Sale of foreign property which was given as gift from my father

[MJ154]

In 2023, I sold a condo given to me by my father few years ago. I am US citizen. He was not. I understand that I have to pay capital gains on this sale. I assume I calculate the gains by subtracting the value of the condo when it was given to me from the sale price (minus real estate agent fees). Do I also have to submit form 3520 (foreign gifts and list the sale price)? Since  the income from the sale was deposited first into a foreign bank before being transferred to my us account, I understand I also have to file FinCEN Form 114. What about forms 8949 and 8938? Do I also need to complete these forms? 

[pk]

@MJ154 , the gift of an asset  and the recognition thereof  requires  -- (a) recognition  by filing form 3520  for the year  ( contemporaneously) that the event took place.  So when was this  gifted  / titled in your name?  In which country ?  (b) generally the basis of the property transfers from the  donor to the donee i.e.  if the donor acquired for  US$XXXX and put in improvements  of  US$YYYY then his/her basis would be  US$ZZZZ ( sum of US$XXXX and US$YYYY).  The receiving person's basis  at the time of  donation would be also  US$ZZZZ..

Thus the gain on disposition ( for the donee/recipient) would be based  US$ZZZZ not on FMV at the time of transfer from donor to donee..   Note that in some countries  the Capital gain is based on  an indexed value of the asset -- not so in the US.

If the proceeds rested in a foreign bank account that you own and/or have signature authority over, then both FBAR  ( form 114 at FinCen.gov ) and FATCA ( form 8938 ) would come into effect. 

To make this answer more focused, please consider answering my questions.

[MJ154]

The property was given to me in 2012. I did not know it had to be reported to irs so no forms were filed at that time; The property value was listed in the formal agreement. No improvements were made to the property and it was kept vacant awaiting possibility of my father moving in there. After my father passed last year, I was free to finally sell it. The property was in Poland. I did not have to pay any taxes there, since it was a gift and I kept it long enough to qualify for exemption. 

[MJ154]

Thank you for your response!

[pk · Accepted solution]

@MJ154 ,   I am sorry for your loss.

On the 3520, you can either  file it with a note explaining that  it was an error and  mail it to the address   shown on the form.  TurboTax does not support this form., if the valuation of the asset was above US$100,000.    You can also ignore this  and take the risk that IRS does not check on this   ( this is because when you recognize the disposition of the asset on your 2023 filing , you will need to answer how you acquired the foreign asset). Either way it is risk but I like the first option better.

A point to note is the condition under which  your father gifted you the asset --- if there was stipulation that  you cannot do certain things ( like sell ) till your father has passed  -- in the US this  Life Estate -- then the gift  is constrained  and therefore  not quite  a gift till the passing of the donor.  In such a case I would argue that the  basis should be the FMV at the time of passing ( whether he used  it or not ).

If that is the case you should perhaps consulta tax attorney to be able to homologate   Polish and US laws.

If not , then my earlier statements stand.

Is there more I can do for you ?

BTW -- if this has answered your query, please accept the answer so the thread closes.

[MJ154]

Yes, you answered my question. I really appreciate it. You can close this thread. 

[pk]

I cannot -- only you the poster can accept and/or cheer

Thank you for allowing me to be of help