Sale of real estate in india

[DavidD66]

Do you have a question about the sale of real estate in India?

[sunil_kuchipudi]

Yes. I am not sure where to report it in Turbotax. I have already paid 20% Tax at Source in India and would like to see if I need to report as Income here again and if so where.  Thank you !

[pk]

@sunil_kuchipudi , assuming that you are a US citizen/Resident ( Green Card )/ Resident for tax purposes, you are taxed on world income. Thus income from sale of assets in India are taxable to the USA.  Please provide the following info :

(a) when did you acquire the  property;   (b) how did you acquire - buy, inheritance or what; (c) when did you acquire the property;   (d) was the property being used for personal purposes  or rented out for income;  (e) did you make  any improvements to the property during the period you held the property; (f) the 20% tax  you paid in India  is a withholding at source, right?  Or have you filed  the final return in India ? 

Namaste ji

[sunil_kuchipudi]

Yes. US Citizen/Permanent Resident. Property acquired through inheritance (digit and rented out. No improvements, Yes 20 % is TDS (taxed at source) and I have paperwork and will file taxes in India this March. Property sold last December 2019. Thank you !

[pk · Accepted solution]

@sunil_kuchipudi ,

(A)  you have  two choices as to filing your US return-- (1)  file now  with the information you have  and then  comeback and amend your return  in line  with  Indian IT settled return ( i.e. after the Indian taxes have been finalized / settled ) --- note that India uses basis indexing  while US does not  and so Indian taxes  may be  different than  the  TDS amount  OR  (2)  file for an extension  with the iRS before the 15th of April  and  once all the dust has settled with Indian taxes then file your  return  ( both Fed and State )

(B ) Because you have  used the property for income ( rental ), hopefully you have been reporting the income from India  on Schedule-E every year.   There  also should have  been depreciation declared.  This depreciation accumulated over the years  would reduce the  US basis of the property , thus increasing the gain and therefore  taxation.  Your State would also want a cut of this

(C) Your US basis of the property  is  Fair Market Value of the property on the day of  death of the decedent or  an alternate  date within six months -- US does not index the basis -- it remains the same  as at the start.  To this you add all  the cost(s) of improvements

(D)  if you did not  recognize the depreciation over the years , you can let TurboTax recompute it for  --- you enter the  original  basis ( FMV on the day of death )  in US$ of the day; any associated land value  ( not depreciable ) ;  the date on which you made the property available for rent;  that the property is foreign residential --- these will allow TurboTax to compute the  allowable  accumulated  depreciation

If there is  more you need on this please  feel welcome  to comment / ask  ( either here  or PM )

Namaste Ji 

[sunil_kuchipudi]

I will probably pick one of the alternatives (either file the return and amend or request extension).

One last question, just so that I know....

where would  I enter the real estate transaction in turbo tax ? Is it in Schedule D (Capital Gains and Loss) or should I enter in Rental Properties and Royalties (Schedule E).

When I enter via Schedule D - Turbo Tax warns me the following.

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Was this investment used for business?

If this investment was used for business (rental, business expense, farm, etc.), don't report it here. Go to the Sale of Business Property section and report this investment there....

I am not able to find the Business Property section. I am thinking it is Schedule E

Thank you for the guidance !

[SUTUMA]

How would you calculate the cost basis in dollars e.g should i be considering the dollar rate at the time of purchase? Where can find dollar rate for older years

[DoninGA]

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@SUTUMA wrote:

How would you calculate the cost basis in dollars e.g should i be considering the dollar rate at the time of purchase? Where can find dollar rate for older years

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Go to this IRS website for yearly average exchange rates - https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

[SUTUMA]

Turbo tax calculations are showing the sale of real estate at two locations - Sale of Home and Sale of business property - I had home in india which was rented and now i have sold it - where should i enter the details and taxes paid in India how do i enter the taxes paid in India

[pk]

@SUTUMA  first  need a little  clarification:

(a) how did you acquire the house in India?  (b) when did you acquire it ;  (c) did you use it as your main home and if so till when;  (d) when did you convert this to rental/income property ( i.e. when did you first advertise  for rent); (e) have you been using schedule-E to report the rental income/expenses/depreciation etc ever since ;  (f) are you US citizen/Resident ( Green Card ) / Resident for tax purposes and lastly (f) are you married.

All these answers will help setup the situation as it exists.  Generally  you report the sale  as of the current state of the property -- so if at the sale the property was rental then you report is as rental property sale and not as also a home sale.  The sales are treated the same way i.e. a converted property ( home to rental ) still includes the effects of the depreciation to the basis of the property inc computing the gain.  The treatment of the gain  and the exclusion thereof  are generally first the allowable "recovery/clawback"  then the rest of the gain either as capital  gain or excluded gain.

Please provide the answers so we can go forward with the rest 

Namaste

pk