Foreign inherited land with capital gains

[Mlgomez0406]

Hi,

I'm trying to figure out how to report a sale of inherited land in the Philippines.  Capital gains taxes were paid there.  I live and work in NYC.  Entering the details with what I know from reading through various help articles, I owe almost $3k in Federal taxes and almost $7k in NY state taxes.  Can someone help me by letting me know if I did it right please?  I usually get a refund.  I created a file with token 1297853.  Proceeds from Sale is around $140k, Cost Basis was $62k, Capital Gains Taxes paid in the Philippines was around $8k.  Let me know if you need other details.  

Thank you!!

[DaveF1006]

I reviewed your file and everything was reported correctly. If you didn't report the capital gains for the sale this year, you would have received a refund but almost $80K in capital gains does make a difference.

I checked your foreign tax credit entry and you correctly reported the gross amount of the sale and the foreign taxes paid. You received a foreign tax credit for more that $8K, and you were able to claim all of this credit on your federal tax return.

The difference between your tax owed between the federal and state return is the fact the Foreign Tax Credit does reduce tax liability on the federal return only and not the state.  Just remember, you owe taxes this year primarily because of your condo sale in the Philippines. 

[Mlgomez0406]

Thank you so much for reviewing it. The gain was based on the Zonal/BIR value from the document we received after paying for the estate taxes of my dad. That was less than 4 years before the sale of the land. The Zonal/BIR value is very low compared to the offers we were receiving. We didn’t take the highest offer and took a lower offer from a family member so I feel like the Cost basis should be higher and the gain is lower (even a loss)? How do I handle that?  The land was in a very rural area in the Philippines. 

Thank you! 

[DaveF1006]

No, this wouldn't be a consideration for adding to the cost basis. Your cost basis is based on what you paid for the property, plus improvements. It doesn't take into account the value decrease based on a Zonal/BIR value.

[Mlgomez0406]

What value should I use as Cost basis? My siblings and I inherited it from our parents. I used the Zonal/BIR value from when my dad passed away and it’s extremely low. We sold it at a loss based on other offers we were receiving. 

Thank you! 

[DaveF1006]

It depends.  

• The cost basis is determined by the Fair Market Value at the time of your father's death.
• Alternate Valuation Date – If the estate administrator elects, the FMV can be determined six months after the date of death, which may lower estate taxes.

@Mlgomez0406 

[Mlgomez0406]

Thanks! Do you know how I could get the Fair Market Value at the time of your father's death in the Philippines?

[Vanessa A]

You could contact a real estate professional in the area of the home to get information on the value of the home.