You will report the sale of the land in India as the sale of a Capital Asset, which is reported on Form 8949. You will have to report the following:
- Description of Property (Something like "25 acres in XYZ India"
- Date Acquired - this is the date you inherited the property
- Date Sold - Self explanatory
- Proceeds - This is your sales price, less any selling costs (e.g. sales commission) You do not reduce the proceeds by the amount of foreign tax paid
- Cost or other basis - This is the value of the property at the time you inherited it. If there were any improvements to the property they would be included.
The tax you paid to India should not be reflected in the calculation of your gain. You will be able to take a credit for the foreign tax paid on your US Tax Return. You will have to come up with a reasonable method to determine the fair market value of the property at the time you inherited it, or use a cost basis of zero - $0.00 . Be sure to document and keep your method of determining the fair market value when you inherited the property.
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