nagpal_98,
Assuming that this second home in India was not rented out and therefore never showed up in your filings, you have to tell TurboTax that you have home sale. Thereafter it will walk you through whether this is a second home ( and therefore not eligible for gain exclusion) etc. The gain as computed here from the sale = Your adjusted basis ( which is cost of acquisition plus cost of improvements less any depreciation allowable irrespective of used or not ) LESS Sales Proceeds ( Sales price less sales expenses including sales commission etc. ). Of course this is all in dollar of the day i.e. basis is in dollars when the expenses were incurred etc.
Form 1116 requires you to provide the foreign taxes paid for this income and also the foreign income causing this tax levy.. The foreign tax credit allowable is based ona ratio of your foreign income to world income --- thus all your foreign tax credit may not be allowed in the current year. The unallowed foreign tax credit can be carried forward or backward but can only be used in years where you have foreign income. Therefore taxpayers with uncertain foreign income often choose to take a deduction of the taxes paid.
Sometime, ( and this is untested in the tax courts , as far as I know ), one can embed the realestate transfer tax or similar as part of the taxes caused by this sales income and therefore there is no foreign tax credit. This is especially true if the capital gain is to be taxed at the lowest rate ( because of your taxable income ).
Hope this helps and if you need more , please feel welcome to say so in comments --pk
