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Cash and real estate foreign inheritance

Forum|Forum|2 years ago
September 4, 2023
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I received cash and real estate (a share in an apartment) foreign inheritance this year (2023). The cash is in that country's bank account in my name. I want to sell my share to my brother who resides in this country (Israel) and transfer all the money to the US. I'm a US citizen and reside in the US. How do I report all this to the IRS?

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Best answer by pk_

@vrflash , agreeing with @Anonymous_ , that the sale of partial ownership ( share ) of realestate is a sale of capital asset to a related party .

(A) You report this just like disposition of capital asset in the USA ---

1. type of acquisition ( inheritance ),,

2. acquired date ( when actually ownership was affected i.e. transferred by the estate of the demised ),

3. basis ( FMV of the asset /share on the date of death of the decedent plus cost of any improvements LESS any allowable depreciation iff used as income generator in the meantime )

4. Sales Proceeds ( FMV at the time sale/ transfer to the relative ) LESS any sales expenses and transfer taxes etc..

5. The gain is taxable ( ordinary ). Losses are not recognizable because of transfer between related parties.

Your report all this on form 8949 and to schedule -D

( B ) Because this is a inheritance / gifts case from a foreign person / estate/ trust , you also have to report the bequeathal on form 3520 ( assuming g that the cash you were bequeathed is equal or more than US$100,000 -- this is only an informational reporting with no tax consequences.

(C) Because you have a Foreign Bank account and you would have had more than US$ 10,000 sometime during the year , you must report this account details ( for FBAR purposes ) on form 1114 ( ONLY online reporting at www. FinCen.Gov )

(D) From a reading of the US-Israel Tax treaty, there may be tax consequences of the transfer of the ownership ( sale of real estate ) and if any taxes are indeed levied, that tax may be eligible for foreign tax treatment ( credit / deduction).

(E) generally transferring monies to the USA ( Bank to Bank transfer) is not a tax item -- depending on the amount the bank may raise SAR as a routine matter . However if the amount is above a trigger point ( i think it is around US$10 million ) there is US Treasury permission required .

Please also note that FBAR form 114 and form 3520 do not go with your return for the tax year --- see instructions at www.irs.gov

Does this help / answer your question(s) ? Is there more I can do for you.

pk

A

Anonymous_

Level 15

The sale of the real estate is the sale of a capital asset which, presumably, was held for personal use.

As a result, you report the sale on Form 8949 but you cannot recognize a loss (if any) since the buyer is a related person (your brother).

V

vrflashAuthor

Level 4

Thank you.

Does it matter that it's a foreign country's asset? Is that the only form?

A

Anonymous_

Level 15

I am not sure what the foreign country might require. I will page @pk12_2

P

pk_

Answer

Level 15

@vrflash , agreeing with @Anonymous_ , that the sale of partial ownership ( share ) of realestate is a sale of capital asset to a related party .

(A) You report this just like disposition of capital asset in the USA ---

1. type of acquisition ( inheritance ),,

2. acquired date ( when actually ownership was affected i.e. transferred by the estate of the demised ),

3. basis ( FMV of the asset /share on the date of death of the decedent plus cost of any improvements LESS any allowable depreciation iff used as income generator in the meantime )

4. Sales Proceeds ( FMV at the time sale/ transfer to the relative ) LESS any sales expenses and transfer taxes etc..

5. The gain is taxable ( ordinary ). Losses are not recognizable because of transfer between related parties.

Your report all this on form 8949 and to schedule -D

( B ) Because this is a inheritance / gifts case from a foreign person / estate/ trust , you also have to report the bequeathal on form 3520 ( assuming g that the cash you were bequeathed is equal or more than US$100,000 -- this is only an informational reporting with no tax consequences.

(C) Because you have a Foreign Bank account and you would have had more than US$ 10,000 sometime during the year , you must report this account details ( for FBAR purposes ) on form 1114 ( ONLY online reporting at www. FinCen.Gov )

(D) From a reading of the US-Israel Tax treaty, there may be tax consequences of the transfer of the ownership ( sale of real estate ) and if any taxes are indeed levied, that tax may be eligible for foreign tax treatment ( credit / deduction).

(E) generally transferring monies to the USA ( Bank to Bank transfer) is not a tax item -- depending on the amount the bank may raise SAR as a routine matter . However if the amount is above a trigger point ( i think it is around US$10 million ) there is US Treasury permission required .

Please also note that FBAR form 114 and form 3520 do not go with your return for the tax year --- see instructions at www.irs.gov

Does this help / answer your question(s) ? Is there more I can do for you.

pk

V

vrflashAuthor

Level 4

Wonderful, PK. Thank you. A question. You wrote:

( B ) Because this is a inheritance / gifts case from a foreign person / estate/ trust , you also have to report the bequeathal on form 3520 ( assuming g that the cash you were bequeathed is equal or more than US$100,000 -- this is only an informational reporting with no tax consequences.

Is it only cash that counts? The cash was less that $100K but the real estate doesn't count?

Mark

P

pk_

Level 15

@vrflash form 3520 requires recognition of ONLY cash because this is not rtecognize3d anywhere else -- everything else will have a basis and therefore at disposal the gain can be taxed ( I am not sure I understand the actual thinking behind the recognition requirement for cash since US does not have wealth tax or unexplained wealth growth).