Rev. Rul. 71-495

Advice has been requested whether the gain realized on the sale of a residence in the United States by a resident alien who moved outside the United States is subject to the provisions of section 1034 of the Internal Revenue Code of 1954 under the circumstances described below.

The taxpayer was a resident alien of the United States and a citizen of Norway. In 1955 he purchased a residence in the United States where he and his family lived until 1970. In 1970 he sold the house at a gain and permanently returned with his family to Norway where, within a year of the sale, he purchased a new principal residence. The taxpayer's cost of purchasing the new residence exceeded his adjusted sales price of the old residence.

Generally, resident aliens are taxable the same as citizens of the United States; that is, a resident alien is taxable on income derived from all sources, including sources without the United States. See section 1.871-1 of the Income Tax Regulations.

Section 1034(a) of the Code provides that if property (old residence) used by the taxpayer as his principal residence is sold by him after December 31, 1953, and, within a period beginning one year before the date of such sale and ending one year after such date, property (new residence) is purchased and used by the taxpayer as his principal residence, gain (if any) from such sale shall be recognized only to the extent that the taxpayer's adjusted sales price of the old residence exceeds the taxpayer's cost of purchasing the new residence.

Section 1034 of the Code imposes no requirements as to citizenship, residency, or location of the new residence.

Accordingly, in the instant case, the gain realized by the resident alien taxpayer upon the sale of his old personal residence in the United States is not recognized pursuant to section 1034 of the Code. See Rev. Rul. 54-611, C.B. 1954-2, 159.