If you are a US resident or citizen, you report and pay tax on all your world-wide income. If you paid foreign tax on the same income, you get an offsetting credit or deduction, but it may not completely offset the impact of the double taxes.
However, you don't owe US tax on the proceeds of the sale, you owe it on the capital gains. Capital gains is the difference between your cost basis and the selling price. Cost basis is what you paid for the property. You can increase your cost basis by certain costs associated with the original purchase (such as inspections, transfer taxes and attorney fees); you also increase your cost basis by any permanent improvements you paid for to the land; you also increase your cost basis by certain selling expenses, such as transfer taxes, inspections, surveys, and real estate commission. The difference between the adjusted cost and your selling price is your gain.
For example, if you purchased the land for $50,000 (US$ converted value on the day of the purchase), and sold it for $130,000, and paid $5000 in selling expenses, then your capital gain is $75,000, and that is what you are taxed on, not the sales price or the amount of cash you get after paying off a mortgage.
You figure all your expenses based on the US$ value at the day's conversion rate when you paid the expenses.
If you inherited the property, then your cost basis is the fair market value on the date the previous owner died. You may be able to get a real estate agent to give you an estimate or appraisal that is back-dated to the correct date, which would be based on historical prices of similar property from around that time.
The capital gains tax rate is 15% for most taxpayers. Zero percent for some lower income taxpayers, and 20% for a few very high income taxpayers. The foreign tax you paid will at least partly offset the capital gains tax.
