Estate and other tax liabilities and reporting duty for inheritance from a foreign country.

[Astral27]

Here is my situation: my mom, who lived in China and was a Chinese citizen, passed away and I inherited a small amount of precious metal (gold) and half of an apartment (the other half belonged to my sister). I sold my half of the apartment to my sister upon inheritance at the fair market price, which means that the sale itself did not generate any net profit. I paid my share of my mom’s medical expenses, funeral and care taker’s expense etc. out of the sale proceeds. The remaining was deposited into a checking’s bank account in China. That account accrued some interest. What is my tax liability and reporting duty for all these?

[RobertB4444 · Accepted solution]

First, inheritances aren't taxable.  It is assumed that the person that you inherited it from paid taxes on it while they were alive.  So the only thing you have to pay taxes on is the money that you earn with their money.

Second, the sale of half the house to your sister isn't a taxable event.  But it is a reportable event.  You should report the sale on your tax return with zero dollars in profit.

Third, the interest is income to you that is required to be reported in the US and is taxed by the US.

Fourth, if the balance in that checking account is higher than $10,000 USD you are require to report the balance to the IRS every year.  Here are the FBAR requirements.

@Astral27