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Old 07-28-2015, 03:41 PM
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transaction to account as capital gains

Hello,

I have a client ( who's business is just buying gold from customers) who entered into a verbal joint-venture agreement in real estate. In July 2013, my client wired about $450K on his end( about 50% of purchase) to his associate in order to acquire the property thru his company. FYI, There's no trace of MY client's name on the closing paperwork. On Sept 2014, my client wanted out of the joint venture and his associate wired $500K in return. Even though there's no 1099 info, and only his associate purchased thru only the company he has, does my client have to report a $50K capital gain?

Please anyone have an opinion.

Thx - Omar



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Old 07-28-2015, 11:23 PM
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Quote:
Originally Posted by oaviles71 View Post
Hello,

I have a client ( who's business is just buying gold from customers) who entered into a verbal joint-venture agreement in real estate. In July 2013, my client wired about $450K on his end( about 50% of purchase) to his associate in order to acquire the property thru his company. FYI, There's no trace of MY client's name on the closing paperwork. On Sept 2014, my client wanted out of the joint venture and his associate wired $500K in return. Even though there's no 1099 info, and only his associate purchased thru only the company he has, does my client have to report a $50K capital gain?

Correct; although if he pays a tax on the sale to the foreign taxing authority(ies), he may be able to deduct that from what he owes here;aslongas your client paid or accrued foreign taxes to the foreign country on foreign source income, the capital gain, and are subject to U.S. tax on the same income, he may be able to take either a credit on , his 1040 line 47 I guess ,or an itemized deduction on Sch A of 1040 for those taxes.Taken as a deduction by itemizing on Sch A, foreign income taxes reduce his U.S. taxable income.Taken as a credit on 1040, foreign income taxes reduce his U.S. tax liability. In most cases, it is to his advantage to take foreign income taxes as a tax credit but it depends on his taxable income amount. To choose the foreign tax credit, in most cases he must complete Form 1116 and attach it to his U.S. tax return. However, he may qualify for the exception that allows him to claim the foreign tax credit without using Form 1116. Once he chooses to take a credit for qualified foreign taxes, he must take the credit for all of them. He cannot deduct any of them. Conversely, if he chooses to deduct qualified foreign taxes, he must deduct all of them. He cannot take a credit for any of them. On his state return, he may claim /subtract taxes paid to a foreign country if he claimed a credit for taxes he paid to the foreign country and he did not claim a credit for him paid to a foreign country and he did not claim the foreign taxes as an itemized deduction on Sch A; so he needs to contact his home state Dept of Rev for more info in detail.



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