Hi,
I would like to get help regarding a sale of foreign property.
I co-owned the property with my parents initially, (owned 40%), and then I inherited the 30% when my dad (a foreign person) passed. So my total ownership was 70% when the property was sold in 2024
I’m trying to see if my understanding is correct below. For tax filing next year, I should report the sale as two transactions.
1) sale of 40% initial ownership, since the initial cost was low, this part would have a high capital gain. My husband and I have lived in here for over 2years in the 5years leading to the sale. So we can claim the $500k exclusion? Is this correct? Say after taking the exclusion, the capital gain is 200k
2) sale of the inheritance portion (30%)
I can use the step-up basis when inheriting the property as the cost basis ? Then it will result in a capital loss 100k.
So the capital loss should offset part of the gain ? And the total capital gain is 100k from the above?
I also paid significant amount of foreign tax on the transaction, about 100k. So I can use the foreign tax credit ? But that would not be a one on one deduction on the tax I owe but based on the proportion of the foreign income to my total income?
Is my understanding correct with the statement above ? I’d appreciate any input!!
Thank you!
