topic How do i report gain on sale of foreign shares - both long and short term? in Deductions & credits

How do i report gain on sale of foreign shares - both long and short term?

Harry25 — Sat, 01 Jun 2019 00:02:05 GMT

i reported these holdings on form 8938 in 2014

From the perspective of the Internal Revenue Service, if...

DS30 — Sat, 01 Jun 2019 00:02:06 GMT

From the perspective of the Internal Revenue Service, if you sell your foreign stock at a gain, you will have to pay tax in the same manner as if you had taken a profit on an American stock.

If you hold your stock for less than a year before selling it, your profit will be taxed at the ordinary income tax rates. If you hold your stock for a year or more before you sell it, such gains will be able to qualify for a lower capital gains rate.

To report this sale in TurboTax, log into your tax return and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information. See attached screenshot #1.

Additionally, you can get to this section using the following steps:

1. In Turbo Tax Premier Desktop version, once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)

2. Next click on “Wages & Income” ("Personal Income" tab in TurboTax Home & Business)

3. Next click on “I’ll choose what I work on”

4. Scroll down the screen until to come to the section “Investment Income”

5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)

If you pay foreign taxes on the foreign stock transaction, you will be allowed an offset for these foreign taxes on your US tax return. If you take a foreign tax credit, your US tax liability will be reduced by the amount of taxes that you would have paid if the transaction took place in the US (see this link Claim Foreign Tax Credit). If you take a foreign tax deduction on Schedule A, you will be allowed to deduct the full amount of the foreign taxes paid but you will need to itemize (which could limit your ability to take the full deduction). The TurboTax software will help you determine which of these options will lower your overall tax liability.

Once you determine the amount of your gain on the sale, you will need to convert the gain from the foreign currency to US dollar (using a daily exchange rate at the time of both the purchase and the sale). Currently the maximum capital gains rate in the US is 20%. Depending on your tax bracket, you may owe more than 20% due to such factors as Alternative Minimum Tax (AMT) and the additional Net Investment Income Tax (NIIT) of 3.8%.

Do I have to covert the foreign gain to US dollar manuall...

alexmunyard — Sat, 01 Jun 2019 00:02:08 GMT

Do I have to covert the foreign gain to US dollar manually or is this done automatically by the software? What is the best tool to obtain the most accurate exchange rate at the time of both the purchase and the sale?

You will have to do the conversion manually and then inpu...

DS30 — Sat, 01 Jun 2019 00:02:08 GMT

You will have to do the conversion manually and then input the amounts (in USD) in to the TurboTax software. The Internal Revenue Service has no official exchange rate. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive the property, made any capital improvements and sold the property. Please refer to the following IRS links for more information about Foreign Currency and Currency Exchange Rates - https://www.irs.gov/individuals/international-taxpayers/foreign-currency-and-currency-exchange-rates and Yearly Average Currency Exchange Rates - https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

There is a fee when I repatriate the money from oversees....

rdurai — Sat, 01 Jun 2019 00:02:10 GMT

There is a fee when I repatriate the money from oversees. Can I subtract from sale proceeds to calculate the gain? Also the bank's exchange rate is worse than what's on oanda etc. I know the exchange rate the day when I repatriated and using that and the Oanda rate for that day, I calculated their markup for that time period. Can I use that to calculate the exchange on the day of the sale?

Thanks, this tells me where to enter the stock sale incom...

TurboUser — Sat, 01 Jun 2019 00:02:12 GMT

Thanks, this tells me where to enter the stock sale income, but how do I claim the foreign tax credit paid, from Turbotax?

Thanks, this tells me where to enter the stock sale incom...

TurboUser — Sat, 01 Jun 2019 00:02:13 GMT

Thanks, this tells me where to enter the stock sale income, but how do I claim the foreign tax credit paid, from Turbotax?