need help selling my father's house

[macduong]

What is the name of your state?Virginia

I posted this on the real estate forum but I am also putting here should somebody can help me. I have not gotten any feedback.
Thank you everybody for taking the time to read this and graciously help me. I have been unable to find an answer to my question

My parents bought the house in 1989 for 310,000K. They were neither US citizens nor permanent residents. At that time, my brother and his ex-wife also co-applied for the loan since they were citizens. The house has since been paid off by my parents.

The house remains under my parents name only. Neither my brother nor I have our name. In 1997, my mother passed away in the US. I have yet to have her name deleted off the county real estate papers.

My parents lived overseas and therefore this house was like a secondary home for them. They spent the summers here. They actually purchased the house for my brother and I to stay. My brother and I both lived in that house since 1989 and paid all the utility bills and the property taxes.

My father is planning to sell the house. He is currently volunteering overseas, therefore he will not be here at the time of sale. I will be representing him.

The problems are the following:

-My father is a French citizen and not a US citizen. He is a permanent resident. He has never filed an income tax in the US because he never received any income in the US. He has an account here in the bank that is linked to mine..I have been paying all dividends.....

-He has lived here only sporadically not continuously for 2 years. We, his children have lived in the house since 1989. I left last year to buy a house on my own. Adding all the time he has been in the house exceeds 2 years. However, in the last 5 years, he has not really lived 2 years

- The house is expected to have doubled in value to about 650K

My questions are the following:

-To represent him, can a long term power of attorney for finance be enough. I have pulled something off the internet and having him fill that. We will get it notorized at the bank

-Is it possible to consider this house to be his "main home" in the US..How are taxes going to be determined? Can he exclude from income any gain up to a limit of 250K? Does the fact that my mom passed away in 1997 changes anything?

-If the gain cannot be excluded, it will be therefore taxable. At what rate will it be?

-Since 1989, the house has beed our main home (my brother and I) is it better AND is it legal for my father to transfer the name on the title to me and my brother so that when the house is sold, we can use the capital gains exclusion on it

 

[abezon]

What is the name of your state?Virginia

My parents bought the house in 1989 for 310,000K. They were neither US citizens nor permanent residents. At that time, my brother and his ex-wife also co-applied for the loan since they were citizens. The house has since been paid off by my parents.

The house remains under my parents name only. Neither my brother nor I have our name. In 1997, my mother passed away in the US. I have yet to have her name deleted off the county real estate papers.

My father is planning to sell the house. He is currently volunteering overseas, therefore he will not be here at the time of sale. I will be representing him.

The problems are the following:

-My father is a French citizen and not a US citizen. He is a permanent resident. He has never filed an income tax in the US because he never received any income in the US. He has an account here in the bank that is linked to mine..I have been paying all dividends.....

Because he has a green card, your father is a resident alien until the immigration folks take it away. Therefore, he is required to file a US tax return every year, regardless of where he lives or earns money. He should get the last 3 years of tax returns filed, ASAP. If the IRS wants more returns, they will contact him. He can file a power of attorney with the IRS allowing you to handle things. See a tax pro for help filling it out.

-To represent him, can a long term power of attorney for finance be enough. I have pulled something off the internet and having him fill that. We will get it notorized at the bank

A POA will work for selling the house, but you'll need a separate POA for the IRS. He'll need access to a US notary public to execute the POAs.

-Is it possible to consider this house to be his "main home" in the US..How are taxes going to be determined? Can he exclude from income any gain up to a limit of 250K? Does the fact that my mom passed away in 1997 changes anything?

No. The main home is where you spend most of your time.

-If the gain cannot be excluded, it will be therefore taxable. At what rate will it be?

The gain will be taxed at 15%, or 5% if his other income is low enough. He'll probably want to file a 2555 instead of an 1116. The tax pro you hire should be the best international pro you can find (try border states). All returns have to be filed the same way, so make sure s/he looks at all years before deciding on a strategy.

-Since 1989, the house has been our main home (my brother and I) is it better AND is it legal for my father to transfer the name on the title to me and my brother so that when the house is sold, we can use the capital gains exclusion on it

You can't use the gains exclusion unless you own the house & live in it for 2 of the 5 years prior to sale. If he's willing to wait 2 years for the money, gifting the house to you will work.


I strongly recommend you locate an estate attorney with international estate planning experience. Your father probably got a partial step up in his basis when your mother died. However, this may be affected by their immigration/residency status.

