Person A buys a house in Canada. Two years later, Person A sells the house at a loss of $5000 plus $3000 in legal expenses. This loss is recognized by Canada and no tax is due according to the Canadian government.

Is anything owed to the IRS?

P.S. Exchange rates factored in, it's still a loss.

 

I am not sure, but I do know this: talk to a tax specialist. My guess is that it is still a write off as you lost money on it.

 

Got my answer, both from the IRS and an excellent tax attorney. A loss is a loss. Since it wasn't a rental or investment, it's a personal loss and can't be written off.

Thanks for the PMs everyone.