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I live and work in Spain as a permanent resident. I want to sell my house in California and transfer the proceeds to Spain to invest in a rental property I can manage more easily. The house is currently in a revocable trust and would probably yield about $150-180K in capital gains.

My questions are:

  1. Can I sell it as a property in a trust or do I have to change the title?
  2. Can I take those funds and purchase a property in Spain and avoid capital gains tax?
  3. How will I be taxed in the US on those gains if there is no benefit to reinvesting in property in Spain?

Thank you!

JohnFx
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Patricia Sanchez
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1 Answers1

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Can I sell it as a property in a trust or do I have to change the title?

If you're the trustee and the sale is within the trustee's powers then you can sell it in a trust. If not - then you cannot sell it, and you can probably not change the title. Usually, living trusts are such that the grantor, trustee, and the beneficiary are all the same person and the trustee can do whatever they want. But you'll need to check your own trust document.

Can I take those funds and purchase a property in Spain and avoid capital gains tax?

If you're referring to 1031 exchange, then no. IRC Sec. 1031(h) prohibits treating a foreign property as a like-kind to domestic.

How will I be taxed in the US on those gains if there is no benefit to reinvesting in property in Spain?

You'll probably need to investigate this a bit more. You'll need to determine your basis in the property, the allowable depreciation, the locked passive activity losses, if any, and then do some math. Most will be taxed as capital gains and depreciation recapture. See the IRS Publication 523.

littleadv
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