inquirer did not give us enough info to make this call.

[Bees Knees]

The original post says she lives in the US and that her mother lives in the house in Columbia. I assumed that means her principal residence is in the US. But if it were the Columbia residence, then the Section 121 exclusion rules could apply.

[Gary]

Thank you for your quick response. The answer is what I thought. It is true, she did not live in the house.

Gary