Also, he may need to file an ancilary probate action to get the title transferred to his name only prior to sale.

 

[Snipes5]

Just a note about the POA for real estate sale. A POA is only as valid as the people who will accept it.

For real estate sale, it should have the precise legal description of the property, not just the address.

Bonne Chance.

 

[macduong]

Thank you for your help and more questions

Thank you both for your insight. I have e-mailed many forums b4 and this is the first time somebody has been willing to help me.

I have a few more questions as follow up. My father came from VN for the holidays so he is here in the US.

I am going to get a POA with the legal description of the address on it and have it notorized by the local bank notary. However, if the POA is not accepted by the buyer, then what are the options since my father will be overseas.

He is earning about 1300-1400 US $/month for his retirement. Do you know if that qualifies him for the 5% or the 15% tax rate?
I asked him to mail me all his tax returns from France since 2000 and I will file it for him.
I am also going to contact the IRS to ask some questions. (If you have any suggestions, let me know...)

What is "best international pro you can find (try border states)"? I did not understand what you meant on where to find him/her?

Can we file the ancilary probate of action by going to the local government center with a certificate of death?

I agree with the step up basis since my mom passed away in 97 but if the house was bought in 89 at 320K and can be sold for 650K, a difference of 330K...my father will be taxed on 330K at 15% or 5%....The step up basis applies only if the capital gain exclusion could be applied...Am I not correct??

Happy New Year and I look forward to more advice.

M

 

[abezon]

OK, here goes......

1. Talk to 2 or 3 title companies/mortgage lenders about how the POA needs to be phrased & what needs to be included. It's the title company & lender who have to be satisfied.

2. The fact that he is a resident alien means he is not subject to FIRPTA. Be sure you have his social security number & a certified copy or 6 of his green card. The title company/lender may want the green card info incorporated into the POA. Be sure to ask.

3. $1400/mo will put a large chunk of his taxable gains in the 5% bracket. Make sure you file the 2005 return on time. If there is no tax due (i.e., the foreign tax credit takes care of all taxes), he will not need to make estimated payments. He'll still need to save some money for the eventual tax bill, but he can keep it in a CD in his name instead of letting the gov't have it all year.

4. International tax has lots of quirks. You don't want to try to file the returns yourself, nor do you want to hire someone without significant experience with international returns. Tax pros who practice near the Canadian border tend to encounter international stuff regularly & you have a better chance of finding someone competant who won't charge an arm & a leg to cover their own research time. My best guesses would be Bellingham, WA (Vancouver); Detroit, MI (Windsor/Toronto); and Albany/Syracuse, NY (Montreal & Ottowa) or Niagra Falls/Buffalo, NY (Toronto).

5. Talk to an estate attorney about probate issues. Your father may need to execute a special POA for you to act as executor.

6. Ask the probate attorney about basis step ups as well. When someone dies, their heirs get a new basis equal to the fair market value of the property when the owner died. This is usually much higher than what the original owner paid. Your father got some sort of step up from the 1989 purchase price. Whether it was a full step or half step depends on how title was held & the value of mom's estate. Mom's immigration status is probably also a factor. The basis will be more than $320k, but you won't know what until you talk to the estate attorney.

 

[Snipes5]

If I were you I would go with someone near to Montreal, who can actually read and understand his French tax returns. That will make things a lot easier, since you will probably have to mail everything to someone.

I doubt there are many french-speaking tax preparers in VA.

Snipes

 

[abezon]

If I were you I would go with someone near to Montreal, who can actually read and understand his French tax returns. That will make things a lot easier, since you will probably have to mail everything to someone.

I doubt there are many french-speaking tax preparers in VA.

Snipes

Now, Snipes, not all Amurrikans speak only English. I'm sure there are many French-speaking tax pros in VA. But I highly doubt they also know international tax prep.

 

[Snipes5]

Still a lot more likely to find a french speaker in Montreal.

 

[LdiJ]

Still a lot more likely to find a french speaker in Montreal.

Well...LOL...they could find one in Indiana who is both familiar with international issues AND speaks french...LOL....and Italian...and Spanish....although I have to admit that french is my weaker language.

The point there is that bilingual people are available all over the place...its a question of asking....and generally those bilingual people tend to be familiar with international issues, because their language skills drive them in that direction.