I sold my home early last year. not primary residence. India indexes the purchase price to inflation. Based on that calculation, my accountant reported loss on sale to the Indian Tax agency. There was actual gain, but based on indexing, I had a loss for tax purposes. How do I report this to the IRS? The first choice is to convert the original purchase price to dollars based on the exchange rate at the time of purchase and convert sales price to dollars on the date of sale. Then I have a capital gain. The second choice is to calculate the purchase price as reported to the Indian authorities (indexed) minus the sale price. In the latter case, I have capital loss. Which one do I follow? In the latter case, is the capital loss deductible against any capital gains? Thank you for your response.
