William

My reseach notes "as a general rule, a gain on the sale of 'personal property' is US source income if the taxpayer is a U.S. resident and foreign-source income if the taxpayer is a nonresident." It further says "a gain on the sale of exchange of a US reap property interest is U.S. source income, whereas a gain on the sale or exchange of real property located abroad is foreign-source income. All other factors, including where the selling activities took place, are ignored. Pub 519 did not speak to foreign real estate owned by a US citizen. I am not convinced just yet but I sincerely thank you for your response.

The loan is shown on the balance sheet - page 4 and the principal is used to reduce the original loan amount. You have to be careful about maintaing a positive basis for the shareholders.

I have a client who bot a camping lot on the Great Lakes in Canada. In Canadian dollars he lost money but in US dollars he made money. He sold in 2007. Do you calculate the loss in Canadian dollars and convert the loss into US dollars for tax purposes or do you calculate the gain using US dollars and show that on his return?. The devaluation of the US dollar has caused this scenario. I imagine that if he had a gain, he would have to file a Canadian return and pay tax to Canada and then bring the gain to the US return and take a foreign tax credit. Therefore, I am leaning towards calculating the loss in Canadian Dollars and converting the loss to US dollars for the return but I am concerned that I may be wrong and I don't want to not report the gain. Essentially, he lost 500 in Canadian dollars but brought back $10,000 more US dollars upon the sale due to the change in exchange rates. I would appreciate any help and a pub reference if possible.