You may need to include this sale on a US federal income tax return.
Yes, if you are a US citizen or resident. This is because US citizens and residents are taxed on worldwide income.
No, if you are a nonresident alien. Click this link for more information from the IRS on US Tax Guide for Aliens
If you are a US citizen or resident, you will need to report this transaction (in USD) as the sale of a capital asset.
The Internal Revenue Service has no official
exchange rate. In general, use the exchange rate prevailing (i.e., the spot
rate) when your NRA spouse received the income. Please refer to the following
IRS links for more information about Foreign
Currency and Currency Exchange Rates and Yearly
Average Currency Exchange Rates
The
sale of bare land is considered an investment
and the sale is treated as the sale of a capital asset. (However, no capital loss will be allowed on the sale of
land that was or would have been used for your
primary personal residence)
Click this link for further information about reporting
the sale of a capital asset
To
enter a capital gain or loss on investment land in TurboTax, log into your tax
return and type "investment income (gains and losses)" in the search
bar then select "jump to investment income (gains and losses)".
TurboTax will guide you in entering this information (see step 6 below)
Alternatively, to enter your sale
of land transaction in TurboTax Online or Desktop, please follow these
steps:
- Once you are in your tax
return, click on the “Federal Taxes” tab ("Personal" tab in
TurboTax Home & Business)
- Next click on “Wages &
Income” ("Personal Income" in TurboTax Home & Business)
- Next click on “I’ll choose
what I work on” (jump to full list)
- Scroll down the screen until
to come to the section “Investment Income”
- Choose “Stocks, Mutual Funds,
Bonds, Other” and select “start’ (or “update” is you have already worked
on this section)
- 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)
- Since you did not receive a
1099-B, answer “no” to the 1099-B question
- Choose type of investment you
sold - select Land
- Some basic information:
- Description –
Usually the address of the property sold
- Sales Proceeds – Net
proceeds from the sale (If your 1099-S doesn't include selling
expenses, click to add selling expense here (even though it said 1099-B,
add additional selling expenses here)
- Date Sold – Date you sold
the property
- Tell us how you acquired the
property - purchased
- Any business or rental use? -
if no, then select personal use only
- Some Basis information
- Date Acquired
- Original cost basis
- Cost of improvements (Add
these to Original basis screen information
Since you paid foreign taxes on the this transaction,
you will be allowed an offset for these foreign taxes on your US tax
return. If you take a foreign tax credit, your US tax liability will
be reduced by the amount of taxes that you would have paid if the transaction
took place in the US (see this link Claim
Foreign Tax Credit). If you take a foreign tax
deduction on Schedule A, you will be allowed to deduct the full amount of the
foreign taxes paid but you will need to itemize (which could limit your ability
to take the full deduction). The TurboTax software will help you determine
which of these options will lower your overall tax liability.
Please
note : If you have foreign bank accounts, you may be required to file a
Report of Foreign Bank and Financial Accounts (FBAR) if are a US citizen or
resident and:
- you had
a financial interest in or signature authority over at least one financial
account located outside of the United States; and
- the aggregate value of all
foreign financial accounts exceeded $10,000 at any time during the
calendar year reported.
To be directed to the US Treasury Government Website to
prepare a Report of Foreign Bank and Financial Accounts, click FBAR (TurboTax does not support this form)
