I am a U.S. citizen who will be marrying a foreign citizen soon.  How
are taxes calculated on the sale of assets that she owned before we were
married?  (i.e. If she sells her properties after we are married, will
we have to pay full taxes on the appreciation of the property from the
day she bought it, or would it be calculated in a different way?)

Would it be better to sell the property before we are married?  The
tax rate is much lower (basically non-existent) in her country.

Further background - I am an overseas resident (and have been for the
past eight years) and have no intention to return to the U.S. to live
anytime soon.  She also will not be living in the U.S.

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Clarification of Question by henryt2-ga on 22 Aug 2006 04:54 PDT

I am assuming the following things:
1) She must pay U.S. taxes the minute she gets married to me despite
the fact she does not live in the U.S., has never been to the U.S.,
and does not plan to live in the U.S. (although we will visit
occasionally).
2) The profit made off the sale of the house is not entitled to any of
the overseas income exemptions because it is "unearned"

Hi  henryt2,

1) She must pay U.S. taxes the minute she gets married to me despite
the fact she does not live in the U.S., has never been to the U.S.,
and does not plan to live in the U.S. (although we will visit
occasionally).

I'm not sure how you got this idea, but it's incorrect. Foreign
spouses of Americans do not have any obligations to the IRS unless
they earned U.S. source income (which she didn't), or you elect to
file a joint return (she would need a SSN or ITIN number). If you
elect to file a joint return, she will be treated as a resident alien
for tax purposes and you will have to declare her worldwide income. 
So, as long as you do not file a joint return, any income she receives
(earned or otherwise) is not taxable in the U.S.

Last year I got married to a Costa Rican citizen. Can I file a joint
return with my spouse, who is not a U.S. citizen?
"Yes, but in doing so, you make the election to report your income and
your spouse?s income worldwide. If your spouse does not work, or has
very little or no income, it could be to your advantage to file a
joint return. If your spouse does not have a taxpayer identification
number, one must obtained."
http://www.american-european.net/expatriate-tax-advice-financial-planning.shtml 

U.S. Citizens and Resident Aliens Abroad - Nonresident Alien Spouse
Election to File Joint Return
http://www.irs.gov/businesses/small/international/article/0,,id=96734,00.html

Publication 519 (2005), U.S. Tax Guide for Aliens
http://www.irs.gov/publications/p519/index.html

Social Security Number
"If your spouse is a nonresident alien and you file a joint or
separate return, your spouse must have either an Social Security
Number (SSN) or an Individual Taxpayer Identification Number (ITIN).
To get an SSN for your spouse, apply at a social security office or US
consulate. You must complete Form SS-5. You must also provide original
or certified copies of documents to verify your spouse's age,
identity, and citizenship. If your spouse is not eligible to get an
SSN, he or she can file Form W-7 with the IRS to apply for an ITIN.
Refer to Taxpayer Identification Numbers (TIN) for more information."
http://www.irs.gov/businesses/small/international/article/0,,id=96734,00.html

I trust this is good news for you!  If you have any questions, please
post a clarification request and wait for me to respond before
closing/rating my answer.

Thank you,
hummer

I searched the IRS for the appropriate links.

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Request for Answer Clarification by henryt2-ga on 22 Aug 2006 22:09 PDT

You claim:

I'm not sure how you got this idea, but it's incorrect. Foreign
spouses of Americans do not have any obligations to the IRS unless
they earned U.S. source income (which she didn't), or you elect to
file a joint return (she would need a SSN or ITIN number). If you
elect to file a joint return, she will be treated as a resident alien
for tax purposes and you will have to declare her worldwide income. 
So, as long as you do not file a joint return, any income she receives
(earned or otherwise) is not taxable in the U.S.

I've seen all this about filing/not filing joint return.  However,
where is the information that she does not have to file.  When I
reseached getting married to a foreign citizen in the first place, the
information I read said that she would be responsible for paying taxes
from the date she got married.  All the other information I found
online was about MY status and whether I could file jointly, etc. 
Nothing about how she had to file.

Please look for a link saying that SHE does not have to file or HOW
she has to file.  Then, I will be satisfied.

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Request for Answer Clarification by henryt2-ga on 22 Aug 2006 22:44 PDT

In looking for proof that she does have to declare her income, I
believe I've found proof that she does not.  I think I originally saw
the statement that she has to declare her income in a pamphlet in the
U.S. embassy about getting married.  It may have been an
oversimplification.

