sale of farm land

[rajpbg]

I am resident alien for tax purposes. I have an unused farm land in my home country that I want to sell. I had been the owner of the land for almost 20 years. How is the income from the sale of such land taxed in US. Also, does the final sell price that i report consider the amount that i invested in purchasing the land and the period for which  i had held? Will this income be taxed separate from my US income or will it be added to my US income and then taxed? Thanks

[LudwigVan_fan]

Information for Resident Aliens - scroll through the list for additional information

https://www.irs.gov/individuals/international-taxpayers/resident-aliens

If you meet the rules for resident alien, then it appears you are pretty much taxed the same as a U.S. citizen.  Assuming that is the case, the sale of your farmland in another country would be taxed in the U.S..

Sales Price                                                 $xx,xxxx

Less commission

 and other expenses of sale                (     x,xxx)

Less cost or purchase price                (      x,xxx)

                                                                   --------------------

equals gain or loss on sale                    x,xxx

Assuming you would be taxed the same as a U.S. Citizen, it would be included in your world wide income.  Gain should be taxed as long-term capital gain.

If you pay taxes to the country the land is located in on the sale or gain on sale, you should be able to utilize foreign tax credit as well on the U.S. Taxes.

I would also look into whether there are any treaty exclusions/benefits, etc., between the U.S. and the country the land is located in.

[rajpbg]

Hi,

Thanks for your reply. I want to clarify a point here. YOu mentioned that the gain obtained from the sale of the land would be included in my world wide income. So, does that mean that the gains obtained from the sale of the land will be added to my yearly income and then taxed as incomes are taxed or will it be considered as a separate income and taxed at a certain flat rate other than the yearly income.

[LudwigVan_fan]

Unless a treaty, etc., would apply, it would be included in your gross total income.  However, the gain as you described it should be taxed as long-term capital gains...which are generally taxed at a lower rate than your ordinary income.

As I mentioned before, there may or may not be a treaty involved between the U.S. and whatever country the land is located in.  If there is a treaty, the provisions contained in the treaty would applicable.

[rajpbg]

Hi,

Thanks again for the information. This was certainly very helpful. I have just one more question. I noticed that generally in the US the sale of land generates form 1099-s and based on that you report to the IRS. What kind of documentation should I provide from the sale of a foreign land that the IRS accepts? The money will be deposited in a foreign account and that I have to report to FinCen, but other than that is there anything that I can do?

[LudwigVan_fan]

Since the sale is outside the country, presumably by non-U.S. people/companies, etc., they probably don't have any filing requirement with the IRS.  If you didn't receive a Form 1099, they they probably didn't have to file.

Forms 1099 are issued for basically 2 primary reasons.  1 is for the recipients to not forget to report the income.  The 2nd reason (copy to IRS) is to allow the IRS to match the filed F1099s with people's tax returns to make sure the income is reported.

You don't have to file anything with IRS regarding this sale other than properly reporting the sale on your Form 1040. That would mean showing gross sale, basis in asset sold, cost of sale (commissions etc.) on the proper form(s).

You mention foreign bank account, you'll need to answer yes to the question regarding signature over a foreign bank account on your return.

As you mentioned, there is also other forms that need to be filed with FinCen if balances exceed certain limits.  FBAR comes to mind.  Here is the link to FinCen for more information.

https://www.fincen.gov/index.php/resources/filing-information