Ownership of Foreign Properties/Assets

[b-wongg93]

I am a US Citizen and own foreign properties in another country worth at about ~$1MM. Just a few concerns:

1. I understand I need to report this to the IRS to let them know I have foreign assets but if I don't, how do they find out? The foreign properties in that country are under my citizenship there, not under my US citizenship info.

2. So suppose I report these foreign assets (and I will) and I live outside of the US for over 330 days in a year, do I still get taxed (foreign and state - NJ) in the US for the rental income I receive from my foreign properties? What about the capital gains when I sell these properties for profit?

Thanks!

[SweetieJean]

As we indicated in one of your other posts, if you are a US citizen, you must file a return and report Total World Wide Income no matter the source.

[pk · Accepted solution]

As a US citizen you are taxed on your world income  . Thus you must declare yearly all your income including rental income  from properties abroad. The rental income/ expenses are reported on schedule-E -- the only difference  for you is that foreign property are depreciated over 39.5 yards ( TurboTax will do this for you when you tell it that the property is  foreign.   

When dispose off the property , the transaction is treated just like it was on US soil. 

All reporting is in US$ and generally the dollar of the day is used but many use the monthly/ quarterly average -- use any published source ( keep notes/ records of what you used).

If your tax home is abroad ( 330 day out of 12 months you are abroad ), while your foreign earned income ( active income ) is excludable  up to a maximum, passive income are not eligible  for such treatment.  If the local taxing authority also taxes  this non-excluded income, then you can use  foreign tax credit or tax deduction ( this last is still unclear for 2018 on wards ) to reduce the effects of double taxation.

Can the IRS find out , if you do not report ? ----  suggest you assume that they will ( besides, when you file you are attesting  that it is true to the best of your knowledge). 

Good Luck