Sold Foreign Real Estate Property

[TKwan]

Hi,

I'm a US citizen. I inherited a real estate property in 2023 from my parent. I did an appraisal and file Form 3520 in tax year 2023. 

I will sale the property in 2024. The proceed will be left in the foreign country until 2025. In 2025, I will wire the money to my bank account in the US.

Question 1 - What tax form I need to use for the sale of the inherited foreign property?  Which Turbo Tax has that form?  Other than FBAR reporting, are there other form I need to file?

Question 2 - When I wired the money to the US, do I need to file any tax form?

Thx - TK

[pk · Accepted solution]

@TKwan 

(a) why did you have to file form 3520 --- for cash inheritance / gift from a foreign person or what ?

(b)  from your post it sounds like  you have foreign bank account -- if so  you come under the rules of FBAR  ( form 114 at FinCen.gov  -- only on-line ) and possibly FATCA  ( form 8938 along with your tax return ).   If you need more these forms and the requirements , I will be happy to answer  your questions and/or provide information on these .

(c)  Assuming  your property was located in  a Treaty country ,  your filing requirements are as follows :

       1.   you file your return on the disposition of the asset in the foreign country ( following the  tax laws/rules  of that country ) -- this is so you have the details  of the taxes imposed / levied  by that country.

       2.  you prepare your return for the year in which the  alienation of the asset takes place  under  US laws    generally  using form 8949  declaring the basis -- FMV at the time of the passing of the decedent -- and sales   proceeds etc. ).

        3.  Then under  Deductions and Credits look for Foreign Tax Credit and you fill out the Foreign Source  income ( generally the US Gain on the disposition of the asset  ) and the foreign taxes paid on this  doubly taxed income  ( both US and the foreign country having taxed the same income ).  Note this requires that  US and that other country have a tax treaty   with a "double taxation" clause or similar reciprocal conditions.

(d)  Depending on the amount of proceeds that rest in a foreign account  (  which you own and/or have signature authority ) you have to report the maximum  aggregate  value for purposes of FBAR and FATCA -- as mentioned above.

(e)  The transfer of the monies from another country to the USA  does not require  any reporting -- your  receiving bank account will automatically raise a SAR  ( Suspicious  Activity Report ) for any transfer  equal or over  US$10,000  and  nothing happens to this.  If the amounts are significantly larger  ( => 1 Million  ) then  you may need US treasury permission --- also your other country may need notification of large US$ / local currency outflow .  

Is there more I can do for you ?

[TKwan]

Thank you for the detailed explanation.

I filed form 3520 because I inherited the foreign real estate property from my passed away mom. The property is NOT in a Treaty country

Your are correct on FBAR and Form 8938 because my foreign account has some money, also inherited from my passed away mon. I filed FBAR and form 8938 for 2023 tax return.

When my mom passed in 12/2020 I didn't know she gave me the property until after COVID when I visited the foreign country in 2023. The FMV was determined in 2023 when I went to the foreign country and inherited the real estate property (i.e. transferred the real estate property to my name).

There will be no capital gain since the appraisal value on the property is higher than the sales price.

Based on the above, do I still use Form 8949 to report the sale of the inherited real estate property?

Thank You,
Tak

[pk · Accepted solution]

@TKwan , agreeing with your other comments / explanation of the situation.   Just note that even if  the sale resulted in a loss per US tax laws, you still have to recognize the sale and report on form  8949.   It will show up a  Long-Term  Realized  Loss  on form 1040.  Generally it  may affect your  tax liability ( depending on exact facts and circumstances).

Is there more I can do for you ?

pk

[TKwan]

PK,

Thank you for all the information and explanation.  Have a great day

Tak