Just learned that taxpayer owned a house in Bolivia. She emigrated from that country many years ago and is a longstanding US resident and citizen. The house was built by her family in stages over time before she moved to the US. Additional improvements were made to the house and ownership eventually passed to her. It?s unclear whether she became owner before moving to the US and becoming a citizen. Any paper trail with all legal and financial documents remains in Bolivia.
During her time as a US resident and citizen, she would occasionally use the house during visits with her family. It has been primarily occupied by a house sitter although it was occasionally rented. Real estate taxes were paid annually. No rental income has ever been reported, nor has any depreciation ever been claimed. It isn?t quite clear how to determine the basis of this property. In Nov 2009 it was sold for $180,000, with commission and taxes of $10,000.
Where to start? Although it?s tempting to do otherwise, since no documentation would have gone to the IRS, I assume the gain from this sale, if any, is reportable. Not sure if it?s worth the time and effort to reconstruct the rental property history? Could she have been claiming a foreign tax credit for the real estate taxes paid?
Ideas and suggestions warmly appreciated.