Taxpayer is a non-resident alien ("NRA") who bought California residential property many years ago. NRA's sister and her children have been living at the property since it was bought. NRA is considering either to sell the property (at $400K+ profit) or transfer it at some point to NRA's sister's children (who are US citizens). NRA has no US income. Which option would have the least tax consequences? Thanks!
1 Answer from Attorneys
The ownership of property in the US subjects the NRA to the jurisdiction for purposes of imposing a US tax unless there is a treaty which changes that result. Since we do not know what country is involved, we can't advise. A sale of California real estate is subject to US income tax and California Income Tax. This will likely be withheld in the sale escrow. A US nonresident Federal and California return will be needed to calculate the tax obligation and obtain any appropriate refund. You will need to be more specific as to the transfer to childern. Is this a gift? Is it a sale to the children? This gratuitous response does not create an attorney client relationship. The advice provided herein is generic, may not apply to your circumstances and is not to be relied upon in your actions. An attorney client relationship is created only upon execution of an engagement letter hiring me or my firm.