when to report capital gains for a transacation completed this year but money arrived next year...

[LP1968]

I have (short term) capital gains from selling one of my companies overseas, in a transaction that was finalized last October.  However, the money (both my cost basis and my capital gains) may not  reach my USA bank account this year due to some international account proccessing. 

I suppose I still have to report the transaction and the corresponidng capital gains when i file my 2022 tax return next April, and pay tax for the capital gains by April 15, 2023. correct? 

if the capital gains amount is significant, do i have to even pay also estimate tax by Jan. 15, 2023 even though I may not have yet recieved the money? 

Please advise. Thanks in advance. 

[Bsch4477]

Capital gains are taxed when they're "realized." Your capital gain (or loss) is generally realized for tax purposes when you sell a capital asset.

Generally, you must pay 90% of your current year's taxes, or an amount equal to 100% of your taxes from the prior year (110% if your adjusted gross income was more than $150,000), either through withholding or estimated tax payments.

[Mike9241 · Accepted solution]

if it was a sale of a non-public company (not traded on any established securities market ), you may be able to use the installment sale method of reporting (form 6252)  to delay reporting the gain for taxes until 2023

irc sec 453 IRS pubs 537 & 544

when property is sold at a gain. and at least one payment is made after the close of the tax year (of the sale), the installment method must be used unless you elect out. (you do this by not using form 6252) under the installment method. a portion of the gain is reported as each payment is received. the downside if the sales agreement does not provide for interest (at least the applicable federal rate) two rules for calculating imputed interest may apply. either  IRC 1274 or 483. the imputed interest reduces the sales price  

however, should it be deemed that you have constructively received the proceeds in 2022 though they won't hit your US bank account until 2023, you can't use the installment sale. 

since this involves an overseas company and transaction, I can't provide any additional info. if you think the installment reporting would apply and you want to use it, confer with a tax pro. what you don't want is to use the installment sale method and have the IRS audit and say it doesn't qualify. then besides the taxes, there will be penalties and interest. 

[LP1968]

Thanks! This is very helpful  @Mike9241  So, based on your response, I conclude that:

The safest appriach is to recognize the gains in 2022 (and pay the tax by April 15, 2023), because even if the “installment sale method” may have been applicable in my case, I can simply claim that I opted out ot it (especially since in my sales agreement does not provide for any interest)... This way IRS will never have an issue!  Correct? 

Thanks again!

[Mike9241]

I don't know if it qualifies because of the potential that you may have constructive receipt. certainly 2022 you'll get no arguments from the IRS and it's simpler. it's more a question of what you feel comfortable with.