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Old 04-25-2014, 05:04 PM
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Join Date: Nov 2011
Posts: 2
Foreign inheritance and US tax implications

I have a possible tax situation for next year. I want to prepare ahead.
I came to USA in 1985 and became US citizen nineties.
My father inherited land in India which in turn I inherited after his death in Jan 1991.
I am going to sale this land in near future and want to bring the proceeds
to US after full felling Tax requirements(capital gain)in India.

Until now I am self tax filer.
What are my tax obligation in USA?
1) Reading other appends, I need to pay capital gain tax and I will be able to take credit(tax treaty) against the tax paid in India. I think I nderstand
that part.
2) The land was a barren land and did not produce any income ever. Because of circumstances beyond my control it took for ever to sale this property.
3) Is the date of my father's death is the date of acquiring the property for me? My father did not had a will and it got transferred on my name according to Hindu inheritance laws. It took about 4 to 5 months to happen that.
4) I was not aware of filling any other IRS forms for inheritance which I received in early nineties at that time. If I have not, then what I have to do now? I may cross the reporting threshold.
I read about 3520, When 3520 came to existence?
What about 8938?
5) Also what kind of documents are needed to support my filling.

Thanks a lot in advance.



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Old 04-26-2014, 03:48 PM
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Posts: 5,233
Quote:
Originally Posted by Nana View Post
I have a possible tax situation for next year. I want to prepare ahead.
I came to USA in 1985 and became US citizen nineties.
My father inherited land in India which in turn I inherited after his death in Jan 1991.
I am going to sale this land in near future and want to bring the proceeds
to US after full felling Tax requirements(capital gain)in India.

Until now I am self tax filer.
What are my tax obligation in USA?
1) Reading other appends, I need to pay capital gain tax and I will be able to take credit(tax treaty) against the tax paid in India. I think I nderstand
that part.
2) The land was a barren land and did not produce any income ever. Because of circumstances beyond my control it took for ever to sale this property.
3) Is the date of my father's death is the date of acquiring the property for me? My father did not had a will and it got transferred on my name according to Hindu inheritance laws. It took about 4 to 5 months to happen that.
4) I was not aware of filling any other IRS forms for inheritance which I received in early nineties at that time. If I have not, then what I have to do now? I may cross the reporting threshold.
I read about 3520, When 3520 came to existence?
What about 8938?
5) Also what kind of documents are needed to support my filling.

Thanks a lot in advance.
What are my tax obligation in USA?====>>>>>>>>>>>no federal /state inheritance/estate tax imposed on your inherited land.
1) Reading other appends, I need to pay capital gain tax and I will be able to take credit(tax treaty) against the tax paid in India. I think I nderstand
that part.=========>>>>>>>>>>>>OK it means that aslongas you pay tax on the inherited land to Indian taxing authority(ies) then you can claim Indian tax(es)paid to India on your US returns, fed and state returns



2) The land was a barren land and did not produce any income ever. Because of circumstances beyond my control it took for ever to sale this property. =========>>>>>>>>>>>as mentioned above.if te land generated some sort of rental income, then you must report the rental income on Sch E of 1040 and as said you also deduct what you paid to India on the rental income on your US returns


3) Is the date of my father's death is the date of acquiring the property for me? My father did not had a will and it got transferred on my name according to Hindu inheritance laws. It took about 4 to 5 months to happen that. =======>>>>>>>>>>>I guess you need to cntact t Indian authorities;In US FMV of the inherited land is your basis, and the inherited land is treated as long term asset.
4) I was not aware of filling any other IRS forms for inheritance which I received in early nineties at that time. If I have not, then what I have to do now? I may cross the reporting threshold.


I read about 3520, When 3520 came to existence?=========>>>>>>>>>>>>Form 3520 is needed when you receive More than $100K from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate)
that you treated as gifts or bequests; also aslongas you keep bank acct in India and the aggregate value of all foreign financial account(s) exceeded $10K at any time during the calendar year then form td f 90.22.1 to be reported.

What about 8938? ========>>>>>>>>>>You need to file Form 8938 to report your specified foreign financial assets if the total value of all the specified foreign
financial assets in which you have an
interest is more than the appropriate
reporting threshold.I guess it is more than $50K.The penalties for failure to file this form are particularly horrendous…$10,000 is just the beginning! foreign assets mean; a savings account in a foreign country; stocks issued by a foreign corporation, but not maintained by a brokerage company; your interest in a trust fund, which is held/maintained in a foreign country; your interest in a partnership or corporation that’s in a foreign country; bonds issued in a foreign country; a foreign pension plan


5) Also what kind of documents are needed to support my filling.======>>>>>>>>>>>you as a US resident neeed to report your world wide and US source income to the IRS/ your home state and also need to file form 1116 to claim taxes paid to India on your US returns.aslongas you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Any foreign tax credit amount in excess of the maximum limit may be carried back to a previous tax year or carried forward to a future tax year. You can carry-back the foreign tax credit to the immediately preceding tax year, or carry-forward the credit for the next 10 tax years.



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Old 04-27-2014, 11:18 AM
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Join Date: Nov 2011
Posts: 2
Thanks a lot Wnhough!
About Item 4) I have following additional questions
Is receiving inherited property is consider same as recipients of Bequests?
When the requirement of filing 3520 came in effect?
Thanks again.



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Old 04-27-2014, 04:11 PM
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Join Date: Oct 2010
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Quote:
Originally Posted by Nana View Post


#1;Is receiving inherited property is consider same as recipients of Bequests?




#2;When the requirement of filing 3520 came in effect?
Thanks again.
#1;yes it is usually/also treated as a bequest in reporting to the IRS. The terms inheritance and bequest applies to the interest in, the title to, or both the interest in and the title to, any real property to which a fiduciary succeeds by reason of the death of the prior holder of that interest, title, or interest and title, regardless of whether the prior holder died testate or intestate.

#2;as said, while gifs and bequests from nonresident aliens are usually not taxable, they must be reported to the IRS if they are above a certain threshold. Generally, U.S. persons who receive the aggregate amount of $100K or more in gifts and/or bequests from nonresident aliens or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) during a tax year must report those amounts on form 3520. Failure to file Form 3520 (and even late filing of the form) may result in substantial penalties, unless the taxpayer may demonstrate that failure to comply was due to a reasonable cause and not willful neglect. For example, if you receive an inheritance of $150K in 2013which is then deposited in your checking account in India, you must file both forms 3520 and FBAR. The likely due date for Form 3520 will be April 15, 2014 whereas the FBAR must be received by the Department of Treasury by June 30, 2014



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