Loss on property sale in Puerto Rico

[nando12]

My wife owned a property that was sold at a loss in Puerto Rico.  Am i entitled to take that loss in my federal taxes? If yes where would this go?  Schedule D Long term capital gains as the property was owned for 13 years?

[DDollar · Accepted solution]

Whether or not the loss is deductible depends upon what the use/purpose of the property was.  If the property was for personal use (whether or not  you actually used it) then no, it is not deductible. If the property was purchased as an investment with the intent to hold for appreciation, then yes the loss is deductible similar to a stock loss.  If the property was used for business (or farming) then it is deductible as a business expense.

If you can claim an investment loss, you report this on your personal tax return. You will enter this under the Investment Income area of Wages & Income.

1. Click on Search
2. In the Search Window type "Capital Loss"
3. Click on "Jump to Capital Loss"
4. Click on "+Add an Account
5. Answer No To "Did you get a 1099-B or a brokerage statement for these sales?"
6. Type of Investment: Everything Else
7. Enter a description, Net Proceeds = $0 and date of sale = dissolution date.
8. Acquired: Purchase
9. Cost Basis: your investment basis at dissolution
10. Date of Acquisition: date you made your investment

TurboTax will calculate the loss on this investment and determine if it was short- or long-term. If you have other capital gains, the loss will offset some or all of the gains. In general, up to $3,000 of the capital loss will go to line 13 of Form 1040 and offset other income. The remaining loss over $3,000 will be carried forward each year until used up (applied to capital gains and/or ordinary income).

[nando12]

As a follow on question, Puerto Rico withheld taxes on the sale.  I am currently filing Puerto Rico taxes to get that money refunded. I believe I am getting it all back at this point.  Do I then take a foreign tax credit this year and next year count is as when you get a state refund for whatever I end up getting back?