Problem is, they seem to assume that if a person marries a U.S.
citizen, the MUST want to live in the U.S.  "How could ANYONE not want
to live in the U. S. of A?!!!"  They tell me they may refuse my
fiancee a tourist visa even after we're married because just being
married to a U.S. citizen is proof that she wants to immigrate to the
U.S. and that disqualifies her (even though she can qualify for an
immigrant visa and doesn't want to).

Thank you for all your answers.

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Clarification of Answer by hummer-ga on 23 Aug 2006 04:43 PDT

Hi henry2,

I wish you had waited for me to respond to your clarifications before
rating my answer as I would've been more than happy to reply until you
were fully satisfied.

Foreign citizens have no obligations to the IRS unless they have U.S.
source income, marriage plays no role in this. I think you may be
getting immigration laws and tax laws mixed up a bit. Even after your
marriage, your wife's tax status will not change, she will still be a
foreign citizen with no U.S. source income. The election to file a
joint return is just that, an election, and is normally only done if
the spouse's income is low (the joint return means *you* are electing
to declare your family's worldwide income). Uncle Sam's arm may be
long, but it's not long enough to dip into the pocketbooks of every
foreign spouse around the world, the spouses must earn that privilege
by making money in the U.S.

U.S. or Non-U.S. Source Income:
"Nonresident aliens, for tax purposes, unlike U.S. citizens and
residents, are only subject to tax on income that is considered U.S.
Source Income by the IRS. Foreign Source Income received by
nonresident aliens is not subject to U.S. taxation.
* U.S. Source Income - income is generally considered U.S. Source if
the location of the activity for which the payment is being made is in
the U.S.
* Foreign Source Income - income is generally considered foreign
source if the location of the activity for which the payment is being
made is outside the U.S."
http://vpf-web.harvard.edu/ofs/tax_services/emp_pay_sou.shtml

Form 1042-S: Foreign Person?s U.S. Source Income Subject to Withholding:
Box 6, Exemption Code 03: Income is not from U.S. sources:
* "Non-U.S. source income paid to a nonresident alien is not subject
to U.S. tax."
http://www.irs.gov/pub/irs-pdf/i1042s.pdf

You are correct in that getting married will change your wife's status
in the eyes of border officials. It shouldn't be too difficult for you
to prove that her "intent" is not to immigrate to the U.S. by showing
evidence of your permanent residence in her country (home ownership,
full time employment, etc.).

Best of luck to you and your bride,
hummer

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Clarification of Answer by hummer-ga on 23 Aug 2006 05:50 PDT

In other words, as an individual your wife will be under no obligation
to report her foreign income to the IRS. It's only after her income
gets combined with yours (in *your* joint return) that her income is
declared. If you continue to use an individual return, her income will
not be reportable. hummer

The question has a second part:  what should she do with her real estate?

Most if not all US treaties with other nations to avoid double
taxation of income exclude income from real estate transactions.
Obviously, if she sells before you two marry, the IRS is not involved.
Also if she sells it before you would choose to file a joint tax
return, this is also the case.  And you may choose not to file a joint
return, which will leave all her income separate from yours, as
Hummer-ga points out.
And probably under the applicable treaty, regardless of what you
choose, income from the sale of the house still remains free of US
tax.  (This would also apply for your US tax situation for real estate
you might own in a foreign country, if the treaty with that country
excludes income from real estate transactions.)

I am sure that Hummer-ga can find the treaty for her country of
citizenship and that where the house is, if you will post the
information in a Request for Clarification.

PLease note the disclaimer below:  no information provided on G-A is
legal or professional advice.

Thank you for your comment.  I am actually interested in this
exemption on real estate transactions.  Perhaps you can research sales
of properties in Kazakhstan, Kyrgyzstan, United Arab Emirates, Egypt,
and Thailand and send the appropriate link/s my way.  I'd like to
offer you the opportunity to answer this question and be paid for it,
but I'm not sure how to do this (other than posting up a general
question).

Hi Henry,
I have already posted a comment to your new question, and hope that a
Researcher can provide more information in an "answer."  Only G-A
Researchers such as Hummer-ga, who have blue user names, can post
"answers" and be paid.
Perhaps in my comment there you will find the double taxation
agreement with the country of your future wife's citizenship.  These
do no exist for all countries, since they only become necessary when
there is enough corporate and personal business between countries make
it worthwhile to establish a treaty.

Not that I am an authority, but I agree with everything Hummer has posted.

Regards, Myoarin