Some other income items that may apply to U.S. Government civilian employees stationed abroad are discussed in this section.

Republic of Panama. Income earned by any citizen or resident of the United States is not exempt from U.S. tax by any section of the Panama Canal Treaty. However, certain allowances can be excluded. See Allowances, Differentials, and Other Special Pay, earlier.

Sale of personal property. If you have a gain from the sale of your personal property (such as an automobile or a home appliance), whether directly or through a favorable exchange rate in converting the proceeds to U.S. dollars, the excess of the amount received in U.S. dollars over the cost or other basis of the property is a capital gain. Capital gains are reported on Schedule D (Form 1040), Capital Gains and Losses. However, losses from sales of your personal property, whether directly or through an unfavorable exchange rate, are not deductible.

Sale of your home. All or part of the gain on the sale of your main home, within or outside the United States, may be taxable. (Losses are not deductible.)

You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return). You must have owned and used the home as your main residence for two of the five years preceding the date of sale.

If you sold your home before May 7, 1997, you may have taxable income or you may need to report the sale (or purchase of a new home) now if you postponed paying tax on the gain in the year of sale because you intended to replace the home within the time allowed.

For detailed information on selling your home, see Publication 523

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