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My sister and I own a 4-unit residential building. We have lived in 2
units as our primary residence for 10 years. We just converted all 4 units into 4 condos
and intend to sell the entire property. May we apply our $500,000 tax exemption to half of
the capital gain?
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 The general rule is that you and your sister each can sell your
principal residence and exclude up to $250,000 each, as long as you have owned and lived
in the residence for at least 24 of the 50 month period prior to sale. Thus, the value of
the two units you and your sister lived in would be subject to the residency exclusion.
You also may combine the residency exclusion with the tax-free exchange provisions of
Section 1031 to postpone gain on the sale of the rental units.
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I
live and work in California during the week. I commute to Illinois on weekends to see my
family. If I claim Illinois as my tax home may I claim all expenses related to my
California residence as unreimbursed business expenses?
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California would probably be
considered your place of residence since you spend the majority of your time there. As
such, you are not entitled to deduct costs of maintaining the California residence as a
business expense. However, if the property qualifies as a second residence, you are
entitled to deduct qualified mortgage interest and property taxes.
Generally, your "home" refers to the principal place of business or post of
employment, and you may not keep this residence at a location where you are not engaged in
business and then take a deduction for traveling expenses to and from your actual place of
employment.
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My wife and I own rental property and file separate
returns. How should the income be reported - by the person who has legal title to the
property, or equally, regardless of how legal title is held?
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The answer depends on
whether the property is considered: (i) one spouse's separate property; (ii) community
property of both spouses or; (iii)separate property of one spouse in which the other
spouse as a marital property interest under the laws of the state where your reside. If
both spouses own the property equally or have equal interest in the property under the
laws of your state, then you must split the income and expenses equally. If one owns the
property as separate property, that person claims the income and expenses. Of course, if
you file a joint return, this issue becomes moot.
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I am
a non-citizen, non-resident. I hold a US bank account and deposit U.S. source income and
dividends to this account. The company does not withhold taxes on these amounts and I wish
to know what U.S. tax obligation I have.
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You owe tax on your income at the flat rate of
30%. If you choose to pay it, file a Form 1040 NR and declare the income and pay the tax.
However, provided you've truthfully reported your filing status to the company, it is the
responsibility of the company to withhold and pay the 30% tax to the U.S. since the U.S.
generally has no legal jurisdiction over a non- U.S. resident/citizen, absent treaty
provisions allowing for collection of taxes cross-border. The upshot: you can pay the tax
if you want to (use form 1040 NR) but the responsibility for the tax generally rests with
the payor.
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Sale of Residential and Rental Units
