@NS_CN , Please excuse the delay in answering your query.
1. The exclusion of gain from the sale of main home is applicable only when the home was used by the taxpayer (s) as main home within the last five years -- counting from the date of sale completion ( "closing" date ). From your post -- the property was being used by your parents does not qualify. If they were filing a return and the property was in their name then they could have qualified for the exclusion. The eligibility to exclude as described in code section 121, requires -- (a) the property must be owned by at least pone of the tax payers; for two years (b) both taxpayers must have used the property as main home/ residence for 720 days with a look back period of five years from the date of sale and (c) neither taxpayer must have used this exclusion during the last two years. My ref in this is --> 26 U.S. Code § 121 - Exclusion of gain from sale of principal residence | U.S. Code | US Law | LII /...
2. When you tell TurboTax that you have sale of residence -- it would walk you through filling out the required forms 8949 and Schedule- D and on to form 1040 as required. I am assuming you are using the step-by-step ( interview ) method and not forms mode. It will ask for details like When did you acquire the property, how did you acquire ( purchase , gift or inheritance etc. ), what did you pay, how did you use the property ( personal use or income generation ); when did you sell thew property ; How much did you sell the property for etc. etc. Through all of this TurboTax will compute the gain/loss based on US laws and will transfer the final figure to form 1040.
3. Assuming that India collects TDS and you have to file an ITR to settle the final tax on the gain ( per Indian laws ), that Foreign Tax is eligible for Foreign Tax Credit ---- US-India Tax Treaty article " mitigation of double taxation ". Note however, while the total taxes paid to India is recognized , the allowable tax credit is the lesser of US tax allocated to this doubly taxed income and that paid to India. The most you can get is full credit of the US tax. The rest of the foreign tax is banked and can be used backward for one year or forward for 10 years -- but you must have foreign income to be able to use it.
4 As a US person you are subject to FBAR ( form 114 at FinCen.gov and only on-line filing ) and FATCA ( Form 8938 along with your return for the year ) regs. TurboTax will help you fill out the form 8938. While these forms are only informational ( no tax impact ), filing these is mandatory if required. Here is some info on these two forms --> Comparison of Form 8938 and FBAR requirements | Internal Revenue Service
Does this answer your query ? Is there more I can do for you ?
Namaste ji
pk
