My situation is that a property I inherited in India was sold a few days prior to 6 months from the date of the owner's demise. For calculating the cost basis, since the rules in India allow only indexing from FMV in 2001 whereas US rules allow FMV on the date of death, the cost basis is going to be much higher for the US. I was fretting over this conundrum as pointed out by PK but the reply by Opus 17, that US rules apply for US returns, appears to make sense. However, does anyone know if the gain in this case would be ST or LT in the US? In India, any gain in inheritance would be automatically considered LT. Also, can the FMV be equal to the sale value if the sale happens within 6 months from the date of demise, for the US return? Can I use this as a justification to not get an appraisal on the date of demise or is an appraisal absolutely necessary?
Using the SRO guidance values in India (which is the minimum price that is allowed for registration of that property; hence, well below FMV), and using the foreign tax credit, turbotax is calculating a US tax amount which is only about 10% less than if the foreign tax credit was not claimed. Of course, in this case, the gain was treated as a ST gain. Now, my understanding is that the foreign tax credit is a dollar-for-dollar credit and, in this case, it is not even remotely so. May be I am making the entries wrong?
Any comments?
