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 I moved out of my
residence and want to sell or rent it, whichever comes first. Can I still qualify for the
residence exclusion and deduct mortgage interest?
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 The residence
exclusion applies to a sale when you live and own a home for at least 24 of the 60 months
prior to sale - therefore, the maximum time one can move out of a home, and sell it to
qualify for the residence exclusion, is 3 years. The mortgage is still deductible as
either your first or second residence, or as a rental property.
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I am renting out
a room in my home. What is the maximum amount of rent I can receive before I'm required to
report the income on my tax return?
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You need to file
Schedule "E" to Form 1040 to report your rental income and expenses. There is no
threshold amount for reporting income and expenses on rental income. Note: If you rent
your home or second residence (vacation home), or any portion thereof, for 14 days or less
during the year, you do not need to report the income.
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I'm a
non-resident alien who purchased undeveloped land for $50,000 which is now worth $100,000.
How would the sale be taxed?
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A non-resident
alien is taxed on the sale of U.S. real property under the same tax rates as the U.S.
taxpayer. Currently, the rate on capital gains is 15% federal. Since the seller is a
non-resident alien, the purchaser in general, has a federal withholding requirement of 10%
of the sales price. The NRA files a U.S. tax return to claim a refund if applicable.
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If I win a
lawsuit for copyright infringement, how is the award taxed?
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It depends on the
origin of your claim. If the award represents ordinary income to you, then you are taxed
at ordinary income rates. In general, damages are taxed as ordinary income, except in
cases of physical personal injury. Usually, if the damage award involves capital assets,
then the damages would be taxable as capital gains. |
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Our parents died
leaving their California home to me, a California resident, and my sister, a Texas
resident. If we sell the home, how will it be taxed?
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There is no
California inheritance tax, but California residents will pay income tax on any gains
accruing after the date of death. The federal capital gains rate is 15%; California taxes
the gain at ordinary income rates. A non-resident is
subject to tax on California source income. The gains on sale of real property in
California is California source income and the Texas resident is subject to income taxes
under the same calculation as the California resident - the person receiving the funds has
an obligation to withhold taxes for the Texas resident. |
