Foreign inheritance

[anders650]

A non-US person passed away overseas in Dec. 2022. The estate was valued $28,000 using the exchange rate at the death date.
One year later, Dec 2023, I concluded a settlement agreement with the executor that I should receive half of the value of the estate. By this time the value of the estate had dropped both in the foreign currency and in US dollars to $24,000 using the exchange rate on the day of the signing of the settlement agreement. I.E. I was to receive foreign currency equivalent of $12,000 valued at that date.

In Jan. 2024 I received a payout in foreign currency equivalent to $11,000 using the exchange rate on the day I received it. Stated in foreign currency the payout was slightly more than the foreign currency amount stated in the settlement agreement. The difference was said to be 1 month interest payment in local currency and was about $200.

Questions.
On my TY2024 1040 do I have an interest income of $200? OR do I have a latent loss of $1,000 or even a latent loss of $3,000 (28/2-11=3). In case of a loss, how do I declare that?

I assume it will fall out based on the cost basis I set for the foreign currency I received and still hold.
Which exchange rate date should I use when I set the cost basis for the foreign currency? Death date, Settlement agreement date or the date when I actually received the foreign currency?

[maglib]

@anders650   sorry for your loss.

You have a few questions:

1. The value of the assets is the FMV of the property at date of death.  Question were there securities or assets sold or was it just foreign currency in the estate. You need to distinguish.

2. as a US citizen you must report foreign assets inherited or gifted on IRS Form 3520. In your case, the value is under the 100k threshold.  (I state this as others may read the comments).

3. If you had an interest in a fgn bank account, you must file FBAR if the value exceeded $10k which it did. 

you also must file form 8938.  on the 8938 you report value over the threshold, you also report dividends and interest

4.  Did you transfer the assets to a US account or did you keep them overseas?

5. so yes you need to report the interest income.

6. I believe the assets were already sold, I'm not sure. If they were then you report the gain/loss from date of death to sale of the assets you had interest in. 

7.If it is just fgn currency,  that falls under IRC Section 988 https://www.law.cornell.edu/uscode/text/26/988

it would be a personal gain/loss not to be recognized if it is just fgn ccy gains/losses normally unless the gain exceeds $200.  I gave you the link for all the details.

Good luck.