Taxes on properties abroad

[sac428]

- As a naturalized US citizen, do you have to report your foreign property (direct ownership of real estate) on your tax return (inherited or personal, not generating any income)?

- Is there a minimum rental income from foreign rental property that should be reported or any rent you receive is considered taxable income?

- What is the percentage of the sales price to be withheld in the US on the sale of foreign real estate property?

[NCperson]

1) as a US citizen, you are required to report all your world wide income; there is no de minimis amount to that requirement. 

2) any capital gains tax is based on the sales price (and selling expenses) minus cost basis (plus improvements), so not sure there is a way to provide an answer based on sales price. 

[pk]

@sac428  agreeing with my colleague @NCperson , the gain/loss computation on disposal of an asset  ( foreign or otherwise ) is based on a  number of items  -- your basis,  accumulated depreciation, sales price, sales expenses etc. etc.   So it is not useful to hazard a guess based solely on sales price -- that is what  @NCperson  is trying to get across.  Capital gain tax is also affected by your  AGI  without considering the  Capital gain ( MAGI ).

So could you provide more info on your situation :   which country is the asset located in,  how did you use it . when did you acquire it and how,  any depreciation allowable  (   claimed opt not )  ,   when did you sell, was there any sales expenses  ( such as sales preparation costs, commission, transfer tax,  etc. i.e. expenses that you would not have incurred if you had not tried to sell / sold the asset .

Will circle back once I hear from you --yes ?

[sac428]

Thank you! This is what I found on the IRS website regarding my first question: "Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938. For example, a personal residence or a rental property does not have to be reported." If I understand correctly, only an income from sale or rent should be reported.

[pk]

yes -- both your statements  ( 1.   real-estate holding is not a specified financial asset,  and   2. ONLY income generated by a real-estate  asset   either as rent/lease or alienation/sale need to be recognized )  are correct.

Is there more  I can do for you ?

[sac428]

I also found this: "Foreign bank accounts must only be reported if they have more than $10,000 on any given point in the tax year, using the FBAR". What if the rental income is less than $10,000 in the tax year? I am confused, knowing that any rental income should be reported (no matter the value). Are we talking about two separate things: personal savings/rental income? 

[pk]

@sac428 , think we are talking about two different things here:

FBAR reporting ( only on-line at  FinCen.gov and form 114 )  requires reporting if  you have bank / broker cash  accounts you OWN or  have signature authority over that meet the threshold amount of US$10,000.  There is no tax consequence  but not reporting when required to can attract onerous fines.

FATCA  requirement  ( on form 8938  along with your tax return  ) is more broad cover all kinds of semiliquid assets  and threshold depends on  your filing status and  whether your tax home is in the US or abroad.  Again there is no tax consequence but non-reporting  can attract onerous fines.

Rental income , no matter where  the asset is located , is reported as income on schedule -E and  may generate taxable income.  Also the allowable depreciable life may be different based on when  rental was started and where located.

Alienation / disposal of asset   need to be recognized  and may generate taxable  gain ( capital or otherwise ).

Does this help ?