I sold an inherited house in India in 2021. The proceeds are in an Indian bank and I filed my taxes there. Where and how do I report that income in TurboTax premier?

[Critter-3 · Accepted solution]

1. 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" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on” (jump to full list)
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)
6. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
8. Choose type of investment you sold - select Second Home

[rjs]

In order to report the sale in TurboTax, you must convert all amounts to U.S. dollars. All amounts that you enter in your U.S. tax return must be in U.S. dollars.

[pk · Accepted solution]

@vijdam ,  Having gone through your post and great comments / help by @Critter-3  and @rjs , I would like  point out the following ( you may already be aware of  and if not :(

1. Please change your sign-in name -- it is too close to an email address ( just in case)

2. The basis of the inherited asset/property is the  Fair Market Value  of the prop. on the day of the demise of the decedent.  Hopefully you have it and if not you need to find it and  change to US$ at then exchange  rate.  Note that for India tax purposes you would be  using an indexed valuation and this may or may not be the basis .

3. If the sale is occurring  after a  period and the property was rented out for profit, then  (a) the such income would have been taxable income in the USA and (b) there were allowable depreciation.

4. If the prop. was rented  till sale, then your basis is eroded by the accumulated depreciation. Thus  your basis  becomes  Adjusted basis = Acquisition basis LESS allowable accumulated depreciation.  Also your Sales proceeds  is reduced by the sales cost  such as  commission, required repairs etc. , transfer  tax etc. etc. thus giving you adjusted sales proceeds.  

You gain for US purposes than is  Adjusted Sales Proceeds LESS Adjusted Basis all in US$ at published / applicable rates.

5. If you have to pay income tax on the gain on the disposition of the asset , because there is  foreign source income that is being taxed by both US and India , you can ask for  foreign tax credit or  deduction.

Do you need more help on this ?

pk

[vijdam]

Thank you for the details, very helpful.

I tried asking for foreign tax credit or deduction since this is foreign source income that is being taxed by both US and India. But TurboTax only shows this option - “foreign earned income” and includes wages and business income made while working in another country.  It is asking for info from 1099-b/div/int or K-1.

But this property sales doesn't fall in any of the above.

Please advise.

[rjs]

The foreign earned income exclusion is only for income from working. It does not apply to income from the sale of property. You need the foreign tax credit. In TurboTax the foreign tax credit is not on the Income tab. It's on the Deductions & Credits tab. Go to Federal Taxes > Deductions & Credits > Estimates and Other Taxes Paid > Foreign Taxes. Or in the Search box type "foreign tax credit" (without the quotes), then click the link that says "Jump to foreign tax credit." See the following FAQ for more information.

Where do I enter the foreign tax credit (Form 1116) or deduction?