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I am currently living in India but I had some money invested in mutual funds in the US while I lived there from 1981 to 1992, which I left there when I returned to India. In 2008, one of those investments had amounted to $100,000, and I liquidated it. That was my only US earnings in 2008. I have received a IRS letter saying I need to file a return for 2008, and pay tax if necessary on that amount. Per IRS Publication 519, the calculation and reporting of capital gains depends on your days present in the United States during the tax year. If your were present in the United States for less than 183 days during 2008 and your gains were not effectively connected with a U.S. trade or business, then your gains are tax exempt. It is true that I was present in the US for less than 183 days in 2008. How I should file a return that reflects this?
ANSWER
Expert Wray Rives's Answer:
You need to file a Form 1040NR; however do NOT report your capital gains on Schedule D. Rather you need to attach a statement to the form 1040NR listing your capital gains on the mutual fund and stating that it is capital gain from sale of assets and excluded from gross income due to your non-resident status.
